The exchange of contracts is a big milestone when buying a new home, along with completion. When contracts are exchanged, the purchase becomes legally binding, so once this has been achieved, you can feel confident that you’ll be settled in your chosen home before too long.
Read on to find out all the information you need to know about the exchange of contracts process, including when you exchange, what happens when you exchange and what can hold it up.
In this article
- What does exchange of contracts mean?
- When do I exchange contracts?
- Can I exchange and complete on the same day?
- What happens at exchange of contracts?
- What can hold up exchange of contracts?
What does exchange of contracts mean?
Exchange of contracts is one of the last steps when buying a house, it’s where the contracts are signed and swapped between the buyer and seller of a property and means the sale has been legally agreed. It’s also the point where you will need to pay transfer your deposit to your conveyancer.
Whether you’re buying or selling, it’s what everyone’s working towards from the moment a property goes on the market. You can only exchange contracts once all the necessary property searches have been carried out, the paperwork and finance are in place and all parties are happy to make the deal binding.
As soon as contracts are exchanged, the transaction becomes legally binding. Before the exchange, there’s no legal obligation to complete and it’s possible for either party to withdraw from the deal without legal penalty. Once you exchange, you’ve formally committed to transfer legal ownership of the property.
First time buyer? Find out exactly what to expect with our First Time Buyers’ Guide.
What is the difference between exchange of contracts and completion?
Exchange of contracts is the point at which the transaction becomes legally binding. Whereas completion is where the balance of payment is passed to the seller and legal ownership is transferred to the buyer, along with the keys.
When do I exchange contracts?
Exchanging contracts should only happen once all the paperwork has been done and each of these points satisfactorily ticked off:
- Offer made and agreed
- Seller’s Property Information Form (TA6) and Fixtures and Fittings Form (TA10) have been inspected
- Surveys carried out
- Lender has conducted valuation
- Conveyancer has completed searches
- EPC checked
- Funding for deposit has been secured
- Completion date has been agreed
- Buildings insurance has been organised
- Buyer has thoroughly read and understood contract
- Contract has been signed
Will my conveyancer tell me when we exchange contracts?
Your conveyancer will contact you to read out and finalise the contract ready for exchange. The other people in the chain will also be contacted by their conveyancers. Once this has been done the contracts will be exchanged and the transaction is legally binding, you’ll likely receive an email notification when this is done.
Can you exchange contracts without a completion date?
For a standard property purchase/ sale, you cannot exchange contracts without having a completion date agreed, this is because the completion date is written into the contract. If you’re buying a new build off-plan, you may be able to, so long as there is a long stop date written into the contract. Find out more about buying a property off-plan.
Can I exchange and complete on the same day?
It is possible to exchange and complete on the same day. However, if possible, it should be avoided as you may face an extra fee and if anything does go wrong, you won’t have any time to put things right. Additionally, you won’t know for sure that you are moving until the day which makes it tricky to pre-book removal companies or sort out anything else ahead of the moving day.
What happens when contracts are exchanged?
Once you’ve exchanged, you’ve officially secured the property purchase, and all that’s left is to complete and get packing. Once you get the ‘okay’ that it’s time to exchange, this is the process you can expect:
- Make sure your conveyancer has your signed contract
- Agree a completion date with the entire chain
- Pay the deposit
- Instruct your conveyancer to exchange
- The conveyancers in the chain will discuss any issues and go over the contract in detail
- Exchange of contracts is completed!
Read more: The Process of Buying a House Explained
What time of day does exchange of contracts happen?
Contacts can be exchanged at any time of the day, however, it will be during your conveyancer’s working hours and more often than not, is in the afternoon.
Who holds the deposit on exchange of contracts?
When buying a house, before your conveyancer can exchange contracts with the seller’s solicitor, your deposit must have cleared in their account. Once the exchange of contracts has taken place, your conveyancer will then transfer the monies to the seller’s solicitor who will hold it in a client account until completion day.
How long does it take to exchange contracts?
The actual exchanging of contracts doesn’t take long and usually only requires a couple of phone calls.
How do solicitors exchange contracts in a chain?
If you’re in a chain when buying or selling, the exchange of contracts is the same process. However, all members within the chain need to be happy with the contracts and agreed completion date before the contracts can be exchange between each buyer’s and seller’s solicitor.
How long after exchange of contracts is completion?
Once contracts have been exchanged, completion will typically take place within 7 to 14 days.
What can hold up exchange of contracts?
Sometimes an exchange of contracts can be delayed because of blockers that need to be solved before the purchase can be completed. Though this is undoubtedly frustrating for all parties, ensuring that all bases are covered and that you, as the buyer, are protected is crucial. Though there are many reasons why exchange can be held up, some of the most common include:
Buyer or seller hesitancy
Whether it’s because they’re wobbling over the transaction itself, or are just ill-prepared, the other side can get in the way of progress. Good communication between agents and both parties’ conveyancers can help nudge them along, but often it’s a case of being patient and waiting for the other side to make up their minds.
Delays with the mortgage provider
Your mortgage in principle should be sorted out at the earliest stage of the transaction. However, if someone on the chain hasn’t secured theirs ahead of time, waiting for their mortgage to be approved can hold things up.
Delays with third parties e.g. Local Authority searches or extensive searches
If the Local Authority responsible for providing searches is slow at sending them through, nothing can proceed until they do. Your conveyancer or solicitor will not be able to analyse the paperwork or raise necessary enquiries without these results. They will come through eventually, but it can be very nerve-wracking waiting for them to arrive.
Completion of enquiries elsewhere in the chain
If solicitors’ enquiries are becoming complicated, or one solicitor along the line is being tardy with responding, this can cause hold-ups all along the chain.
There’s also the risk of ‘gazumping’; when the seller accepts an offer from another buyer. Unfortunately, gazumping is legal; your agreement with the seller is not legally binding until after contracts have been exchanged.
Want to find out how much the conveyancing process will cost for your house purchase? Get an instant quote with our conveyancing quote calculator.
Disclaimer: The article above is only a rough guide to give you some idea of what is involved in an exchange of contracts.
