Loan pre-approvals by banks can be confusing. They aren't a rubber stamp to buy whatever you want, but some buyers are being a little too cautious.
Conveyancing tips and pitfalls in an electronic era
When did you last handle a cheque? If you’re not a banker or professional cashier the answer is probably ‘not recently.’ But within the residential property industry, a cheque remains a currency of choice.
And it’s not just for that 10 or 20 per cent deposit a buyer passes to an estate agent on signing a contract of sale. Go forward in time 60 or 90 days – the typical period in Australia between contract signing and settlement – and a clutch of professionals will gather in a room to effectively just swap cheques on settlement day for that property. And around them in the same room, and together with other rooms in cities across Australia, hundreds of other similar professionals will be dancing this elaborate cheque-spinning waltz, despite us supposedly living in the era of contactless payments.
This highly choreographed process has of course been absolutely necessary to ensure the title of a property isn’t passed from vendor to buyer before all parties with a financial interest in the transaction – the lending institutions, the state revenue office, the rates-collecting local council, utility firms and the solicitors – are paid what they are due and that the responsibility for those payments is correctly apportioned between the buyer and seller, based on the terms of the contract.
This process is now in the throes of becoming purely electronic. Conveyancing and settlement is a state-based system of rules, but a concerted effort is being made to move all jurisdictions to online settlement in the next two years.
The big four banks are instrumental in this migration to PEXA, the electronic settlement system, according to Garth Brown, principal of Sydney-based firm Brown and Brown Conveyancers. “The big four banks are on board for the switch online. That’s 80% of the home loan market. And the smaller banks and credit unions are gradually coming on board as well. The banks are driving this because it is a cost savings to them.”
Once PEXA is mandatory sometime in late 2019 across Australia, the days of DIY conveyancing will be gone. “Only registered practitioners will have access to PEXA,” says Brown. “Which isn’t a bad thing, as you want a professional to do it properly for you.”
I couldn’t agree more. There are so many horror stories of buyers losing tens and even hundreds of thousands of dollars because they tried to do the due diligence on the vendor’s statement and title documents themselves. Robert Ball, a partner at Melbourne-based law firm Henderson & Ball, singles out developers who try to hand ball their own obligations to unwary buyers. “Some developers try to pass on any problems that might arise out of, for instance, soil degradation and other matters,” says Ball. “But the buyer should object to those sorts of clauses and have them removed from the contract.”
The varying rules across the country for conveyancing make it hard to give general advice that applies everywhere. But Brown believes there are some universal procedures buyers need to follow to ensure a smooth settlement with no surprises:
- Gain bank pre-loan approval
- Appoint a professional conveyancer
- Obtain the contract from the vendor’s agent and send it to the purchaser’s conveyancer
- Verify your own identity via an Australia Post office or through the IDFY App. Passports and drivers licenses will be required
- Order a pest and building report and a strata report if high rise
- Consider title insurance.
The dance of the manual settlement cheques may be dying out, but the beat of the conveyancing conga line continues.