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What Can Go Wrong? 9 Possible Settlement Problems and How to Avoid Them

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What Can Go Wrong? 9 Possible Settlement Problems and How to Avoid Them

Problems with acquiring timely and appropriate financial documents is one of the most common reasons for settlement delays.

If a buyer is not financially prepared, settlement can become a lengthy and stressful process.

Check out 9 of these possible settlement problems, and learn how you can best avoid them.

1. Finance Issues

Settlement can be delayed if the buyer is not fully prepared or approved with their bank. The buyer will likely need a mortgage and a home loan to ensure the settlement process, however, sometimes banks are not ready in time before the settlement date comes up.


In order to avoid this problem, keep an open communication between both parties, and return all documentation as quickly as possible. Many brokers actively assist and coordinate communication between buyer and seller, and work to ensure that both parties meet the agreed upon deadline.

2. Final Inspection

Buyers have the right to an inspection before settlement, to certify that everything is in the same condition as when they bought it. Issues may occur if the seller has not maintained the appropriate or agreed upon condition. Many sale contracts legally and directly state conditions that the seller must adhere to in order to close the sale.


Examples of this may be:

  • That a standard of cleanliness is required.
  • Certain repairs must be made.
  • Furniture is included.

If these conditions are not met by the selling party, this could result in delayed settlement. Buyers should take reasonable steps to ensure that the property they’ve purchased is sold to them in the condition that was agreed upon.

3. Late Documents

House settlement requires many steps and can be complicated for some.Many documents must be returned within a strict deadline, and the settlement can be delayed if certain documents are not signed or returned on time.

Throughout the settlement process, make sure to be efficient with any documents you’re handling, and return them within the deadline.

4. Legal Obligations

Across Australia, the legislation regarding sales and settlement periods is dependent on the state you live. For example, in Victoria, a buyer doesn’t have the right to receive penalty interest if a vendor delays settlement.

If you’re selling a property and the purchaser chooses to delay, you are within your right to charge penalty interest. After 10 business days delay, either party has the right to rescind the contract.


5. Allow time

Selling or buying a house is an exciting experience!

It’s not uncommon for either party to want to agree to a 14-day or 21-day settlement, with the intent of speeding up the process.

Although a 14-day settlement sounds ideal, it may make it difficult or impossible for funds to be arranged.

We strongly recommend 21 days as a minimum for settlement, as this allows a good amount of organisational time for both parties.

6. Cover note

A cover note is a temporary form of insurance that is offered until a full insurance policy is issued. We recommend having a cover note in order before the settlement period arises.

On the off chance that your property is damaged during the period between deposit and settlement, you want to ensure that you will be covered. A cover note is a necessary security measure to eliminate the element of stress that would occur if anything was to go wrong.

7. Subject Sales

Many home buyers are dependent on the sale of another property. Whilst this must be disclosed during the contract negotiation, sometimes issues may arise that delay the settlement.

Whilst complications that may arise from subject sales are harder to avoid, you can greatly reduce the chance of them happening by following our other tips and tricks, namely: submitting all documentation in an efficient and timely manner, and identifying and avoiding other potential risks.


8. Seller Delays

Sellers can also delay settlement, one major issue that could arise is if the seller or their tenants does not move out of the house on time. This issue can often be solved with communication, or revisitation of terms and conditions within the original sale contract. In more extreme cases a relevant state authority can be contacted in order to evict the tenants.

9. Tips and Tricks

Whether you’re the buyer or the seller, the best way to streamline the settlement process is to be organised as early as possible. Take simple steps in order to reduce stress and minimise the chances of settlement delays.

dream home

Key takeaways:

  • Ensure funds for your deposit/contribution payment are cleared in your bank account.
  • Have an open communication between both the seller and the buyer.
  • Pay attention to details and double check documents.
  • Arrange for a cover note, and any added security to reduce risk factors.
  • Allow a decent amount of time for the settlement.

A delay in settlement can disrupt the flow of the moving process for both the buyer and seller. Organisation and preparation is the most crucial aspect to avoiding these delays.

We hope we’ve been able to help prepare you for how to best identify and avoid settlement problems. For more tips and tricks; check out our other helpful guides on the Homesta app.