If you’ve never been through it before, the house-buying process can seem very complicated. And, to be fair, many people feel that way even when they’ve bought ten properties. There are lots of steps you need to take and terms you may not have come across before, and every home move is different.
One of the most important steps is exchange of contracts, so it’s only natural you’ll have plenty of questions about what this involves. To help you, we’ve put together the answers to some of the most common questions we receive around exchange and completion.
What is exchange of contracts?
Exchange of contracts is one of the last steps in the house-buying process, and certainly one of the most crucial. Whether you’re buying or selling, it’s what everyone’s working towards from the moment a property goes on the market. It means a sale’s been legally agreed, all the necessary searches have been carried out, the paperwork and finance is in place and all parties are happy to make the deal binding.
What happens when you exchange contracts?
As soon as contracts are exchanged, the purchase and sale of a property becomes legally binding. Before the exchange, there’s no legal obligation to complete and it’s possible to withdraw from the deal without penalty. Once you exchange, you’ve formally committed to transfer legal ownership of the property. This means the next steps concerning finances can be completed with confidence.
How long does it take to exchange contracts?
Typically, the average property purchase in the UK takes around 6-8 weeks to progress from an offer being accepted to the exchange of contracts. However, this can vary wildly depending on a huge range of factors. These could include anything from delays in searches to not having a mortgage offer in place, or appointing a less experienced solicitor who isn’t able to deal with any issues or complexities quickly and efficiently. Plus, big chains can also cause delays, as everyone in it can only exchange once the last person in the chain is ready to proceed.
How do solicitors lawyers exchange contracts?
Exchange of contracts is usually done on the phone. This is simple if there’s no chain, but once other property sales become involved, your conveyancer needs to liaise with the other links in the chain to agree on a time exchange will be done by. Then, the final link in the chain will exchange first, before the deals work backwards through the chain.
What happens between exchange and completion?
As most of the paperwork’s completed at the point of exchange, the main thing that’s left to be arranged is the finances. This includes a repeat of the bankruptcy search to ensure the buyer hasn’t gone bankrupt prior to completion, as well as transferring mortgage funds to solicitors. Having a delay between exchange and completion allows for these things to happen, which is particularly useful when you’re in a chain.
How long does it take between exchange and completion?
Nowadays, most of the legal work concerning the sale of a house is completed prior to exchange. This allows you to discover whether there are any issues that would prevent the deal going through. This means there’s a much shorter time between exchange and completion than in years gone by. Instead of waiting for around a month like in the past, you can expect your completion date to be 7-14 days after exchange of contracts.
Can you exchange contracts without a completion date?
It is possible to exchange without a completion date, although as a buyer this is something you should avoid as you’re opening yourself up to things going wrong. If the seller of the house you’re buying insists on this, you should agree a longstop date which will be the very latest day completion can take place. If you exchange without this in place, you could in theory be stuck indefinitely without a completion date, lose your mortgage, or have to pull out and potentially put your deposit at risk.
Do I pay my deposit at exchange of contracts?
Yes, the contractual deposit of 10% of the purchase price is due at exchange of contracts, so it’s essential that you have the funds ready to go by this point.
Is exchange of contracts legally binding?
As we touched on above, exchange of contracts is legally binding. If you pull out of the deal after exchange, you will become liable for damages – whether you’re buying or selling. This is why exchanging contracts is such a pivotal step.
What happens if I pull out before exchange of contracts?
Pulling out of a house purchase before exchange can cause problems whether you’re buying or selling, but neither party is legally required to complete the transaction until contracts have been exchanged. There can be lots of reasons for this happening, whether your offer’s been gazumped by another buyer, or the vendor’s simply decided against selling their home. Buyers can lose money for things like searches, while sellers can find themselves out of pocket for any costs involved in marketing their home. Unfortunately, this is just one of the risks involved with buying or selling a house.
Who is responsible for buildings insurance between exchange and completion?
If you’re wondering when to get building insurance when buying a house; you’ll want to do it as soon as you’ve exchanged contracts. You become instantly responsible for insuring your new home, although if you already insure your existing home, your current insurer will usually agree to provide cover until your completion date without any changes to the premium.
What happens on completion day?
On completion day, all monies are transferred between the relevant parties. If you’re buying, you can look forward to picking up the keys to your new home as soon as your completion day money transfer is done. To help you stay on top of everything you need to do, get a completion day checklist ready which should include things like organising your packing and removals, taking meter readings, contacting your new utility suppliers, collecting your keys, and raising a toast to your new home.
For more advice on planning for your home move, take a look at our handy checklist.
Disclaimer: The article above is only a rough guide to give you some idea of what is involved in an exchange of contracts.