Sydney's property boom seems to be softening, with auction clearance rates declining. This is certainly good news for consumers frantically saving a deposit to get into the market, but the drop-off could hit people waiting to sell an existing property.

Alan West, chief executive officer at the Australian Institute of Conveyancers, says many of his members are reporting a noticeable decline. "The peak seems to have been around six months ago," he says. "While the Christmas period is traditionally slower, our members are seeing drops of around 20 per cent since September." Most problems arise when a buyer is selling an existing property to raise cash for the the new home.

What can you do if the completion date is looming and things haven't gone to plan?

First up you'll need to examine the contract you signed to buy the new property.

Under the conditions of sale, you'll see that if the sale is not finalised on the completion date, normally 42 days after the contract is signed, you'll be up for penalty interest on the balance outstanding. While the rate can vary, it will be typically 10 per cent a year, calculated on a daily basis.

Say the new home costs $300,000 and you have paid a $10,000 deposit. The outstanding balance of $290,000 will be costing you about $79.45 a day after the contract completion date.

Delays of this nature are hopefully short-term, and may occur when funds from a term deposit are not available or an uncleared cheque results in your bank not being able to issue a bank cheque to the vendor.

Eventually, under the terms of the contract, the vendor can terminate the contract and retain any deposit paid, up to 10 per cent of the purchase price.

The vendor can also sell the property and if it sells for a price less than your original offer, he or she can sue you for the difference.

If it appears that settlement is likely to be delayed, you may need to make alternative arrangements.

The most common strategy is to arrange a bridging loan. These are normally provided by institutions for a period of three months, but sometimes longer. They are typically interest-only loans and you can expect to pay 1 to 2 per cent more than the variable rate.

You will also be up for the loan application and establishment fees – likely to be between $600 and $1000.

Remember, this is in addition to the loan you may have in place for the new home.

A trap that catches many property owners is that bridging finance is usually not available when your equity in the property you plan to use as security is less than 20 per cent. Importantly, this will be based on what the lender values your old home at, not what you may have it on the market for.

If the equity in your home is not that great, it may pay to get a formal valuation done on your existing home before signing the offer on the new home.

Nonetheless, if you are considering a bridging loan, it will be worthwhile to do your sums. If the delay is likely to be just a few weeks, the penalty rate provided for in the contract may be a cheaper option.

In some cases, the problem can be reversed.

You may have decided to sell your existing home to take advantage of the high prices now and wait a few months in the hope that prices fall. In this case, the costs of alternative accommodation, storage and removal fees must be factored into your calculations and these can add up, particularly if you're moving a large family with years of accumulated possessions.

The cost of removal and storage for just a few months can add up to several thousand dollars and your hopedfor savings in housing prices could be quickly eroded by these additional expenses.

As Alan West says: "Above all, do your sums before leaping into the housing market and be realistic in your calculations. Delays can cost you thousands if you're not careful."

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