Depending on what headspace you’re in, waiting to sign the final paperwork for your first home can feel like it’s moving at lightening speed, or at a snail’s pace. The good news is, once you’ve bought a house, you know that it’s yours. You just have to go through some formalities, first. In this guide, we walk you through the steps involved for a buyer when settling on a property.
What is settlement day and how long does the settlement process take?
Settlement day is when the property you have purchased officially becomes yours. It’s also the day that you have to pay the balance of the purchase price (the remainder of your deposit and any money you’ve borrowed from the bank through a home loan is transferred to the seller). Below, we take a look at what you can do to prepare for settlement day, as well as what’s involved on the day itself. Generally, the settlement process takes around four to six weeks after contracts have been exchanged. However, it’s not unusual to see a settlement as short as 10 days after an auction. If you need a longer settlement, arrange this before signing the sales and purchase agreement. If you’re buying off the plan – where the property doesn’t exist yet – the settlement day might be one or two years away.
What to do in the lead-up to settlement day
Settled.govt.nz provides a checklist of steps to take prior to settlement day:
- You should arrange to inspect the property before settlement day. This is the pre-settlement inspection.
- You need to make sure your purchase finance is ready before settlement day.
- Your property insurance needs to be in place for settlement.
Let’s have a look at each of these points in a bit more detail.
Arrange to inspect the property before settlement day
A pre-settlement inspection, which you arrange through the seller’s real estate agent, gives you the chance to see that the property is still in the state that you first viewed it, and that there aren’t suddenly new holes in the walls! During the inspection, check that the chattels are in the same condition as when you signed the sales and purchase agreement.
Arrange the inspection for at least two days before settlement, to give the owner time to remedy any potential issues – either by fixing or deducting money from the final amount owing. If the property is tenanted, the landlord might need extra time to get the tenant’s consent for an inspection.
It’s a good idea to take a copy of the sale and purchase agreement to the pre-settlement inspection, so you can refer back to details about the home’s conditions and chattels. Here’s a list of specific things to look out for during your inspection:
- Check that all the chattels included in the sale are in good working order, unless earlier specified.
- Check that the lights and curtains work. If you put maintenance work in as a condition of sale, make sure that it has been done.
- Check that the previous occupant has removed all their belongings and rubbish.
- Ensure all keys, garage door remotes and security alarm codes are accounted for and will be available to you on the day of settlement.
A pre-settlement inspection is not the same as a pre-purchase inspection (that is carried out by a building inspector) and is not designed to uncover problems that were there when you agreed to buy the property. If you do uncover any new issues or damage during your pre-settlement inspection, contact your lawyer or conveyancer immediately. Remember, the property doesn’t officially change ownership until settlement day, and you do not need to make the final payment until any issues are resolved.
Make sure your purchase finance is ready
In a standard property sale, you pay the first part of the deposit when you exchange signed copies of the sales and purchase agreement with the seller (the vendor). If you buy at auction, you’ll sign the contract and pay a deposit (usually 10%) on the spot. Once you’ve exchanged signed contracts and paid the deposit, the contract is legally binding, but you do not technically own the property.
On settlement day, you pay the remainder of the deposit. Let’s say that the bank agreed to give you a home loan, provided you contribute a 20% deposit. Generally, you’d pay an initial 10% when you agree to buy the property (on signing the sales and purchase agreement) and the remaining 10% on settlement day. Ensure that you’ve the remainder of the deposit, in this case 10% of the purchase price, ready for settlement. If you are using a KiwiSaver withdrawal towards your deposit, make sure you have completed all the required paperwork ahead of time, so that it can be withdrawn for settlement. Your lawyer or conveyancer can help you with the KiwiSaver withdrawal process.
If you’re still in the early stages of looking for a home and need to organise pre-approval and/or your home loan, take some time to research your options. You can compare home loan providers and products using Canstar’s free comparison tools, below.
Your property insurance needs to be in place
Generally, lenders will require you to arrange property insurance as a prerequisite for finance. You need to arrange insurance before settlement day, so that your property is insured from the day you take possession. Your lawyer or conveyancer will ask for evidence that you have insurance. As with all financial products and services, Canstar recommends you research insurers and policies. We understand that buying a house is a big expense, but avoid the temptation to choose home insurance simply on price. If you do have to make a claim, you want the process to be as painless as possible. Canstar surveys New Zealanders, to find out their level of satisfaction with providers in the market.
The settlement process is largely a legal one, and your lawyer or conveyancer will do most of the work for you behind the scenes. Prior to settlement day, however, you’ll need to visit your legal appointee to sign an authority to transfer the property title, as well as your bank’s home loan and finance agreements, if you are using a home loan.
Other practical things to think about before settlement day
- Book a moving company if you’re using one and plan the move. Settled.govt.nz recommends booking the move for the day after settlement, in case there are unforeseen issues or delays on the day.
- Plan care for children and pets on the day.
- Leave time to clean your new home before you move in your furniture.
- Arrange transfer of services including internet, electricity, gas, and phone.
- If you are renting, notify your landlord that you’re moving and apply to get your bond back.
- Change the address of your contents insurance (if you already have it) and make sure it includes cover during your move. If you need to get home and contents insurance, make sure you do your homework.
What happens on settlement day?
You’ve made it. The big day is here. Congratulations! How good are you at the waiting game? If you don’t know, you’re probably about to find out. There are a number of important administrative things going on in the background that have to happen before you get the keys:
- Your lawyer or conveyancer will pay for the property (using the authority you signed a few days earlier). The money is paid to the seller, via the seller’s lawyer or conveyancer, who gives your lawyer or conveyancer a receipt for payment.
- When this is completed, your lawyer or conveyancer will tell you the sale has gone through and you can collect the keys from the seller’s lawyer, conveyancer or from the agent.
- The seller’s lawyer or conveyancer will release documents to your lawyer or conveyancer, who will arrange for the transfer of ownership and to have your details and the details of your bank or lending company recorded on the record of title.
What are the key things to be aware of with settlement day?
All the steps listed above need to happen in sequence. Unfortunately, if there’s a delay to one step, then you’ll have to wait. This is why it’s often recommended to book a moving company for the day after settlement.
When the documentation and payment has been completed, your lawyer or conveyancer will let you know. You can then collect the keys from your lawyer, conveyancer or from the agent. Property settlement is like a chain, and any broken links in the chain may delay the keys being released to you. If you’re selling a home on the same day, or if the seller is purchasing another home, the chain is longer, and this may also cause delays. So just hold tight!
If you do face any issues, your legal appointee is your first port of call. They can answer any questions and help you to negotiate with the seller to remedy any issues, such as a broken window or missing keys.
Most settlements run smoothly, and the buyer has a new property by the end of the day. However, things can go wrong. Your lawyer or conveyancer is the first person to call if there are any issues. They will be able to answer your questions and guide you.
Lastly, remember to savour the moment and the feeling of unlocking your home for the first time. You’ll only ever buy a first home once, so enjoy the experience – you’ve earned it.
Moved into your first home and want some advice on how to care for it? Read our guide on caring for your home.