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Simultaneous Settlement :  6 Common Pitfalls

If you’re considering selling your current house and buying a new home you will have to ‘settle’ on both properties. So, what exactly is property settlement?

Property settlement is an official process carried out on a specific date between the buyer’s and seller’s legal and financial representatives where the buyer:

  • pays the seller the balance of the purchase price
  • receives the property title and become the registered owner
  • takes possession of the property, unless otherwise arranged.

Property settlement is a complex legal process that is commonly facilitated by a solicitor or a conveyancer.

To buy or sell first — that’s the question. Is simultaneous settlement the answer?

If you’re looking to move house, selling or buying first is a common dilemma faced by homeowners. There are pros and cons to both approaches, but there is a third option to consider that might solve the problem — simultaneous settlement.

So, what is simultaneous settlement? It is when the sale of your old property and the purchase of your new home take place at the same time. While it can work, several factors need to be carefully weighed up because the process isn’t simple or straightforward.

The main advantages of simultaneous settlement:

  • Simultaneous settlement avoids the need to take out a bridging loan. A bridging loan is a financial product offered by many lenders that covers the cost of buying your new home while you are selling or waiting to settle on your existing property. This can be quite stressful because you’re essentially paying off two mortgages. Read our post about bridging loans for more information.
  • You don’t need to move into temporary accommodation or store your belongings, because if everything goes to plan, then you can move out of your old home in the morning and into your new home in afternoon.

The pitfalls to be aware of:

  • Simultaneous settlement sounds great in theory, but in practice, it’s notoriously difficult to organise. It’s not impossible, but we’d highly recommend getting a conveyancer or solicitor to assist you because simultaneous settlement is a complex financial and legal process that’s difficult to navigate for those who don’t know the intricacies of property agreements.
  • Simultaneous settlement typically requires flexibility around the settlement period from at least one party (either the buyer you are selling your property to or the seller you are buying the new property from) — this usually involves an extra-long settlement time for one transaction (e.g. 6 months) with the option to bring this forward when certain conditions are met (e.g. you have found a new property to buy or you have found a buyer for your old property).
  • This flexibility isn’t always possible because of conventions around settlement times that many parties rely on. For example, in NSW the standard settlement time is usually six weeks. In cases where flexibility is possible, it comes at a cost because of the concessions buyers and sellers must agree on to make simultaneous settlement work. This usually means selling your house for a little less and buying your new home for a little more to incentivise both parties to agree to delayed settlement.
  • There can also be a mind-boggling number of parties involved who are either required to make payment or receive payment from someone else, for example: the buyer of your old property, the seller of your new property, their respective lenders (incoming and outgoing), and of course you and your lenders. Trying to align nine parties or more can be a nightmare!
  • It can get even more complicated when one of the other parties is also involved in a simultaneous settlement on their end — this is known as a chain.
  • The major risk with simultaneous settlement is that the two settlements are reliant upon each other. And if there’s a problem with either, it can delay the process and result in penalty fees, being stranded with no home to move into, or worse, the loss of the deposit on your new home.

What happens on settlement day?

On settlement day, your conveyancer will manage the admin and legal portion if the sale. This often includes:

  • Check all clauses in the sales contract
  • Check whether there is any existing mortgage on the title, and discharge it
  • Remove any third party or person who has rights over the property
  • Register the transfer of land and mortgage with the title office in your state

Typically, you will not need to be present on settlement day, as your conveyancer will meet your lender and seller and exchange documents on your behalf.

However, for simultaneous settlement to go smoothly and to avoid delays, you and your conveyancer need to make sure that:

  • No outstanding arrears or land tax obligations
  • No errors in the paperwork
  • No outstanding final inspection issues
  • Ensure that your lenders have finished discharging the mortgage

Juggling the purchase and the sale at the same time can be stressful and time consuming. Sellable can help you eliminate uncertainty and stress.Successful simultaneous settlement relies on excellent negotiation skills, usually between your conveyancer and all parties involved in the sale and purchase of your old and new home, and can be exceptionally nerve-racking. No one wants to be in a situation where the moving truck is in transit to the new property but they don’t have access to the keys. This is something you don’t have to worry about if you choose to sell your home with us.

With Sellable, there are no stressful negotiations about simultaneous settlements. We will give you a guaranteed price for your current property, based on a fair and independent valuation, so you can go shopping with confidence. It also does not take long after house settlement to get paid. Once you accept our offer and have found a new property you like, negotiate a settlement time that suits you or the vendor of your new home, and we’ll simply pay the seller of your new home directly so you can move out of your old house in the morning and into your new home in afternoon. And if your old home sells for more than the guaranteed price, you’ll receive 75 percent of any additional upside — a handy bonus that could be used to help furnish your new home.

If you’d like more information, or to talk about your situation, give our team a call on 1300 722 910, visit sellable.com.au or send us a message.