Who pays settlement fees buyer or seller?

Standing on the threshold of settlement day often feels like finishing a marathon. You have negotiated the sale price, satisfied finance clauses and counted the sleeps until the keys change hands. Yet just before the finish line lies a less celebrated but critical topic settlement fees. Many Victorians still ask, "Do I pay them, or does the other party pick up the bill?" In this long form guide, written especially for readers in Melbourne, we break the issue down step by step so you can budget with confidence and avoid last-minute surprises.

Understanding Settlement and Its Costs

"Settlement" is the legal hand-over of the property title from seller (vendor) to buyer (purchaser). In Victoria the date is fixed in the contract of sale, usually 30–90 days after exchange, and on that day the buyer pays the balance of the price, the title is transferred and possession passes. The event triggers a cluster of fees, taxes and adjustments that arise because government departments must register the new ownership, banks must release or create mortgages and professionals (conveyancers, solicitors, settlement agents) must coordinate the paperwork. Who pays which fee rests largely on long-standing practice rather than statutory rule.

Quick Snapshot – Who Pays What?

• Buyers usually cover stamp duty, land transfer registration, loan costs and their own conveyancing fees.
• Sellers usually cover real-estate agent commission, marketing, mortgage discharge fees and their own conveyancing fees.
• Both parties share outgoings such as council rates via a settlement adjustment.

Let us explore each category in detail.

Buyer Settlement Costs in Victoria

1. Stamp Duty

Stamp duty (technically titled "land transfer duty") is the elephant in the room. In Victoria the duty is assessed on the purchase price or market value and is paid by the buyer, usually at settlement or within 30 days after. First-home buyers may access concessions, but everyone else should budget roughly 5 per cent of the price.

2. Land Transfer and Mortgage Registration Fees

Land Use Victoria charges a government fee to record the new owner and, if applicable, to register the mortgage. Although modest compared with stamp duty, these are still buyer costs.

3. Lender Fees and Lenders Mortgage Insurance

Loan application, valuation and settlement attendance fees sit with the buyer because the lender is acting for them. When borrowing more than 80 per cent of the value, the bank may also require Lenders Mortgage Insurance.

4. Buyer Conveyancing Fees

Professional fees for a Melbourne conveyancer generally range between $600 and $1,400 plus disbursements. Disbursements include title searches, planning certificates and verification of identity checks.

5. Building, Pest and Strata Inspections

Optional but highly recommended, inspection reports protect the buyer and are therefore a buyer expense.

6. Settlement Adjustments

Council and water rates, land tax (on non-principal residences) and owners corporation levies are paid by whoever enjoys the property for that period. If the vendor has paid a yearly rate in advance the buyer reimburses the unused portion through an "adjustment" shown on the settlement statement.

Seller Settlement Costs in Victoria

1. Real-Estate Agent Commission and Marketing

Commission averages 1.6–2.5 per cent of the sale price in greater Melbourne and is the seller's largest outgoing. Marketing packages for photography, listing portals and board signage also fall on the vendor before or at settlement.

2. Mortgage Discharge Fees

If the property is mortgaged the bank will charge a discharge or settlement fee, typically $160–$600, to remove its interest from the title. Early-exit break costs may apply to fixed-rate loans.

3. Seller Conveyancing Fees

Vendors need their own representative to draft the contract, Section 32 statement and discharge instructions. Professional fees mirror the buyer's range but can be higher where complex titles or off-the-plan contracts exist.

4. Capital Gains Tax (CGT)

CGT is a federal tax, payable only when the property is not the seller's main residence. While not strictly a "settlement fee" it is triggered by settlement and is borne by the seller.

5. Adjustments Reflected in the Statement of Settlement

Just as buyers reimburse prepaid rates, vendors receive credit for those payments.

Shared or Negotiable Costs

Electronic settlements in Victoria are processed through PEXA. The platform charges each party its own subscriber fee, so buyer and seller both pay their side. Sometimes developers or motivated vendors may offer to pay the buyer's stamp duty or cover a portion of the buyer's conveyancing to sweeten the deal, but these incentives are driven by negotiation, not law.

Real World Budgeting Working Example

Imagine a two-bedroom townhouse in Brunswick selling for $950,000 with settlement set 60 days after contract exchange. Below is an indicative, rounded breakdown:

• Buyer:
  • Stamp duty: $52,000
  • Transfer and mortgage registration: $2,000
  • Loan establishment and valuation: $1,500
  • Conveyancing professional fee: $1,000 plus $350 disbursements
  • Building and pest inspection: $600
  • PEXA buyer fee: $160
  • Settlement adjustment (rates reimbursement): $700
  • Total buyer costs: $58,310
• Seller:
  • Agent commission at 2 per cent: $19,000
  • Marketing package: $2,500
  • Conveyancing fee: $1,100 plus $200 disbursements
  • Mortgage discharge: $350
  • PEXA seller fee: $120
  • Settlement adjustment (rates credit): −$700 (credit)
  • Total seller costs: $22,570

This illustration shows how buyers can spend roughly three times more than sellers at settlement even before accounting for loan repayments.

Frequently Asked Questions

Can I ask the seller to pay some of my costs?

Yes. In a buyer's market vendors sometimes agree to pay some or all of the buyer's stamp duty or PEXA fee. Any such term must be written into the contract before signing.

Does the seller ever pay stamp duty?

Not in Victoria. The buyer always pays land transfer duty except in rare cases where the Victorian State Revenue Office grants a special exemption, for example in a relationship property transfer.

Who pays body corporate levies?

Levies are adjusted so that each party pays only for the period they own the property. If the seller has paid the whole quarter in advance the buyer reimburses from settlement day until the end of the quarter.

What happens if rates are not adjusted correctly?

Errors can be rectified after settlement but prevention is cheaper. Engage a licensed conveyancer who double-checks figures against council and water certificates.

Tips for Melbourne Buyers

1. Budget for 5 per cent extra. On a $900,000 purchase you may need $45,000 on top of your deposit for duty, fees and inspections.
2. Order reports early. Delays in pest or strata reports can push finance approval back and threaten settlement.
3. Keep funds liquid. Lenders will not draw stamp duty from the loan. Have cleared funds in your nominated account.
4. Book a pre-settlement inspection. Check that appliances, light fittings and inclusions listed in the contract remain in place.

Tips for Melbourne Sellers

1. Lodge your discharge request promptly. Banks can take up to 21 days to issue a discharge. Late lodgement risks delaying settlement.
2. Factor commission into your reserve. Underquote campaigns may exclude advertising costs. Clarify the full commission structure in writing.
3. Prepare a tidy Section 32. Missing certificates will cause requisitions that slow the process. A good conveyancer will ensure the statement is complete.
4. Plan for moving expenses. Hire removalists well ahead. Overlapping ownership could mean paying two sets of holding costs.

Common Misconceptions Cleared Up

"My lender will pay settlement fees." False. The bank lends against the property but will not pay your duty or conveyancing. Those costs come from your savings.

"I can do my own conveyancing and avoid professional fees." While legally possible, the Victorian property legislation is complex. One missed search could expose you to unapproved structures or planning overlays. Professional fees are modest compared with the risk.

"GST is charged on residential property sales." Existing residential premises are generally input-taxed so GST is not added at settlement. New residential premises may attract GST which is factored into the contract price, not an extra settlement fee.

Key Take-Aways

• In Victoria the buyer shoulders the lion's share of settlement costs, chiefly stamp duty.
• The seller's biggest cost is usually agent commission and any mortgage discharge fee.
• Council rates, water, land tax and strata levies are adjusted so each party pays only for the time they own the property.
• Professional guidance from a licensed conveyancer streamlines the process and prevents expensive mistakes.

Speak with Local Experts

Navigating settlement costs is easier when you know which side of the ledger each fee belongs to. Whether you are purchasing your first unit in Carlton or selling a family home in Frankston, a clear fee map allows you to budget accurately and negotiate from a position of strength. For tailored advice on your unique transaction, contact the Melbourne conveyancing specialists at Pearson Chambers Conveyancing. Their friendly team will review your Section 32 at no charge and guide you through every stage until settlement day.

Phone: 03 9969 2405
Email: contact@pearsonchambers.com.au