Property settlement moving towards digital age
While you might be pounding the streets of Perth or Melbourne looking at houses for sale, you’re only at the beginning of the journey. Of course there’s plenty to do: Home loans need to be applied for and there are myriad listings to view. After you get all the inspections done and you’re happy to move forward, there’s still negotiating the contract.
Once all that is completed and you’ve signed on the dotted line, there is just one more thing to do – settle the sale. Of course, before this happens, you’ll be able to inspect the property one last time to make sure you’re getting it in the condition you bought it in (accounting for fair wear and tear). So, what does settlement entail?
Currently, the last step of a property sale involves transferring the title from one party to another. This is a bit more complex than it sounds, and involves settling any existing mortgage(s) and taxes and rates, as well as addressing covenants on the title or conditions in the sale contract.
This can involve multiple parties, including the financial institutions holding the mortgage for both the buyer and seller, as well as the settlement agent or solicitors acting on behalf of both parties. If you like, you can be there too – but your representative is covering this on your behalf. Once this process has taken place, your real estate agent is given the go ahead to hand over the keys.
Over the past couple years, the conveyancing industry has been undergoing a change, moving to a digital system known as PEXA – named after Property Exchange Australia Ltd (PEXA Ltd). The electronic method of transfer is expected to save Australians billions of dollars in reduced transaction fees, not to mention the amount of paper it will save.
Another benefit of moving away from a paper system is that digitally held data is safer, as well as easier to populate in multiple systems without double entry by several people. Hopefully, this also leads to greater transparency for consumers as well.
Just how much money are we set to save? According to research by PricewaterhouseCoopers, the average transaction can be reduced in cost by around $75. When you add up the amount of transactions that will eventually be run through the system, this adds up to billions and billions of dollars. Businesses are also poised to take advantage of greater efficiencies, are as all levels of government.
Unfortunately, delays in the rollout of this new conveyancing technique could be creating undue costs for Australia’s biggest asset base. The PwC Digital Property Report shows that the residential property market is worth $5.7trillion, significantly more than the country’s GDP of $1.58trillion.
Real estate in Australia isn’t only our biggest asset – it’s one of our biggest earners. Recent research by the Property Council of Australia reveals that the sector accounts for one-ninth of the country’s gross domestic product at $182.5billion.
Opportunities to streamline the purchase of rental properties or owner-occupied dwellings represent a chance to impact the entire economy for the better. It is therefore imperative that conveyancing catches up with the rest of the economy and moves into the digital space.
Of course there is scope for improvement all along the supply chain, and moving building approvals systems and other registries online will serve to reduce legal costs for builders and buyers.
“Property transfer affects everyone buying or selling a home. Fast, safe and efficient transactions will occur with state governments, lenders and property professionals collaborating to drive change,” said Marcus Price, CEO of PEXA in a 9 June Property Council release.
With 20 per cent of property settlements experiencing long delays, according to the PwC report, it’s essential that we move towards the electronic future of conveyancing as soon as possible.