Settlement Day: What Happens at Closing and Final Preparations
Settlement is the final day of a property purchase. It’s when ownership transfers from the seller to you, funds are transferred, and the transaction is legally complete. Understanding settlement day removes anxiety and ensures nothing goes wrong.
The settlement date is specified in your purchase contract (typically 30–60 days after contract signing). Your solicitor coordinates settlement with the seller’s solicitor, the real estate agent, and the lender.
Pre-settlement (3–7 days before): Your solicitor will contact you with final settlement details. You’ll receive a statement of settlement, which shows all costs: lender’s loan amount, your deposit/cash contribution, legal fees, valuation fees, LMI, stamp duty, and other costs. Review this statement carefully; errors can be corrected before settlement.
Settlement day logistics vary, but typically your solicitor handles all funds and documentation transfers. You don’t necessarily attend settlement in person; most modern settlements happen electronically.
The settlement process in sequence:
- Your lender releases the mortgage funds to your solicitor.
- Your solicitor receives your deposit/cash contribution.
- Your solicitor confirms receipt of all funds.
- The seller’s solicitor confirms the property title is clear (no liens, mortgages).
- Your solicitor and seller’s solicitor exchange documents simultaneously.
- Ownership transfers to you.
- The seller’s mortgage is discharged (paid off from sale proceeds).
- Your mortgage is registered against the property.
Final walk-through: Before settlement finalizes, you (or your inspector) typically do a final inspection of the property to confirm it’s in expected condition and the agreed chattels (items included in the sale, like light fixtures, are still present). If issues are found (e.g., broken window the seller agreed to fix), you can withhold settlement and force remediation before proceeding.
Keys transfer: Once settlement is complete, you receive keys from the real estate agent or seller. At this point, you can move in.
Settlement costs: Total costs (beyond the purchase price) are typically 3–5% of the purchase price. A $500,000 purchase might have $15,000–$25,000 in settlement costs. These include:
- Lender’s fees: $150–$500
- Valuation: $300–$600
- Legal/conveyancing: $800–$2,000
- Stamp duty: varies by state, typically 3–5% of purchase price
- LMI (if applicable): 2–4% of loan amount
- Council and utility searches: $100–$300
Mortgage discharge from old property: If you’re selling a current property and purchasing a new one, your old mortgage must be discharged simultaneously with new settlement. Your solicitor coordinates this; funds from the old sale are used to pay off the old mortgage, and the discharge is registered on the same day as the new purchase.
Settlement delays: Occasionally settlement is delayed due to title issues, funding delays, or legal problems. If settlement doesn’t complete on the scheduled date, your contract specifies remedies (you might be entitled to compensation, or you might walk away if delays exceed a threshold).
Risk of loss: Once settlement completes, the property is yours, including any damage that occurs between contract and settlement (unless you had insurance). This is why your final inspection is critical; confirm the property is in expected condition immediately before settlement.
Disclaimer: This article provides general information only and should not be taken as financial or legal advice. Settlement processes, timelines, and cost allocations vary by state and lender. Consult your solicitor and lender for settlement-specific guidance.