What happens at settlement?
When you sign the contract you will usually agree to a settlement day.
Most commonly this will be six weeks after the date of exchange.
At settlement the buyer pays you everything they owe you to ‘settle’ the purchase. This amount will take into account any utility bills and strata levies you have already paid as well as any tax calculations that your solicitor makes. If the buyer cannot settle by the date stipulated in the contract for sale, you’re often entitled to charge interest. In some limited circumstances, you may even be able to cancel the sale.
If you owe money on the home you are selling, your solicitor will talk to your bank or building society to work out exactly how much you need to pay to ‘discharge’ the mortgage. They will let the buyer know this amount so that they can make out a bank cheque to your lender.
They will also tell the buyer who you’d like the balance to be paid to.
Do I need to be present at settlement?
You do not usually need to attend settlement in person.
Instead, your solicitor and the buyer’s solicitor will meet to make sure they have everything they need for the sale to go ahead. If you have a mortgage over the property you are selling, a representative of your bank or building society will also attend settlement to receive any money owing on your loan. In some cases, settlement may occur electronically rather than a physical settlement.
Buying and selling at the same time
Chances are you may be looking to buy a new house at the same time as you are selling your current one. In that case, it is important that you try to make sure the settlement date in both contracts is the same.
If the settlement date on the contract for the house you are buying falls before the settlement date on the contract for the house you are selling, you may need to take out expensive ‘bridging finance’. If it is the other way around you may be forced to live with friends or family until you can move in.
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