Why Property Settlement Is A Crucial Step In The Real Estate Process
There’s more to real estate property transactions than just the buy and sell process, one of which is the property settlement stage and is as important as closing a deal.
You might be thinking, buying or selling a property can be a complex and stressful process in itself. So why add more burden to buyers, sellers and agents?
The importance of the property settlement process
Property settlement is the final stage of the transaction and involves the transfer of ownership from the seller to the buyer.
It is crucial for both the buyer and the seller to understand what happens during a real estate property settlement and what to expect from the process.
That is why the property settlement process should never be left out and its importance should never be understated.
There are documents and requirements that are essential in a real estate transaction and can sometimes be neglected or forgotten, but are in fact critical to the process as they help ensure a smooth and legally-compliant transaction.
Here are a few examples of often overlooked documents and requirements:
Property survey
A property survey is a document that shows the exact boundaries and features of the property being sold, but it should not be mistaken as the property title itself.
This document may be required by the lender to ensure that the property is free from any issues, such as boundary disputes or zoning violations.
For instance, a buyer purchased a property without a property survey and found out later that it encroached onto a neighbouring property.
This could lead to a legal dispute and may cost the buyer thousands of dollars in legal fees and more.
Building Permits
Building permits are required for any major construction or renovation work on a property. Not having these can result in legal issues and fines.
For example, a seller completed a major renovation on their property without obtaining the necessary building permits.
The buyer only discovered this after the purchase was completed, which led to a legal dispute and the seller being forced to pay the fines and obtain the necessary permits.
Title Insurance
The title insurance is a type of insurance that protects the buyer and lender against any defects or issues with the title of the property.
Title issues can include liens, encumbrances, or other legal issues that may affect the ownership of the property.
If a buyer purchased a property without obtaining title insurance, only to discover later that the property had a tax lien, this can cause legal problems and the buyer having to pay the outstanding taxes.
Homeowners Association (HOA) Documents
If the property is located in a community with a homeowners association, there may be additional documents and requirements involved in the transaction, in most cases.
These can include HOA bylaws, financial statements, and disclosures.
For example, a buyer purchased a property in a community with an HOA, only to find out that the HOA had a special assessment that was not disclosed in the documents, which can cause more hassle to the buyer and sometimes even being forced to pay the special assessment.
What happens during a property settlement
It is important to be aware and understand how a property settlement process takes place. Here’s a good example of a property settlement process.
Appointing a settlement Agent
The first step in the property settlement process is the appointment of a settlement agent, also known as a conveyancer
A settlement agent is a licensed professional, oftentimes a lawyer, who is responsible for conducting the settlement process on behalf of the buyer and seller.
The settlement agent is usually appointed by the seller, but the buyer can also appoint their own settlement agent.
Preparation of the Settlement Statement
Once the settlement agent is appointed, they will prepare a settlement statement, which outlines the details of the transaction, including the purchase price, deposit, and any other fees or charges associated with the transaction.
Verification of the Settlement Statement
Both the buyer and the seller will receive a copy of the settlement statement for verification.
It is important to carefully review the settlement statement to ensure that all the details are correct and that there are no errors.
Transfer of funds or payment
On the day of settlement, the buyer will transfer the balance of the purchase price to the settlement agent, as agreed.
After which the settlement agent will then turnover the funds to the seller and any other parties involved in the transaction, such as mortgage lenders or real estate agents.
Transfer of Ownership
Once the funds have been transferred, the settlement agent will lodge the transfer of ownership with the relevant government authority.
The transfer of ownership will only be completed once the government authority has processed the transfer and updated the land registry.
Best ways to anticipate a property settlement
Regardless if you are the seller or buyer, it is crucial to factor in the property settlement process into your real estate journey.
Here are some of the best practices to make the most out of the process.
Anticipate and Plan ahead
It’s important to plan ahead for the settlement process, including securing the necessary funds, arranging for inspections, and scheduling movers.
Having a checklist can help ensure that everything is in order and ready for settlement day.
Communicate clearly
Good communication is key during the settlement process.
It’s important to keep all parties informed of any changes or issues that arise and to be responsive to any requests or questions.
Review all documents thoroughly and carefully
Buyers and sellers should carefully review all documents involved in the settlement process, including the purchase agreement, settlement statement, and any loan documents.
If there are any questions or concerns, they should be addressed with the appropriate parties.
Attend the settlement meeting
It’s important for both buyers and sellers to attend the settlement meeting in person, if possible.
This allows for any last-minute questions or issues to be addressed and ensures that all parties are on the same page.
Follow up after settlement
Once the settlement is done, buyers and sellers should follow up with any outstanding issues, such as repairs or payments, to ensure that everything is completed as agreed upon.
Conclusion
Neglecting or forgetting critical documents and requirements in a real estate transaction can lead to legal issues, financial losses, and disputes.
Buyers and sellers are advised to work with experienced professionals to ensure that all necessary documents are presented, any outstanding issues resolved, and all requirements are complied with to avoid any surprises or issues down the road.
It is important for both buyers and sellers to understand the property settlement process and what to expect from each of the parties involved.
By following these steps and understanding the expectations of the property settlement the process can be completed smoothly and without any issues.
Need help in buying or selling property and going through a property settlement process? Let Northlink take the hassle out of your real estate journey and turn it into a memorable and enjoyable experience for you.