Seller Shortfall at Settlement: What You Need to Pay

You expected your Victorian sale to leave money over, but the settlement figures show you need to contribute funds instead. Before transferring anything, work out the exact shortfall and check which amounts have already been counted.

The short answer: An additional seller contribution may be needed when the funds available for completion are less than the confirmed mortgage release requirement and the other payments that still have to be made. Your conveyancer should reconcile the figures, confirm the authorised payment route and check that the money will be available for settlement. Having enough money in your own account does not, by itself, mean the sale is ready to complete.

Start with the lender's confirmed release requirement

The first figure to identify is the amount required to release the mortgage for this sale. Do not rely only on a loan balance shown in a banking app or on an estimate that has not been confirmed for the transaction.

Ask your conveyancer what release amount the lender has confirmed and which settlement date that figure relates to. A discharge of mortgage is the dealing that removes the mortgage reference from the title when registered, so the payment calculation and the title-release arrangements need to line up. Our guide to discharging a mortgage when selling explains that broader process.

If the figure is still an estimate, treat it as an estimate. Check when the confirmed amount is expected and whether it must be updated if the settlement date changes. A request for the lender to accept a different amount is not the same as confirmation that the mortgage will be released on those terms.

This step is only about identifying the amount that must be funded for the sale. It does not answer questions about refinancing, debt arrangements or how a seller should raise the money.

Count the deposit once and trace what is still available

The buyer's deposit is part of the purchase price, not extra money on top of it. The contract records the price, the deposit paid and the balance owing at settlement, so the deposit must not be counted twice when calculating a shortfall.

Where an agent manages the sale, the deposit is held in the agent's trust account until settlement or transferred to the seller's conveyancer or legal practitioner's trust account. Early release is a separate process and should not be assumed merely because a seller needs funds.

Ask for the current stakeholder record showing the deposit position. A stakeholder is the person or business holding the deposit. The records should allow your conveyancer to identify how much was received, what has already been paid out or released with authority, and what remains available for completion.

If a credited deposit has already been received and spent, the buyer does not owe that amount again simply because it is no longer available. In the same way, an expense already taken from the deposit should not be included again as an unpaid completion expense.

The useful figure is the amount of the credited deposit that can still be applied to the payments remaining at settlement.

Reconcile the contribution using one set of figures

Once the lender requirement and available deposit are known, compare the total funds available with the payments still required. Use the actual settlement adjustments for the transaction, because rates and other applicable outgoings are adjusted between buyer and seller.

Suppose the agreed price is $500,000 and the buyer has paid a $50,000 deposit. For this simplified example, assume there is no net adjustment to the buyer's $450,000 balance. The confirmed mortgage release amount is $505,000, with another $10,000 in required seller payments still unpaid.

For this example, the stakeholder will apply $5,000 of the deposit to authorised selling expenses at completion, leaving $45,000 available for the other completion payments.

Completion calculation	Amount
Buyer balance still payable	$450,000
Remaining deposit available	$45,000
Total available before your contribution	$495,000
Mortgage release payment	$505,000
Other required payments still unpaid	$10,000
Total required payments	$515,000
Additional seller contribution	$20,000

The $5,000 allocated to selling expenses is already reflected in the lower deposit amount available for the other payments. It is not added again to the $10,000 of other unpaid payments. These figures are only an illustration of the calculation, not quoted fees, a lender policy or a prediction of the amount required for another sale.

If you have already paid part of the shortfall, give the receipt to your conveyancer and have that payment included in the reconciliation. The goal is one supported figure for the remaining contribution, rather than separate estimates from the agent, lender and conveyancer.

Confirm where the contribution must be paid

Do not move the money until you have transaction-specific instructions. The settlement funding route depends on the arrangements for the particular sale, and there is no single account instruction that every seller should follow.

Confirm:

the outstanding contribution after any money already received;
the account details and payment reference;
who is authorised to apply the money at settlement;
when the recipient needs the funds to be available; and
how receipt and availability will be confirmed.

Electronic settlement directions to disburse client funds require client authority. That makes the payment instructions part of the transaction's settlement arrangements, not something to infer from another sale or from a buyer's funding process.

Before paying, verify the account details by calling the business using contact details you have checked independently. Replying to the same email thread does not prove that changed banking details are genuine.

After transferring the funds, provide the requested reference and obtain confirmation that the money has been received and is available for the sale. A transfer receipt is useful evidence that you sent the payment, but it does not by itself confirm that every settlement requirement has been satisfied.

Raise an unfunded amount before settlement

If you cannot make the contribution in the instructed time, tell your conveyancer promptly. They need to review the contract settlement date, the lender's release position and any other unresolved completion arrangements.

A newly identified shortfall does not itself change the settlement date stated in the contract. Any proposed change needs to be considered against the contract and confirmed with the other side rather than treated as automatic.

Keep the lender's position separate from any request you have made. A request for different funding or release terms is not confirmation that those terms have been accepted. Your conveyancer can coordinate the sale documents, settlement figures and payment arrangements, but cannot promise that a lender will accept less than its confirmed release requirement or approve new borrowing.

About the Pearson Chambers Conveyancing team

Pearson Chambers Conveyancing assists with residential purchases, sales and title transfers in Melbourne and across Victoria. For a seller facing a settlement contribution, the team can check the sale figures and coordinate the contract documents, payment directions and completion arrangements.

Sources we consulted

Get your sale figures and settlement arrangements checked

If your sale figures show a funding gap, contact Pearson Chambers Conveyancing promptly to review the contract, required payments, settlement deadline and next steps. We can also assist with preparing the contract and Section 32 and managing a residential sale through settlement.

Email contact@pearsonchambers.com.au.

General information only, current as at the date of publication. Victorian conveyancing rules and legislation change frequently. Please contact the Pearson Chambers Conveyancing team for advice on your specific contract.