One of the most important steps in the house-buying process is the exchange of contracts. To help you, we’ve set out the important information on the exchange of contracts process and the journey to completion.
Contents:
- What is exchange of contracts? The process in easy steps
- What happens between exchange and completion? What to prepare and expect
- What happens after completion? Before you move in
- Exchange of contract FAQs
- Exchange day FAQs
- Completion day FAQs
What is exchange of contracts? The process in easy steps
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 has been legally agreed, all the necessary searches have been carried out, the paperwork and finance are in place and all parties are happy to make the deal binding. For more information on the process of buying a house read our buying a house guide and if you’re selling a house, see our page on advising you through the selling process.
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 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. This means the next steps concerning finances can be completed with confidence. For more information on the conveyancing process see What is Conveyancing.
The following is a guide of the exchange of contracts process:
- Sign the contract
- Agree a completion date with the entire chain
- Pay the deposit
- Instruct your solicitor to exchange contracts
- Lawyer exchanges contracts
- Completion of the exchange of contracts
Exchange of contract FAQs:
Can you exchange contracts without a completion date?
- This option is only really used when buying a property off-plan, i.e. at the point of exchange it’s not build-complete. In this case, completion will be on 10 days notice at some point in the future.
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 make sure that every lawyer is ready to exchange on the same day.
What happens if I pull out before exchange of contracts?
- Neither party is legally required to complete the transaction until contracts have been exchanged. However, buyers can lose money for things like searches, while sellers can find themselves out of pocket for any costs involved in marketing their home.
Is exchange of contracts legally binding?
- 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, and stand to lose the deposit if you are buying. This is why exchanging contracts is such a pivotal step.
Do I pay my deposit at exchange of contracts?
- 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.
What happens between exchange and completion?
As most of the paperwork is completed at the point of exchange, the main thing that’s left to be arranged is the finances. This includes the lender carrying out their final checks and 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.
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.
Exchange day FAQs:
How long after exchanging contracts do you complete?
- You can expect your completion date to be 7-14 days after exchange of contracts.
What can hold up exchange of contracts?
- Buyer or seller hesitancy
- Delays with the mortgage provider
- Seller accepting a better offer from another buyer (gazumping)
- Delays with third parties e.g. Local Authority searches or extensive searches
- Completion of enquiries elsewhere in the chain
Who is responsible for buildings insurance between exchange and completion?
- As a buyer, you’ll want to do it as soon as you’ve exchanged contracts as you become instantly responsible for insuring your new home
Can you exchange and complete on the same day?
- Yes, however if anything does go wrong, you don’t have any time to put things right, and you don’t definitely know that you are moving until the day of the move. This makes it tricky with booking removals and potentially paying cancellation fees.
What happens after completion? Before you move in
On completion day, the payment for the new home is transferred to the seller’s solicitor and the ownership is transferred to the buyer.
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, and the seller has vacated – which is usually about lunchtime.
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.
Completion day FAQs:
What happens on completion day?
- All monies are transferred to the relevant parties and you can pick up the keys to your new home.
Disclaimer: The article above is only a rough guide to give you some idea of what is involved in an exchange of contracts.
