Selling a Home
After the sale
Your home has now been sold and it's time to move on. But do you know who gets paid and when? How do you go about notifying your current lender about the upcoming exchange of contracts? What conveyancing options should you consider before you look at transferring property title to the new owners?
This section discusses some of the issues that arise on sale of a property
Who gets paid & when
At settlement, your solicitor or conveyancer usually carries out the transfer. This involves arranging for the balance of the purchase price to be paid either directly to you or into your bank account. Agents normally deduct their commission fee from the deposit after settlement and forward the balance to you.
Discharging your mortgage
To discharge a mortgage your solicitor/conveyancer (or you) will need to i.e.
Contact the bank or lending institution that holds the mortgage to let them know that the mortgage will be discharged, as soon as contracts have been exchanged.
Once they know what is the date of settlement date, they will tell you what the final pay-out figure for the mortgage is (which will include a charge for discharging the mortgage).
Your mortgage provider will be paid out any outstanding amounts. Once the bank is paid out the title deeds may be transferred to the new owner or new mortgage provider.
A document called a Discharge of Mortgage is given to the buyer at settlement, who then lodges it at the Land Titles Office.
Notify your current lender
Discharging the mortgage
To discharge a mortgage you will need to:
- Contact the bank or lending institution that holds the mortgage to let them know that the mortgage will be discharged.
- Once they know the date of settlement, they will tell you what the final pay-out figure for the mortgage is (which will include a charge for discharging the mortgage).
- Your mortgage provider will be paid out any outstanding amounts at settlement. Once the bank is paid out the title deeds may be transferred to the new owner.
- A document called a Discharge of Mortgage is given to your solicitor/conveyancer at settlement, who then lodges it at the Land Titles Office.
Finding additional finance
In some cases, the proceeds of the sale do not cover the remaining mortgage. If the amount is relatively small you could take out a personal loan or sell some of your assets.
If the amount is quite large a course of action would be to get professional advice from your accountant and/or financial adviser.
Government taxes and charges
Capital gains tax (CGT)
A capital gain or loss from a dwelling is ignored for CGT purposes if the dwelling (e.g. a home, an apartment/flat, a strata title unit) was your main residence throughout the ownership period. However, a capital gain or loss may still arise if the dwelling was also used for income-producing purposes. If this arises, you might be entitled to obtain a partial CGT exemption.
Where there is a capital gain, you might be entitled to a 50% discount on the amount of the capital gain for CGT purposes provided that you have owned the CGT asset for at least 12 months.
You can go to the Australian Taxation Office website for more information on CGT.
Property Title transfer
When property is transferred from one owner to another, a 'Land Transfer' form must be lodged and registered with the appropriate State Titles Office. It is this document that records change of ownership.
Your solicitor/conveyancer will usually arrange for the transfer of title deeds, for which there may be a relatively small administrative charge. The cost to register title varies in each state/territory.
Legal matters
Once you've agreed to sell your property to the new owners, it is important that you cross all your "t's" and dot all your "i's" from a legal perspective. Until the day of settlement when the keys are handed over you are still legally in possession of your property, so it's important to make sure all is in order not only to protect yourself and your rights, but also the rights of the buyer.
Property Conveyancing
Once you have found a buyer for your property, conveyancing is the next step in the selling process - where a property is transferred from one party to another. This is usually done via one of three ways: a solicitor, a conveyancer or by the purchaser via a do-it-yourself (DIY) convenyancing kit.
Find out more information on the various methods of conveyancing.
How long does settlement take?
The length of time between exchange of contracts and settlement varies. It normally ranges from four to six weeks. Settlement time is normally dictated by the seller and the banks providing the mortgages, but is negotiated with the buyer.
Final Property Inspection before settlement
Normally a day prior to settlement, the buyer may visit the property for a final inspection to make sure that the property is clean and that all fixtures and fittings that were sold as part of the sale are still there e.g. dishwasher, TV antenna etc. If there are any issues with the state of the house on final inspection, your real estate agent (or you) may be contacted to discuss and resolve the issues.
What if there are problems?
If at any stage you experience problems, you may want to contact your solicitor or conveyancer who might be able to answer your questions or guide you in the right direction.
When your legal ownership of the property ends
The property remains legally your responsibility until settlement day when the keys are handed over and the purchaser takes ownership.
Accidents / Insurance
It is important that you notify your building and contents insurer of the date when your ownership of the property ends, and consider arranging for insurance on your new property (if applicable).
Be aware that while you remain the legal owner of the property, you will be liable for any accidents that occur on the property.
Conveyancing options
Conveyancing is an important step in the buying process - it is where a property is transferred from one party to another. This is usually done via one of three ways: a solicitor, a conveyancer or by the purchaser via a do-it-yourself (DIY) conveyancing kit.
Solicitors are usually the more expensive option, but can provide you with a wide range of legal advice in relation to property, wills etc. Note that in Western Australia you can only use a solicitor for the purchase of a property if that solicitor is also licensed as a conveyancer.
Conveyancers are licensed to provide the same conveyancing services as solicitors, but can only give legal advice relating to property. If you also need advice on other areas, such as tax or your will, you will need to see an appropriate adviser such as a solicitor and/or accountant.
For those who like to be 'hands on' there are DIY conveyancing kits on the market that are suitable for both buying and selling a home, and for auction and private treaty sales. These kits provide a step-by-step guide to conveyancing, and some offer a telephone support service to assist you. The major advantage of going the DIY path is the money you can save, but there are potential pitfalls into which a solicitor or conveyancer is less likely to fall. The professional's indemnity and fidelity cover is also a factor that a buyer may wish to consider.
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