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Your agent has just presented you with an offer. After several ‘tos and fros’ and negotiating the terms of the contract, you agree on price and terms.
So it’s time to celebrate! Right? Wrong.
Although this is a massive hurdle in the buying and selling process, there are many things that still need to happen before the property can go through to settlement and you can break out the Moët.
By this stage you should have well and truly employed or at very least engaged with a settlement agent (in WA), conveyancer or solicitor, depending on what state or territory you live in. Let’s just assume for the rest of this article that you live in Western Australia and you’ve hired a settlement agent or conveyancer.
Settlement agents and conveyancers have such an important job. They need to obtain a valid authority to act from their clients, arrange the Transfer of Land document, arrange the change of rates, deal with the banks, make sure the property settles on time and protect their clients from the legal pitfalls of property sales. I even know of really good settlement agents who do things like arrange the Home Buyers Assistance Account (HBAA) for their first home buyer clients, giving them a rebate of up to $2000 after settlement, which isn’t really their job but it’s a nice thing for them to be doing.
The first thing I discuss with my clients at this point is to make sure that they are communicating with their real estate professional and their settlement agent or conveyancer. If you aren’t going to get finance approved by the finance due date, it is better to know this a week or two beforehand than on the finance due date, so you can talk everyone through the process and ease any anxiety. After all, the seller doesn’t usually want to go back to market and find another potential buyer and 99.9% of the time the buyer doesn’t want to miss out on the property, so it’s almost always better to work with a deal than to terminate a contract and start again. Which is why clear communication throughout is so important.
The next thing I explain to both the buyer and the seller is to do everything that needs to be done, when it needs doing. If your mortgage broker or banker needs you to sign mortgage documents, don’t wait two weeks and then go in and sign, get it done straight away. If you’re the seller and you have a mortgage on the title (even if there is no debt), you will need to fill out and sign a Release of Security form or Discharge Authority form (they all call it something slightly different but it’s the same thing) with your bank. The banks then usually have a 10-15 working-day turnaround to process this form – so good luck trying to settle on time if you haven’t done this form within the first week of having an unconditional contract.
It’s also really important to remember that signing a contract isn’t just about getting finance approved (although you could be forgiven if you celebrate when you get it through). There are normally other conditions under the contract that need to be met, too. Things such as the Timber Pest Pre-Purchase Inspection Report and the Australian Standard Pre-Purchase Building Inspection Report. Sometimes carpets need cleaning, light globes replacing and the list goes on. Remember when I mentioned clear communication earlier on? Imagine if all this had to take place and no one was speaking to each other!
Once finance is approved and everything else on the contract has been ticked off, it’s time to complete the final inspection or the pre-settlement inspection. This is the only opportunity the buyer has to inspect the property after signing an Offer and Acceptance or Contract of Sale before settlement. It is to make sure that the property is as it was when they inspected it last and that everything that should be working is working. Under the changes in the 2018 Joint Form of General Conditions for the Sale of Land in WA, the buyer actually has the right to re-inspect something if it isn’t working or if something isn’t how it was when they last inspected it. This is why I always explain to my sellers to keep the lawns mowed, check everything in the house is working themselves, which then sometimes means they need to call in a plumber, electrician or other qualified tradesperson.
So now you’ve got an unconditional contract (all conditions of the contract are met), the final inspection has been completed, the banks and financial institutions on both sides are ready, the settlement agents are ready and it’s settlement day. If you’re the buyer at this point, I sincerely hope you haven’t booked a removalist truck for 15 minutes after settlement. The seller, after all, has until midday the following day to move out and hand over keys if it is owner-occupied. Things can go wrong. Banks can say they are ready right up until settlement day and then turn around and say they lost the title! The point I am making here is plan for the worst and listen to the advice you are getting from your real estate professional and your settlement agent.
Once settlement has taken place and the property is vacant and you’ve either handed over the keys or received the keys, by all means, pop the Champagne bottle and celebrate like it’s 1999. But until then, communicate, act quickly and listen to the advice of the professionals. If you do this, it should be all smooth sailing.