GlobalX CEO Peter Maloney says buyer preferences to move on a weekend often drive the high volume of Friday settlements, with families, couples and new owners picking up the house keys on a Friday and moving the following day. But it is this very fact that leads many to sever disappoint and additional cost. Peter explains.
Kevin: It seems fairly traditional that when you buy a property, you probably want to settle on a Friday, thinking that maybe you can move in over the weekend. There might be some good reasons why you might want to rethink that strategy. A recent survey of conveyancers has brought to light some interesting insights into when it might be best to settle a property and why.Joining me to explain it, the GlobalX CEO, Peter Maloney.
Peter, this is some research you did. Were you really surprised about the busiest day being a Friday?
Peter:Kevin, thanks for having us on.
Not really. It’s been a long-held tradition in Australia that property settlements would occur on a Friday. It flies in the face of what you’d normally say contractual settlement times are because if you were signing up for a 30-day settlement, the calendar would suggest you settle on a Monday, and for 45 days, you should be settling on a Tuesday, and a 60-day settlement, you should be settling on a Wednesday.
But it appears that the long-held tradition of consumers wanting to settle on the Friday so that they can move in over the weekend has held true for a very long time.
Kevin: There might be some good reasons why you shouldn’t. I was surprised to hear out of the research that one in five settlements is actually delayed due to human error. That could cause a lot of angst and grief, especially if you’re looking at a settlement at, say, 3:00 or 4:00 on a Friday afternoon.
Peter: Absolutely. And Kevin, that is one of the most popular times. Settlements peak on a Friday between 2:00 and 4:00, so there is not much wiggle room between then and close of business on a Friday at 5:00 p.m. in the day.
Kevin: You cite in the outcome of the research that some of the conveyancing errors include things like missing signatures. These small things can actually derail that settlement, but I would have thought a lot of that would be found well in advance of the day of settlement.
Peter: You’d think so, but the small things that fail a property settlement occur every single day: misspelled names, inconsistency of the names between the contractof sale and the mortgage instrument. In those situations, you have two different groups preparing documents for one property settlement, and when humans are involved, errors creep in.
Kevin: Is it becoming easier because a lot of these documents are done online? Are we doing away with paper?
Peter: That’s the emerging great change that’s set to hit the property market in Australia. The emergence of electronic conveyancing would, in essence, remove virtually all human error from the settlement process but also give consumers the opportunity to settle on any day of the week and at any time, because we’re not relying on human capital to facilitate the property settlement.
Kevin: Of course, there’s nothing to say that you’d have to settle one day and then move into the house the next day; there could be several days.And in fact, just thinking about this, if you had a settlement set for a Monday and there was a bit of a hiccup, it gives you some time to actually work through those issues. You don’t have to settle right then, but you may want to settle the next day.
Peter: Absolutely. Yes, we would recommend to all your listeners that when you’ve just bought your property and you’re looking to negotiate a settlement day, try and aim for the middle of the week – aim for the Tuesday or the Wednesday. If anything does go wrong with your property settlement, it gives you two days through to that Friday and you can still bump into your new property on the weekend.
Kevin: Buyers are entitled to have a pre-settlement inspection. If you go into the property and see an hour or two before the settlement is due that there is something wrong, it doesn’t mean the property can’t settle; you can simply withhold some funds at that point, Peter.
Peter: That’s right. Final inspections is the third largest reason why scheduled settlements don’t take effect. And everything that your listeners would be aware of: it could be damages to the internal property or the description that they thought they were buying doesn’t actually hold true.
Final inspections, if they are done early in the week, it still does provide enough time to negotiate a final payment that is withheld or have the problem remedied.
Kevin: That withholding funds is something a lot of buyers and sellers are not aware that they can do, but I imagine most solicitors would.
How many settlements are disrupted like that, Peter, in your experience?
Peter: I’m not sure of the actual number, but overall around the country, around about one in five – so 20% – of property settlements don’t occur on the day or the time they’re scheduled to occur.
The most common reason is inconsistency on the documentation – and that is largely around names – or insufficient settlement funds being prepared on the day of settlement, and then comes final inspection, so it would be a large number.
Kevin: I’ve been to a couple of settlements in my career, and I was so excited when I went to the first one. I thought there would be this wonderful ceremony, but it was almost like a non-event, just passing paper over.These massive checks were handed over, and it was all over in a matter of seconds.
Peter: Absolutely. The settlement clerks require a meticulous eye for detail because the ultimate outcome is a proprietor’s name is registered on title. But there isn’t a lot of fanfare at a settlement. It is really document checking, exchange of checks, and the handing over of the title deed.
Kevin: I wouldn’t recommend anyone go to it thinking there is going to be popping champagne. It just doesn’t happen.
Peter: No, wait until they get into the new house to pop the champagne.
Kevin: Absolutely. Peter, it must be a nightmare for conveyancers and property lawyers when everything comes to a head and everyone wants to have a settlement around 3:00 or 4:00 on a Friday afternoon. How have you got staff to cover it all?
Peter: That’s a bit about the nature of the industry. The industry largely works on human resources that are relatively flat during the week and then on Fridays, the volume of staff working in property settlements jumps by about 50%. That gap is largely filled by casual staff, and most of those casual staff are studying law.
Kevin: Yes, great experience for them.
Peter, great talking to you, mate. Thank you very much. Peter Maloney is the GlobalX CEO, and a brief explanation there about maybe changing your thought about when you should settle that next property. Peter, thank you very much for your time.
Peter: Terrific. Thanks, Kevin.