An introduction to settlement. When buying off the plan, buyers have to wait for their dream home or investment property to be completed. In this market insight we outline the steps required to satisfactorily settle a house and land package.
What is Settlement?
Settlement is the date when the property title is transferred into the name of the purchaser, and the balance of the purchase price is paid to the developer. In the case of a house and land package, the land must be settled first before the builder commences the construction of the home. Technically the settlement is managed separately. The land settles and then the house settles. It’s still once asset, but there are two signed agreement in place. The final settlement of a house and land package occurs once the house has been erected and you have completed a key-handover.
What needs to be prepared prior to settling the land?
There are a few things you need to do to prepare for settlement. The better you are prepared the easier and more enjoyable the process becomes. Having some professionals such as a mortgage brokers, property advocates and conveyancers are trusted partners to make it a seamless process.
Nominating a builder to construct the house:
In most cases, we suggest nominating a builder at the time of purchasing the land. Having this done simultaneously ensures you know what you are paying for. A full turn-key solution is the most ideal as the prices are fixed and it includes everything such site costs, fencing, build permits etc
If you haven’t nominated a builder at the time you’ve purchased your land, you should have one selected at least approximately 3 months prior to settling the land. This will provide the bank with a clear understanding to what you are buying, what’s included and how much they may lend you. You don’t want to leave this any later in case you encounter any delays.
Submitting your loan application:
Most buyers will use a loan to purchase the property. Due to the time it takes to process a loan application, you should work with a mortgage broker. They will also suggest commencing the loan application in advance to provide ample time to complete it. The general lending stages are:
- Loan application submission
- Conditional approval (approval subject to further information or clarification)
- Unconditional approval
- Letter of offer (formal approval)
- Issuing of loan documents (signing and reviewing the terms and conditions)
- Settlement
This can take some time, so it’s very important to start this process early to avoid settlement delays or any potential penalties.
Submitting developer and council approval:
Once you and the builder have assessed your block and chosen a particular floor plan, front façade and landscaping, you’ll need to seek a developer approval. The land developer will have set builder guidelines such as the inclusion of a recycled water tank or a required set back from the street. Once the developer has provided an approval and you have officially settled the land, you can now progress to obtaining a council approval. This stage can vary given the local government authorities. It general terms, this may take approximately 4-6 weeks.
Post the approvals, the builder can get on site, organise soil tests and get building!
Communicate closely with your conveyancer:
Once titles are issued, your nominated conveyancer or legal representative will be notified. A good conveyancer will keep you updated, but as they may have multiple settlements in a week or day, its wise to touch base with them to ensure everything is prepared. Your lender also needs to be readily available to settle to purchase to. Once the land titles, you normally have 14 days to meet settlement.
Construction of the home:
There are a variety of build stages where your bank will fund the builder to construct the home. You will have the following:
- Stage 1: Site works
- Stage 2: Slab down
- Stage 3: Frame stage
- Stage 4: Roof installation
- Stage 5: Lockup
- Stage 6: Fixtures and fittings
- Stage 7: Practical completion
- Stage 8: Handover
Once the home has been satisfactorily completed, you’ll have a key-handover. At this time, it becomes your brand new completed home. This is where you realise how rewarding the process was!
What should I do?
Before buying a property, we recommend seeking professional property advice. At Crest Property Investments we specialise in sourcing brand new and off the plan properties for buyers. We also do not charge fees to buyers! If you’d like to learn more, please feel free to contact us. We welcome the opportunity to help you make the best property decision. If you’d like to learn other helpful tips on buying property, you can also visit our YouTube channel.
While we have taken care to ensure the information above is true and correct at the time of publication, changes in circumstances and legislation after the displayed date may impact the accuracy of this article. If you want to learn more please contact us. We welcome the opportunity to assist you.
March 2021
