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What actually happens between exchange and settlement

You have signed, exchanged and paid the deposit. Then six weeks of near-silence, while the largest transaction of your life happens somewhere out of sight. Here is what is actually going on, week by week — and the two or three points where it is worth paying attention.

Common questions

Exchange, settlement and the bit in between

How long does settlement take in NSW?

Settlement usually takes place around six weeks after contracts are exchanged. That is the common default rather than a legal requirement, and a different period can be negotiated and written into the contract before you exchange. Longer settlements are often used where a buyer needs to sell first, and shorter ones where both sides are ready.

What is the cooling-off period when buying property in NSW?

When you buy a residential property in NSW you generally have a 5 business day cooling-off period after exchange. It starts as soon as you exchange and ends at 5pm on the fifth business day after the day of exchange. For properties sold off the plan a longer 10 business day cooling-off period applies. There is no cooling-off period if you buy at auction, or if you exchange contracts on the same day as an auction at which the property was passed in.

Can I pull out of the contract after exchange?

During the cooling-off period you can withdraw by giving written notice, but it is not free: you forfeit 0.25% of the purchase price to the vendor, which works out at $250 for every $100,000. After the cooling-off period ends, exchange is binding and walking away is a serious matter that can cost you the full deposit and expose you to further claims. Get advice before you do anything.

What is a 66W certificate?

A 66W certificate is a certificate given to the vendor that waives your cooling-off period, so the contract becomes binding immediately on exchange. Vendors often ask for one in a competitive market. It removes your ability to withdraw and forfeit only 0.25%, so you should always seek advice, and complete your inspections and finance checks, before signing one. It is also possible to reduce or extend the cooling-off period by written agreement with the vendor instead.

Do I still need a bank cheque for settlement in NSW?

No. Settlement in NSW is now done electronically. Cheques and paper documents are no longer required. Your solicitor or licensed conveyancer must be a subscriber to an Electronic Lodgment Network, and the transfer of funds and lodgment of documents happen through an electronic workspace at the scheduled settlement time.

When should I do the final inspection?

On the morning of settlement day. The purpose is to confirm the property is in the same condition as when contracts were exchanged, that anything included in the sale is still there, and that anything excluded has been removed. Doing it the day before defeats the point, because you lose the ability to raise an issue while there is still leverage to have it dealt with at settlement.

What happens if settlement is late?

Delays are common and most are resolved within a day or two, usually because a bank is not ready. The contract sets out what happens, which can include interest and the service of a notice to complete requiring the other side to settle by a set date. Strict time limits apply once a notice is served, and the consequences of failing to meet one can be severe, so contact your solicitor as soon as a delay looks likely rather than after the date has passed.

References

Where this information comes from

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