Buying A Property Guide: Contract Date & Settlement Date
The Contract Date is the date that the contract of sale is signed. It is sometimes referred to as the sign date. A binding contract doesn’t exist until it is signed by both parties.
What happens on the contract date?
Two copies of the contract are drawn up so that both parties may sign identical copies. A binding contract does not exist until the seller formally accepts an offer in writing.
The deposit will be payable once the cooling-off period has expired.
Cooling off period
In most Australian states there is a cooling-off period unless you buy the property at auction. This means that you have a short period of time to change your mind about purchasing the property. The amount of time differs from state to state
On the contract date the property may no longer be covered by the seller’s insurance. For this reason it is recommended that the buyer takes out building insurance that will kick in from the date of signing the contract. This will most likely be recommended by the bank you are borrowing with so that the bank is protected.
The Settlement Date is the date that settlement for the property occurs. “Settlement is the official process of legally transferring a property from one person to another. It is usually conducted by the legal and financial representatives - eg conveyancers, of both the buyer and the vendor.”
Source: South Australian Government
You can find more info on property conveyancing in our Conveyancing & Solicitors For Investment Property or Home guide.
When Is the Settlement Date?
The settlement date for a property is specified in the contract of sale for the property. It is usually around 4-8 weeks from the contract date.
What happens on the Settlement Date?
- The balance remaining after deposits is paid to the seller
- Legal documents are lodged with the required agency including:
- Memorandum of transfer: transfers the Title Certificate from the seller to the buyer
- Memorandum of mortgage: the buyer’s mortgage is registered on the Title Certificate
- Discharge of mortgage: the seller’s mortgage is removed from the Title Certificate
- The Title Certificate is transferred to the buyer’s name
- The buyer takes legal ownership of the property
- Payment of rates and taxes is transferred
- Up until the settlement date the seller is responsible for rates. After settlement the buyer becomes responsible
When do I get the keys for the property?
Once the settlement process is completed the buyer can take possession of the property and contact the seller to get the keys.
Cancelling the contract before the Settlement Date
Once you have signed the contract and the cooling off period expires the contract becomes legally binding. It can become very expensive to cancel the contract. This is because the seller will be entitled to some compensation for going through the selling process only to have the buyer pull out.
The compensation amount is usually the amount it would require for the seller to restart the selling process again including any loss on the subsequent sale. Meaning if the seller re-sells the property for $100,000 less than what you had signed the contract of sale for they may demand $100,000 compensation.
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