Why You Need a Settlement Agent

Have you ever wondered why we need to appoint a Settlement Agent? Or what a Settlement Agent actually does? Here is an outline of the process involved once you have purchased a home.

Every property transaction is different, so this is only a guide to the steps a Settlement Agent will take.


Step One:

When you are purchasing a property through a licensed Real Estate Agent in WA you will be required to sign an Offer and Acceptance Contract. This is the form that you will complete with your Real Estate Agent prior to submitting to the vendor (seller) to have the purchase price amount accepted. If the vendor does accept your offer, they will then also sign the back of the form and return to the Real Estate Agent. There will be times when you are going back and forth with different amounts before agreeing on a sale price.


At this point you will be asked to nominate a Settlement Agent. It would be ideal to do your research on Settlement Agents and their pricing prior to this; however, in most cases the purchaser will rely on the Real Estate Agent to make a recommendation. It is important to remember that you do not need to accept the nominated agent; you can nominate any agent you choose. Your mortgage broker will most likely have access to Settlement Agent details as well. It would be wise to get a quote from at least a couple of agents to compare price and service. You may even receive a discount from the Settlement Agent if you ask for it. It has been my experience that most agents do offer discounts. If you are undecided at the time of signing you can have the agent write “To be advised” (TBA) in the space provided.


Step Two:

Your Settlement Agent will need a copy of the Offer and Acceptance Contract. You can arrange this through the Real Estate Agent or Finance Broker. It is a requirement by law that you receive copies of all relevant documents relating to the purchase of the property. Read everything. Establish if there is any potential conflict of interest and ensure that any such conflict is disclosed in the contract, (this may be simply that a particular real estate agency regularly refers their clients to a particular settlement agency. Whether or not they receive any financial benefit from such a referral, it is a requirement that such an association is disclosed in the contract). If the property is Strata Titled (i.e. unit, villa or townhouse) you must receive copies of The Strata Titles Act disclosures. These forms will also need to be provided to the Finance Broker so that they can be submitted to the lender. The Settlement Agent will now conduct a title search on the property and identify any encumbrances that may need to be removed at settlement.


Step Three:

Once the Settlement Agent has been notified by the relevant parties, they will be required to contact you and have an “Authority to Act” form signed and returned to their office. This will obviously give the agent the necessary authority to obtain the required information and attend the settlement on your behalf. In some cases the agent for the seller and the purchaser may be the same agent.


Step Four:

At this point the agent will be attending to any outstanding conditions that have been listed on the Offer and Acceptance. E.g. termite inspection, building inspection, any repairs required etc. There may be penalties incurred by the seller if the settlement is delayed for any outstanding items that they have not completed prior to the settlement date.


Step Five:

Until all of the conditions on the contract are met, the offer will remain conditional. It is generally accepted that once finance approval has been granted to the purchaser, then the offer will become unconditional. The agent will now start to prepare documentation such as the Transfer of Land, preliminary settlement statement and confirmation of the settlement date. The Transfer of Land will be sent to the seller’s Settlement Agent to arrange for their signing as well. The agent will also need to confirm that any encumbrances or caveats have been removed or are being removed at settlement.


Step Seven:

The signed authorities and Transfer of Land need to be returned to the Settlement Agent for actioning. Stamp duty may need to be paid prior to settlement to allow for the stamping to be effected on the transfer. Check with your Settlement Agent whether they have the provision to enable stamping prior to settlement. In some cases the agents do not have access to funds prior to settlement and the purchaser will need to supply the monies. If you are borrowing the stamp duty as part of your home loan, you may find this difficult to achieve. Discuss this with the agent and your finance broker.


Step Six:

A final settlement statement can now be provided to the purchaser. This may include an adjustment for land and water rates, stamp duty, titles search fees and sundries. The Settlement Agent will confirm that there are no outstanding contractual conditions. They will also confirm the settlement date with the purchaser, the Settlement Agent for the seller and the lending institution (via the Finance Broker). The seller should also have organised a discharge of mortgage with their own lender if there was an outstanding home loan on the property. Any delays from their lender could mean that penalties may apply.


Step Eight:

On the day of settlement the agent will once again do a Certificate of Title search to make sure there are no additional caveats or charges lodged. The agent will attend the settlement with the seller’s agent and arrange for monies to be exchanged for an encumbrance free certificate of title. The lender will now be able to lodge their mortgage over the property on behalf of the purchaser. All relevant parties will be notified that the settlement has been effected. If the settlement has been called off for any reason, the Settlement Agent will rectify the problem and arrange to nominate a new settlement date. In WA we are allowed three days grace for the settlement to occur, if it does not happen in this timeframe, then penalties may apply.


Step Nine:

After the settlement the agent will make sure there are no outstanding monies held or to be paid and notify the purchaser in writing that settlement has occurred. This is a basic step by step outline of a simple settlement transaction. Every settlement is different and some could involve many more steps. Do your research and make sure you feel comfortable with your choice of agent.

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