Buyer wants a long settlement? How to decide, and how to borrow against the contract

An offer at your price is on the table. The catch: the buyer wants 120, 150 or even 180 days to settle. It’s tempting to say yes to the headline number and forget the calendar.

A long settlement is a span, and every span carries load. This guide helps you price the wait, see who holds the risk while it runs, and, if you need cash before the proceeds arrive, borrow against the contract once it’s unconditional.

Why do buyers ask for a long settlement?

Usually for a reason you can test:

• Finance or capital: they’re selling their own property, raising equity or waiting on a lender’s process.
• Approvals: a change of use, a development approval or a licence has to come through first.
• A lease-up or business transfer: they need time to move their operation, or to have your tenant’s lease sorted.
• Tax or cash timing: they may want the purchase to land in a different financial year.

Each reason carries a different risk to you. A buyer waiting on approval can walk away if it fails (if the contract is conditional). A buyer waiting on their own sale is relying on a third party. A buyer who simply wants time with money already available is the safest of the three. Ask which one you’re dealing with before you talk price.

What does a long settlement actually cost the vendor?

Price it in dollars. Take your monthly holding cost (rates, insurance, outgoings you can’t recover, loan repayments, and what the money would earn or save you elsewhere) and multiply by the extra months.

Here’s an illustrative comparison. It isn’t a real deal.

	Offer A: long	Offer B: quick
Price	$2,000,000	$1,850,000
Settlement	150 days	42 days
Holding cost at $9,000 a month	about $45,000	about $13,000
Price less holding cost	about $1,955,000	about $1,837,000
Payout and selling costs	$960,000	$960,000
Net proceeds at settlement	$1,040,000	$890,000

On those numbers Offer A is still about $118,000 ahead after holding costs, so the long settlement may be worth taking. Change the monthly cost to $25,000 (say the property is empty and the loan is heavy) and the gap closes quickly. The point is to run the numbers before you answer, not after.

Two things the table doesn’t capture: the chance the buyer doesn’t complete, and your own next move. If you’ve committed to a purchase or a lease that needs money in 60 days, a 150 day settlement leaves a funding gap. That’s where a bridge comes in, and we’ll get to it below.

Who carries the risk while you wait?

You should assume it’s you, unless your lawyer tells you otherwise.

In NSW, the Conveyancing Act generally keeps the risk of damage with the vendor until the earlier of completion or the buyer entering into possession, a rule that came out of the NSW Law Reform Commission’s work on passing of risk. So a storm, fire or flood in month four is the seller’s problem, and a vendor’s insurance policy doesn’t automatically pass to the buyer on exchange. Other states’ standard commercial contracts handle this differently, and some pass risk earlier. Special conditions can change it again.

Practical steps:

• Keep full insurance in place through to settlement, and tell your insurer the property is under contract.
• Ask your lawyer which clause governs damage and what rights each party has to terminate if the property is substantially damaged.
• If the buyer takes early access (to fit out, say), get the risk, insurance and indemnity position in writing first.

Which other things can go wrong in a long span?

Long contracts collect small hazards. The ones to check:

• Clearance certificate. The ATO says a certificate is valid for 12 months from issue and that processing can take up to 28 days. Apply early, as covered on its page about clearance certificates. Without one, the buyer withholds 15% of the price. Our clearance certificate guide explains the trap.
• GST treatment. If the sale is meant to be a going concern, the conditions have to still be true on the day of supply, which is a lot to ask over six months. See the ATO’s page on selling commercial premises and talk to your accountant.
• Tenants. Leases can expire, rent reviews can fall due and tenants can leave inside the period. Decide who bears that before you sign.
• Interest and default. Ask whether the contract charges the buyer for late completion and what the notice to complete period is. Our commercial property settlement period guide shows the vendor tasks that sit inside the span.
• Deposit. A 10% deposit sitting in trust for five months earns the vendor nothing. Early release rules differ by state, so read our guide on the release of a deposit and ask your lawyer.

Can you borrow against an exchanged contract?

Often, yes, and this is where a long settlement can turn from a problem into a plan.

Once contracts are exchanged and unconditional, the exit is known: a price, a date and a buyer who has paid a deposit. That’s the strongest evidence a short-term loan can rest on, and it’s what a closed bridge is built around. We explain the difference in open vs closed bridging.

A lender looking at a closed bridge on a commercial sale will typically want:

1. The signed, unconditional contract and any special conditions.
2. Proof the deposit has been paid and where it’s held.
3. Evidence the buyer can complete (finance approval or cash).
4. Your payout figure, so the net proceeds are clear.
5. A view of the security, which may be the property being sold or other property you own.

If you’d like to see how a bridge could fit around your contract, you can check your options here in about a minute.

What does a closed bridge look like on a long settlement?

Using Offer A from above, say the owner needs $600,000 on day 30 to secure and fit out the next premises. (Illustrative scenario.)

	Contract date	Slow case
Sale settles	Day 150	Day 180
Bridge drawn	Day 30	Day 30
Days of bridge	120	150
Peak debt	$600,000 plus costs	$600,000 plus costs
Net sale proceeds	$1,040,000	$1,040,000
End debt after repayment	nil	nil
Cash left to the owner	about $440,000 less costs	about $440,000 less costs

Two things to notice. First, the exit is generous: net proceeds are well above the bridge. Second, the slow case adds a month of cost to the bridge. If the term was sized only to day 150, a late completion leaves the loan expired before the money arrives. Size the term, and the buffer, to the slow case. Our peak debt and end debt page explains the two figures, and you can run your own dates in the bridging calculator.

Costs are in dollars and depend on the structure; we won’t quote a figure without your numbers. The same goes for the amount you can borrow, which turns on the contract, the security and the evidence.

When is a long settlement the wrong answer?

Say no, or counter, when:

• The buyer’s finance isn’t approved and the reasons for delay are vague.
• The deposit is small compared with the price.
• The contract is conditional on something outside your control and has no long-stop date.
• Your own commitments need the money sooner and a bridge would eat the extra price.
• The property is in a state of repair, tenancy or approval where something could change in six months.

Counter-offers that work: a larger deposit, a staged payment, interest or a fee for the extra time, a firm long-stop date, or an earlier date with a lower price. The right answer is usually the one where the numbers above still hold in the slow case.

Waiting on a settlement date you can’t move?

A long settlement is a decision about time. If you take it, you can still plan around it: price the wait, keep the insurance current, apply for the clearance certificate early and, if you need cash sooner, build the bridge on the contract.

If you’ve got an exchanged contract or an offer on the table, tell us the dates. Enquiring takes about 60 seconds and your credit file isn’t touched just for asking. We don’t send your details out to a pile of lenders; a real person who works on bridges reads your situation and phones you. Please fill the form in accurately, with the true settlement date, your payout figure and what the proceeds are committed to, so we can match the right structure first time.

See if you qualify →