Our settlement agents are often asked this question by people who don’t want to wait a few weeks or months for a settlement to take place.
The short answer is that sometimes it can. If the Seller has an unencumbered title and the Buyer has his money, has made all his enquiries, and is satisfied, sometimes settlement can take place immediately.
But very few people are in this position. We might do one or two like this every two or three years out of thousands of settlements. It’s very rare, so don’t expect it as a norm.
Nearly all sellers have mortgages over their properties that need to be discharged at settlement, and almost all buyers need to borrow money from a bank to buy a property. In these cases, settlement is a two-month process, with the buyer’s bank taking about a month to approve the finance application and another month to prepare all the necessary documents, have them executed by the buyer and then be ready to settle.
So, in those (vast majority) of cases, you should list 28 days for finance approval, with settlement taking place “within 28 days of finance approval.”
Why does it take so long, you may ask? It just does.
Banks are large organisations with very set processes that are followed in strict order, and expecting them to change merely for your convenience is frankly a bit silly.
If it’s for a new house yet to be built, on a house and land contract, often 60 – 90 days is required for finance approval, with another 28 days for settlement. This is because it usually takes a while to price up the build to the bank’s satisfaction so they know how much they are lending.
If you have a cash buyer, you should still allow 21 days for settlement from the contract date as your bank will take ten business days (i.e. two weeks) to process your application to discharge your mortgage from the date they receive your application (i.e. not from the contract date).
Also, if you have a cash buyer, you should ask for a minimum 10% deposit as a mark of good faith to be held in the trust account of your real estate agent or settlement agent. It’s very common for cash buyers to turn out to need finance after all, with the cash offer made to persuade sellers to accept their offer. 10% should be easy for them, given that they should already have 100% of the purchase price, stamp duty and settlement costs before they make the offer. Ten per cent keeps them honest.
The local council will also take ten business days to provide their enquiry responses. Hence, you know what the rates are for apportionment between buyer and seller and what the arrears are to be cleared from the seller’s sale proceeds. Again, this is not from the contract date but from the date they received the enquiry, which your settlement agent or solicitor won’t lodge until they receive your appointment to act.
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DISCLAIMER: Neither Goldfields Settlements, nor any of its staff are lawyers, so none of the above should be construed as legal advice. Readers are advised to seek their own independent legal advice on these or any other matters involving property dealings, preferably before entering into them.