What happens on settlement day?

Possibly the most exciting and nerve wracking day of the process both at the same time – settlement day is the day you pay for the new property, and of course the day it becomes yours.

There’s a few key terms you will hear – and a few things that happen on the day and immediately beforehand, that we need to discuss.

In preparation for settlement

Assuming your loan is approved, you’ve returned your loan agreements in plenty of time and you have organized the necessary insurances – the next step in preparation for settlement is to send any money you are contributing to the “bucket” of money – more on this later.

Your contribution

This relates to the balance of any money that you are contributing to the purchase – don’t worry too much about what is ‘deposit’ and what is allocated to the stamp duty and other costs of the purchase, it all goes into one account – think of this as our giant bucket - and is spent from there. This needs to be “clear funds”, available to spend, so make a transfer early to ensure you don’t miss any deadline. Your conveyancer will give you an estimated figure to contribute a week or so beforehand however they won’t have the exact figures until much closer to settlement simply because things like council rates are not calculated until this time, so err on the high side and anything that isn’t needed for the purchase will be returned to you.

More on the "Bucket" analogy

We are often asked if the stamp duty is paid from your money or from the loan money – and the answer is, it all goes into the one “bucket” of money which the conveyancer “disburses” (or spends) on settlement day. They will arrange for money to go to everyone it needs to, including the seller, the local council, and their own bill. When we are speaking with you about your contribution or what you think of as your deposit we won’t break it down into pieces either, we give you an overall figure so you have confidence that everything is looked after which is what matters afterall!

The one Asterix to this – off the plan or delayed settlement

In NSW the stamp duty is due 3 months after the contract is signed, and in most cases settlement is 6 weeks after contract signing, however if you have a delayed settlement or an off the plan purchase you may have to pay the stamp duty sooner than this. You would then follow the instructions of your conveyancer and pay this sum directly to the titles office.

Authorised account

You may here this term being used as you approach settlement, essentially it is an account with your new lender which has been nominated on your loan agreements to accept your additional money.

When you’re signing the loan agreements, the lender asks you to agree to allow your conveyancer to give the lender on how to divide this money out at settlement time. This account is “authorized”

Alternatively – your conveyancers trust or PEXA account.

PEXA is an online meeting room in which your lender, your solicitor & the vendors representatives will all swap money and titles. This meeting space replaces a physical meeting room where they would have all met to hand over physical cheques and deeds. and from here your money and the loan proceeds will be disbursed, so its fine to put your contribution here. Because of nature of exactly what this is its really important to check these account numbers carefully with your conveyancer over the phone (not email) in case there’s anyone nasty lurking around trying to intercept your email and your money!

When will the money be put in my account?

Short answer is, it won’t be – the bank controls the money and will only hand it over when they receive the title so it doesn’t ever sit in an account ready to be drawn other than this Pexa account.

Final inspection

As close as possible to settlement day you need to walk through the property and confirm it is – more or less – as you expect it to be, and immediately raise any concerns if there are items missing or unexpected damage. Your solicitor or conveyancer is your best guide for this process.

Do I need to be there?

Nope, it's all online, your solicitor, the bank, the vendors solicitor and - if they have a mortgage – their outgoing lender will all join the electronic meeting space and transfer the money and documents. The two solicitors / conveyancers will then communicate to the agent that settlement is complete and they are able to release the keys to you, and you are done - time to relax (or unpack)!!