How to ensure funds have cleared before handing over keys/title?

Assuming Terry_w is right (this is why I like refernerces ), once the transfer papers are in, there is no gate to ensure the funds are processed because that function is performed by a different body. However the disconnect between the different bodies creates shortfalls within the whole process. The simplest answer in my mind is for the conveyancer not to lodge the transfer papers until the payment is secured.

Given the transfer transaction takes a bit of time, would the buyer really care about a 3 day delay per earlier comment?

Would you really need two settlements? Doesn't the conveyancer hold the title in trust for the buyer? This is the bit I need to flowchart

 

Everything I know about producing fraudulant bank cheques comes from the movies. "Catch me if you can", staring Leo De Caprio. Fun movie, but it does give the impression that creating a false check these days is far from trivial.

Conveyancers are far better suited to comment on what happens behind the scenes, but my observation is simply that it's not instantanious.

The paper trail is important. The banks and the police take any sort of fraud very, very seriously. They're very good at following up and procecuting where appropriate and the bad guys in these scenarios do tend to leave their own trail of evidence. You'd have to be very cunning to not get caught and in the situation described the vendor would almost certainly get the property back. It would cause a lot of stress in the meantime however.

These things all provide safe guards to the problem. The chance of being caught is so high you'd be mad to be directly subject to Australian laws. If they're borrowing money to complete the transaction, there's checks and balances on multiple levels to avoid this problem. A solicitor or conveyancer wouldn't want to be associated any part of fraud and there's a high probability they'd pick up on it before it occured.

 

Maybe. I know the process because I have settled two of my own properties in Perth. Our land titles registration is done by Landgate so they may have something on their website but this may vary state to state.

 

@Peter_Tersteeg

I agree. I was also trying to explain to my mates that their property is not that special to warrant a risk on a buyers side...

 

@Perthguy I'll dig around. I'm past critical mass in my investment in this now

 

At settlements in QLD there are normally 4 parties.

1. Seller's solicitor
2. Seller's Bank
3. Buyer's solicitor
4. Buyer's Bank

If Buyer was paying cash then Buyer's Solicitor would get money from buyer cleared into their trust account and then get bank cheques drawn.

If Buyer was borrowing then Buyer's bank turns up at settlement with bank cheques

Seller's bank won't accept dodgy looking chq

If Seller has no bank then Seller's solicitor won't accept dodgy looking chq

 

I'm trying to remember the process from when I did my own settlements but there is definitely an issue with your proposal. At settlement, the transfer papers are given to the purchaser's conveyancer, the vendor's conveyancer does not hold them. You would have to have an agreement with the purchaser's conveyancer not to lodge the transfer papers until the funds have cleared.

I really think that you are overthinking this.

 

If you are borrowing though, it is the Buyer's bank that lodges the transfers.

 

LOL. I think about this as though I was coding up a program - unhandled exceptions = crash and burn. But I think I'll heed your warning. Time to get some coolant from the bar fridge

 

Is your friend chinese by chance? We have had several purchaser clients over the years (of chinese heritage) who are almost paranoid about fraud, asking similar questions and having related fears that they will be "done" out of RE transactions. One client regaled me of her horror story, as a buyer in China, exchanging on a property only to have the vendor then reneg just before settlement (wanting to exit and resell as market had moved upwards so quickly), a corrupt court hearing following (with the officials apparently being bribed by the vendor) and the loss of both the property and their deposit. I had to assure her repeatedly that here in Australia we have laws preventing this type of situation from occurring but I could understand her nervousness....

Reiterating what Terry, Peter et al have stated above. Certainly not a problem that we have EVER encountered in our hundreds of transactions with purchasers, and we've been transacting deals in business for 10.5yrs now....

 

That makes sense. Settlement is so fast that I couldn't remember at the end who got what paperwork.

 

It is good to understand the process. Pretty much, if the buyer is buying the property with borrowed money, no issue. If the buyer is paying cash, then refer above re: funds transferred to a trust account then a bank cheque drawn. Even doing my own settlement as a buyer, I still didn't order my own cheques. The bank's solicitor had the cheques drawn up.

You hear about "settlements" all the time but you would be amazed if you actually went to one. In WA there are usually 4 parties: vendor's bank's solicitor and settlement agent and the buyers bank's solicitor and settlement agent. There a cheques exchanged and documents such as the transfer of title application. It litereally takes under a minute for "settlement". The settlement is booked in for a certain time, the parties stand around a table and have a quick chat pre-settlement, then cheques and documents are exchanged, the parties farewell each other and leave. The greeting and farewelling take longer than the settlement.

 

While all the information here is great, I can see the root cause of the problem is the banks....
Originally they only accepted Bank Cheques as they were seen as cash and cleared funds. However with fraudulent activity and the like, they now need 3+ days to clear..... While you would hope that all solicitors and conveyancers would get the funds prior into a trust account and then TT the funds on settlement...... However, as we all know, old school conveyancors and solicitors just aren't that tech savy and still just use the old settlement process of bank cheques.

When it comes down to it... at settlement, the buyer gets the keys and moves in and you get a nice 3-5 day wait before you get the funds to use !!! While for most this isn't a big deal, for some it is a pain as you are looking to buy/settle another place with those funds - which then gets delayed.

For my next property, I am going old school.... At settlement - it's CASH ONLY. See if the banking sector starts to rethink its approach to poor systems when it has a few million in cash coming out of banks each day. Yeah Yeah - i here people mumbling "thief, robbery" but hey get the buyer to put into your account (not your issue).

Anyway - just my 2 cents.... and how cool laying in a bed with a million in cash around you.

 

You will find it very hard to find a buyer to pay cash. probably 90% or more borrow to buy the property. The lenders lends the money secured on a mortgage - you give them the title and they hand over the money (and hope that they can register it later).

To receive 'cash' someone would need to walk in with a suitcase. $1mil in cash is a few suitcases.

If the buyer were to deposit the cash into their solicitor's trust account then this would still need to be paid into the other solicitor's trust account via transfer or cheques drawn.

They could pay it into the seller's solicitor's trust account, but they do not have a client/solicitor relationship so there is a risk.

In summary - not practical.

 

Not sure about other states but in NSW, the standard form contract allows for up to $2,000.00 to be paid in cash on settlement.

The remainder is to be paid by way of settlement cheques. Of course you could ask for your conveyancer/solicitor to request an amendment to the Contract however I am not sure how long it would take to count $998,000.00 in cash whilst attempting to ensure no counterfeit notes. I would certainly not be prepared to take on this liability.

These concerns can be alleviated if your sale/purchase is settled electronically through PEXA which I note has been mentioned earlier in this thread. Sellers have the proceeds of their sale processed as cleared funds and buyers have transfer documents lodged instantly at the relevant Land Titles Office.

See Lawyers & Conveyancers | PEXA
for more information and ask your conveyancer/solicitor whether they are registered for PEXA and have experience conducting online settlements.

 

As @Terry_w said.... you will have trouble finding a cash buyer in the first place and then there are other logistical problems.

 

Can you imagine walking out with $1mil in cash.

 

Good way to get mugged in the street me thinks !

 

Good luck!

Not cool.

 

[QUOTE="shmoopty, post: 165916,]

- Is there a way to determine if the bank check is genuine?
If we can verify the cheque is real - no more worries (but it seems it takes the bank 3 days to do this).




Another question springs to mind, if everything is so hunky-dory, why do the banks take 3 days to check the validity of the cheques?

.[/QUOTE]
I did a settlement last year doing my own conveyancing. St George brought a bank cheque around to the settlement. Aftersettlement I walked the 50 m to the St George branch that drew the bank cheque to put in my account there and was told it would take 3 days to clear in case of fraud.