Simultaneous settlement refers to the coordinated closing of two property ownership transactions on the same day. This means that both the sale of your current property and the purchase of your new property are finalised at the same time. Generally, settlement is the final step of property transfers or property sale.
Moving house can be a stressful experience, juggling packing, paperwork, and finding a new place to call home. For many Australians, however, the traditional method of selling their existing property before buying a new one adds another layer of complexity – the need for temporary accommodation.
Read on to learn more about simultaneous settlement.
The Property Purchase Process
Before we delve into simultaneous settlement, let’s first discuss the property purchase process in Australia. Every property transaction begins with acquiring a copy of the property title from the relevant state or territory land registry. This document serves as the official record of ownership and contains vital information about the property, including:
- Owner’s details: This verifies the identity of the person selling the property and ensures they have the legal right to sell it.
- Land boundaries: A clear understanding of the property’s boundaries is essential to avoid future disputes.
- Registered interests: These are any legal claims or restrictions attached to the property, such as easements, covenants, or caveats.
- Confirmation of ownership: This confirms that the seller is indeed the legal owner and has the authority to transfer ownership to you.
Navigating the legalities of property transactions can be complex. Here are some key terms you’ll encounter:
- Encumbrances: These are legal interests held by a third party on the property, such as easements (granting specific rights to use part of the property), covenants (restrictions on how the property can be used), or caveats (temporary claims lodged against the title).
- Mortgages: These are loans secured by the property, meaning the lender can repossess the property if the borrower defaults on loan repayments. Legal professionals meticulously search for any encumbrances or mortgages attached to the property, ensuring you are aware of these obligations before proceeding with the purchase.
Unresolved financial obligations associated with the property, such as unpaid taxes or local council rates, can hinder the transfer process. Typically, the seller remains responsible for outstanding property taxes, while the title may transfer unpaid rates.
Simultaneous Settlement Process
You can purchase and sell real estate on the same day with simultaneous settlement, eliminating away with the necessity for interim housing. Although this sounds appealing, there are a few processes involved and some difficulties:
- Pre-approval: Get pre-approved for a new home purchase with the condition of selling your existing property simultaneously, aided by a mortgage broker.
- Selling your old home: List your old home with an optional real estate agent or lawyer.
- Finding your new home: Search for a new home while your old one is on the market.
- Legal support: Hire a lawyer or conveyancer for the settlement process. Lawyers and conveyancers are experts on the process of buying or selling a house. Securing these professionals will make your transactions more seamless.
- Negotiate offers: Once you receive an offer on your old home (past the cooling-off period), place an offer on your new home (avoid doing so before the cooling-off period ends).
- Extend selling settlement: Negotiate an extended settlement period on selling your old home (up to 6 months), with the option to bring it forward with four weeks’ notice.
- Finalise finances: Discharge the mortgage on your old property and establish a new one for the new property.
- Register ownership: Register the transfer of title and mortgage with the relevant state authority.
- Move in: You can now move seamlessly from your old home to your new one.
Simultaneous Settlement: Advantages vs Disadvantages
While some may benefit from a simultaneous settlement, others may have a different story. Here’s a table on its advantages and disadvantages.
Advantages
- Seamless Transition: Eliminate the need for temporary housing by moving directly from your old home to your new one. This eliminates the hassle and expense of finding temporary accommodation, storing furniture, or relying on friends and family.
- Cost-Effectiveness: Reduce moving expenses by only requiring one move on the settlement day. Additionally, you avoid the double burden of paying two mortgages and potential bridging loan costs associated with buying before selling.
- Financial Efficiency: Consolidate the refinancing process, replacing your existing mortgage with the loan for the new property in the same transaction, potentially saving on transaction fees.
- Streamlined Utilities: Simplify the process by disconnecting and reconnecting utilities for both properties with a single call or email.
Disadvantages
- Complexity: This intricate process requires meticulous planning and the expertise of professionals like mortgage brokers, lawyers, and conveyancers to navigate the legal and financial complexities.
- Increased Risk: Involving numerous parties increases the potential for unexpected delays or complications from any participant within the transaction chain.
- Negotiation Challenges: Negotiating with buyers to shorten your selling settlement or convincing sellers to accept “subject to sale” clauses for your purchase can be demanding, requiring skillful negotiation tactics.
- Potential Price Compromise: Time constraints inherent to simultaneous settlements might necessitate accepting a slightly lower selling price for your old home or a slightly higher purchase price for the new one.
- Domino Effect: Delays or issues in any linked settlements within the chain can have cascading effects, potentially leading to financial penalties or even the loss of your new property deposit.
- Professional Guidance is Crucial: Considering the potential risks and complexity, engaging an experienced mortgage broker becomes even more crucial to ensure a smooth and financially secure transaction. A single error could lead to significant financial losses.
Why Should You Hire Conveyancers and Lawyers?
While real estate agents play a crucial role in facilitating property purchases and sales, legal professionals like lawyers and solicitors offer invaluable expertise throughout the process. JB Solicitors has a team of property lawyers and conveyancers who can safeguard your interests. We can also perform:
1. Sales Contract Preparation and Review: We meticulously draft and review the purchase contract, ensuring all terms and conditions are fair, balanced, and comply with relevant laws. We also facilitate negotiations between you and the seller to reach a mutually beneficial agreement.
2. Title Transfer and Settlement: We oversee transferring property ownership from the seller to you, ensuring all legal requirements are met. This includes:
- Payment of stamp duty, a tax levied on property purchases.
- Registration of the transfer with the land registry, officially recording you as the new owner.
Contact us today for more information about simultaneous settlement.
