How to Prepare for Settlement in NSW
Settlement is the day the property becomes yours. Almost everything that goes wrong on the day was avoidable a week earlier. Here’s the checklist we work through with every buyer.
Contracts are exchanged, finance is sorted, and there’s a date in the diary. Most buyers then assume settlement just happens. It mostly does, but the settlements that fall over almost never fail on the day itself. They fail because a bank wasn’t booked in, duty wasn’t paid, or the money wasn’t cleared in time. Here’s what you actually need to do in the weeks before.
At a glance
- A standard NSW contract completes 42 days after exchange unless you negotiated something different.
- Your bank needs lead time to book into settlement, so an unconditional loan the day before is not the same as being ready.
- Transfer duty must be paid and verified before settlement can go ahead.
- You get one final inspection in the 3 days before completion, and it’s the last moment anything can be fixed.
What settlement actually is
Settlement, or completion, is the moment the balance of the purchase price is paid and legal ownership transfers from the seller to you. In NSW it happens electronically through PEXA, so nobody meets in a room and no cheques change hands. Your conveyancer, the seller’s conveyancer, your lender and the seller’s lender all sign into the same digital workspace, the money moves, and the transfer is lodged with NSW Land Registry Services.
The date for completion is set in the contract at exchange. On a standard residential contract it’s 42 days, or six weeks, though a longer or shorter period can be negotiated before you sign.
In plain English
Exchange is when the deal becomes binding. Settlement is when you actually pay for the house and get the keys. Everything in between is preparation, and almost all of it has a deadline attached.
Your settlement checklist
Work through these in order. Your conveyancer drives most of it, but the items that need you are the ones that hold settlements up.
Get your loan unconditional and book your bank in
Unconditional approval is the first step, not the last. Your lender then has to prepare mortgage documents, have them signed and returned, verify your identity, and book itself into the PEXA workspace. Most lenders want several business days’ notice of the settlement date, and some want considerably more.
Tell your broker or lender your settlement date as soon as you have it, and tell us who your lender is so we can start talking to them directly.
Pay your transfer duty
Transfer duty, still widely called stamp duty, has to be paid and processed before settlement can proceed. It isn’t something you hand over on the day.
If you’re a first home buyer, your exemption or concession has to be claimed and approved through the same process, so don’t leave the paperwork sitting in your inbox. More on the timing of stamp duty in NSW.
Sign your transfer documents and finish your ID checks
You’ll need to complete verification of identity and sign a client authorisation so we can act for you in the PEXA workspace. It takes minutes, but nothing can be signed electronically until it’s done.
Check your settlement statement line by line
About a week out we’ll send you a settlement statement: the balance owing, the adjustments for council rates, water and any strata levies, and every fee coming out on the day. Read it. If a figure looks wrong, this is the point to say so, not on settlement morning.
Send a copy straight to your lender too, so they draw down the right amount.
Have your shortfall funds cleared and sitting ready
Whatever your loan doesn’t cover has to be in the right account, cleared, before settlement. Two things catch buyers out here.
- Daily transfer limits. Moving $60,000 out of an account with a $20,000 daily cap takes three days, or a trip into a branch.
- Money still sitting in a term deposit, an offset with a notice period, or coming from a family member who hasn’t transferred it yet.
Move the money early. Funds that arrive an hour late are the same as funds that never arrived.
Arrange building insurance
For a house, you want cover in place from settlement at the latest. Your lender will usually insist on it and may ask for a certificate of currency before it will fund.
For a strata property the building is insured by the owners corporation, so you only need contents cover. If you haven’t priced it yet, it’s worth knowing why an insurance quote before you buy can change what you’re willing to pay.
Book your final inspection
The standard contract gives you one inspection in the 3 days before completion. Ring the agent and lock in a time now, because a Friday settlement with a Thursday inspection leaves you almost no room.
What you’re checking is that the property is in the same condition it was in at exchange, allowing for fair wear and tear, and that everything ticked as an inclusion is still there and working. Open the taps, test the hot water, run the oven and the air conditioner, check the pool equipment, look for damage from furniture being moved out, and make sure the rubbish has actually gone. Take photos of anything that concerns you and call us the same day.
Line up utilities, mail and removalists
Connect electricity, gas and internet from the settlement date, redirect your mail, and update your address with anyone who matters. Book removalists for the afternoon or the following day rather than settlement morning. Settlements can move by a few hours, and a truck sitting in the driveway while the banks sort themselves out is an expensive way to find that out.
Not sure where your purchase is up to? Call us and we’ll walk you through what’s outstanding.
What happens on settlement day
You don’t need to be anywhere. Everyone signs into the PEXA workspace at the booked time, the funds are checked, and settlement completes electronically. The balance of the purchase price goes to the seller, your lender’s mortgage is registered, any existing mortgage over the property is discharged, and the transfer is lodged with NSW Land Registry Services.
We’ll confirm the moment it settles, and the agent releases the keys to you once they’ve had that confirmation from the seller’s side. You’ll get a final statement of account from us afterwards, and the title update comes through in the following weeks.
“Being ready a week early costs you nothing. Being ready a day late costs you money.”
The adjustments, explained
Council rates, water service charges, strata levies and land tax are all paid in advance for a set period. The seller has usually paid past your settlement date, so you reimburse them for the part of that period you’ll own the property.
It works the other way too. If a rates instalment is unpaid at settlement, the seller’s share comes off what you pay them. The numbers are usually modest, but they’re the reason your final figure isn’t simply the purchase price less the deposit.
What we see hold settlements up
The bank wasn’t given enough notice and can’t get into the workspace.
Mortgage documents were signed late, or one borrower hadn’t signed at all.
Shortfall funds were transferred on the day and hadn’t cleared.
The seller hadn’t moved out, or the property was left full of rubbish.
Something on the inclusions list had been removed or had stopped working.
What happens if settlement is delayed
If the delay is yours, the consequences are contractual and they add up.
- Penalty interest. Most contracts include a special condition charging interest, commonly around 10% a year, daily on the unpaid balance until you settle.
- The seller’s costs. Bridging interest, storage, temporary accommodation and their own legal costs can all be passed on to you.
- A notice to complete. The seller can serve one, usually giving you 14 days and making time of the essence. Miss that deadline and you’re in breach.
- Termination. If you fail to settle after a notice to complete, the seller can terminate, keep the deposit, sue for damages and resell the property.
If the delay is the seller’s, the same principles run the other way and you may be entitled to compensation for your costs.
In practice, most short delays are negotiated. A day or two caused by a bank is usually resolved by a phone call between the two conveyancers. What turns a delay into a problem is silence, so if you think you might not be ready, tell us as early as you can. Our guide to what happens if settlement is delayed in NSW covers notices to complete and late settlement interest in full. There’s almost always something we can do a week out and very little we can do at 4pm on the day.
The short version
Settlement day itself is largely automatic. The work is in the six weeks before it: loan unconditional and your bank booked in, duty paid, documents signed, ID done, statement checked, funds cleared, insurance arranged, final inspection booked. Get those done early and settlement is a phone call telling you the house is yours.
Settlement coming up?
Talk to Justin, Julie, Amanda or Nicole. We’ll tell you exactly what’s outstanding on your purchase and what needs to happen next.
