If you’ve ever heard the term “simultaneous settlements,” you might have wondered exactly what they are and how they work. In this blog, we’ll explain the basics of this concept and what is included in the process.
What is simultaneous settlement?
When you buy a property, settlement is when you get the keys and transfer the ownership of the property to your name. Simultaneous settlement means that you settle on the place you are buying and the property you are selling at the same time.
What happens at a simultaneous settlement?
It can be a little tricky to negotiate simultaneous settlements because first, you have to have the same settlement date. Depending on the time of year, you might have purchased a property before you sell your current home. We need to wait until both transactions are complete before we can proceed. Fortunately, we’ve worked with many clients who understand that this is just part of the process and they can be patient while we work toward their desired outcome.
In some cases, there might be some back-and-forth between our client and their real estate agent over extending contracts or moving settlement dates forward or back a few days. The important thing is that everyone is willing to compromise and help us reach a solution that works for everyone involved. If we can do that quickly and efficiently, then we can proceed with simultaneous settlements.
As part of the settlement process, we will need to negotiate with your bank. If you’re not using the same bank that holds your mortgage on the property that we’re now discharging, we will then need to tee up the new bank or person that you’re getting your finances through for the purchase. If you still need a mortgage, it might be that you’ve sold for much more than the property is worth, in which case you can just buy your home outright. But it might mean that we have a few more steps and a few more players involved in the process. If this is the case, we’ll need to make sure that everything is moving towards the same day and time of settlement.
We just need a little more information from you to make sure that we can settle your claim quickly. If we don’t meet settlement deadlines, your claim could be delayed and you might have to pay a penalty. So it’s important to give clear instructions to your representative and communicate with us.
It can happen that we have several linked settlements. You might have a simultaneous sale and then your purchase. And then the people you are buying from—they’re selling, too. So we have this domino effect. If one of those settlements falls over, that usually means the one right at the very start won’t settle. And if that one doesn’t settle, the next one won’t settle, and so on. The person who created that holdup at that very first issue is going to be made to wear the penalties.
We’ve had a case where there were six settlements following the first one. In this instance, it was another party’s mistake, but our client was going to be penalized for it. We managed to negotiate the penalties down a bit, but it still cost them about $4,800. We were then able to recover that amount from the other party that had created the issue. But this caused another loophole—we now had to come up with an additional $4,800 to settle things. It can be tricky sometimes, but it also means you won’t have to pay for storage and accommodation while you wait for your purchase to go through. It’s great if you sell your old home before buying a new one—you can move straight into your new home and avoid paying for storage or accommodation until then.
One thing to keep in mind is that if we aren’t able to do simultaneous settlements, we might need to do something like a license agreement. We won’t talk about those yet; We’ll discuss them at another time. But just be aware that simultaneous settlements are great when they work well, but sometimes it may be necessary to have some agreements in place in case one takes longer than planned. For instance, let’s say that your settlement is scheduled for 11:00 AM and you’re hoping to have the day to move everything out of the house. However, if we have other linked settlements down the track, it is possible that someone might not get something signed off until half 11 or even 2 o’clock in the afternoon.
What to expect at a simultaneous settlement?
Please remember that if you are using a simultaneous settlement, which is linked to another settlement, any problems with the other settlement can cause delays for your settlement. So make sure you’re ready to go at that scheduled time, that you’ve got everything sorted with your conveyancer and that they communicate regularly with you. Also make sure your conveyancer has experience in using simultaneous settlements, and not just someone who’s new to this.
Simultaneous settlements can be a really great way to save some money, especially on your accommodation costs. And they do work extremely well—once you’ve completed all the forms and got everything organised with your bank and conveyancer. But you need to be on top of things yourself. If you’re prepared to do everything that’s asked of you, then we can generally get things across the line at the time and definitely on the day that they’re meant to happen. I hope that gives you a little bit of an idea what will happen with a simultaneous settlement, and what it actually means to be part of an all-linked settlement.
There is no one-fit solution when buying and selling property at the same time. The most important thing however is to ensure that whichever option you choose you understand the legal and financial implications and are guided throughout the process.
If you ever have questions about simultaneous settlements or anything about conveyancing, please feel free to contact our team at 1300 459 694 or email email@example.com.