How to prepare for property settlement during COVID-19

Before diving into the details, it’s important to understand what’s involved with settlement of an off-the-plan property. With off-the-plan purchases, you  pay a deposit at the time of contract signing, while paying the balance of funds after the property is constructed and completed. In the lead up to settlement, the developer will begin communicating with you 6 months prior to settlement to ensure you are prepared and have finance arranged so you can settle on the due date. This “due date” is as per the terms and conditions of your contract with the developer, and will usually be 14 days after the developer receives titles from the local Council. This 6-month lead-up time will give you plenty of time to arrange finance with your bank, and then your solicitor can arrange to book in settlement of your property once the developer has confirmed the due date for settlement.

At Ironfish, we have a dedicated team to assist our investors to make the property settlement process as smooth and hassle free as possible. Our teams start working with our investors six months before settlement and communicate regularly right up to the day of settlement.

Obtaining A Home Loan

Although banks are now more conscious about a borrower’s ability to make mortgage repayments during this period, providing you can demonstrate a strong savings pattern and meet serviceability requirements, securing a loan should not be challenging – however it may take a number of weeks to finalise. If you’re looking to invest in property or are due for settlement in the next 6 months, begin demonstrating good saving patterns by reducing unnecessary spending and saving a higher percentage of income.

Bank loan assessments are also taking longer to process due to reduced resources in assessment centres due to the global COVID-19 pandemic. Allow a 4-6 week turnaround time from application submission to formal approval. We suggest buyers should start preparing required documentation and start the application process 2 months prior to settlement.

Valuations

As part of the loan process, your selected bank will require a valuation to be conducted on the property you have purchased. This is an independent opinion of the value of the property, however it is important to note this is an “opinion”, and as a result, valuation results can vary from valuer to valuer. It is important to understand that if a valuation does not match the contract price, you will be required to put in more funds towards settlement, or alternatively you can elect to have another valuation done. This process can be slow and frustrating at times, however the Ironfish Client Care Team can work with you through this process, and also ensure you have a quality mortgage broker who can also help you to secure your finance as soon as possible.

Pre-settlement Inspection

Given the different social distancing rules at each state, the pre-settlement inspection procedures may vary from state to state. Developers have implemented strict inspection procedures and set a maximum number of attendees to protect purchasers and workers. Any access to displays or the property itself will be strictly by appointment only. Buyers should keep an eye out for communications from Ironfish and developers for more information closer to completion.

Leasing

Property managers are able to conduct leasing activities subject to the COVID-19 rules and guidelines according to the state the property is in. As a result of these restrictions, getting prospective tenants through your property may take longer than usual. As a result, landlords need to be prepared for potentially a slightly longer lease-up period, and also maybe a slightly lower rent than they were initially expecting. These conditions are only expected over the short term, and by the end of the year the rental market is expected to have strengthened as the short-term rental market returns, and social distancing rules are eased. In order to ensure you maximise rental returns and minimise vacancy, it is highly recommended to select a highly experienced property manager who can assist with navigating the current rental market conditions.