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Exchanging of Contracts

Zenyx Griffiths

Written by Reviewed by Gareth Brooks

13th Nov 2018 (Last updated on 27th Nov 2020) 13 minute read

The exchange of contracts occurs towards the end of the conveyancing process when both the buyer and seller's conveyancers hold signed contracts and agree to 'exchange' them.

The process is typically done over the phone, with each conveyancer agreeing to send the other their client's signed contract. Once the exchange of contracts is achieved, the transaction becomes legally binding. This means that the seller is legally bound to sell, and the buyer is legally bound to buy. It is a vital part of the conveyancing process.

To further explain the process, we’ve put together this guide to help you understand everything you need to know about exchanging contracts. From how to get started to how long it takes, Compare My Move’s got you covered.

The Exchange of Contracts Process
  1. Covid-19 and Exchanging of Contracts
  2. What Does Exchange of Contracts Mean?
  3. How Do Solicitors Exchange Contracts?
  4. When Do You Exchange Contracts?
  5. How Long Does It Take to Exchange Contracts?
  6. Can You Exchange and Complete on the Same Day?
  7. Exchange of Contracts Deposit
  8. Can You Pull Out of a House Purchase After Exchanging Contracts?
  9. How to Achieve a Quick Exchange of Contracts
  10. What Happens After Exchanging Contracts?
  11. Next Steps of Buying a House

Covid-19 and Exchanging of Contracts

Due to the UK lockdown in March 2020, many residential sale contracts began using what we now call ‘Covid Clauses’. As the global pandemic brought uncertainty, homeowners required further protection for themselves against the increasing possibility of a sudden change in circumstances that could affect the transaction. 

Before exchanging contracts, it would be wise to review the document and ensure a Covid Clause is included to help protect you against the possibility of unexpected costs. This clause would offer the parties involved the ability to exchange contracts whilst also ensuring they’re not at fault or in breach of the contract should they be delayed from completing due to what is defined as a ‘Coronavirus Event’.   

There are a number of covid-related situations that may delay a house sale or require the buyer or seller to rescind contracts. For example, if government restrictions prevent the public from moving house or results in a mortgage product being removed, then it would be classed as a ‘Coronavirus Event’ thus bringing the Covid Clause to the forefront.  

If you’re unsure about adding a Covid Clause to your contract, speak to your conveyancer and discuss the pros and cons it may bring. This type of clause is constantly evolving so it’s essential to speak to a professional before making a decision.

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What Does Exchange of Contracts Mean?

When you exchange contracts, the transaction becomes legally binding for all parties involved. Both parties must agree to the conditions and then sign the contracts. The buyer’s and seller’s solicitors must then take possession of the signed contracts and exchange them accordingly once a completion date has been agreed upon. Before the exchange of contracts, either party is allowed to change their mind and pull out of the sale.

The seller’s conveyancer should also possess the signed transfer of title deed form, whilst the buyer’s solicitor must collect the deposit, proof of a mortgage offer and possibly building insurance. Once these documents and the contracts have been exchanged, the seller is legally bound to sell and the buyer is legally bound to buy the property for the sale price on the completion date agreed. 

If either party breaches the contract after the point of exchange, then they risk incurring severe financial penalties.

What’s the Difference Between Exchange of Contracts and Completion?

Your completion date must be agreed upon by all parties involved during the exchange of contracts. Typically, you will exchange contracts 7-28 days before your completion date. 

The main difference between the two is that exchanging contracts is when both parties sign and exchange the required legal documents, ensuring the sale is legally binding. Whereas ‘completion’ is the date where both parties physically move house and the transfer of legal ownership of the property is finally complete.

How Do Solicitors Exchange Contracts?

Your conveyancer will exchange contracts on your behalf. In the past, the buyer's and seller’s conveyancers would meet up in person to physically exchange contacts. Now, however, contracts are exchanged via a recorded phone call. 

They verbally go through the contract together over the phone to ensure they are identical. They will need to agree upon the terms of the contract as well as the completion date. Each member within the property chain must also agree upon the finalised terms.

The conveyancers will then agree to send their client’s signed contract in the post. Once this has been completed, the contract will then be deemed "exchanged" and the sale will be legally binding.

When Do You Exchange Contracts?

Exchanging contracts will happen once the buyer's conveyancer has carried out all relevant checks and both conveyancers hold a signed contract from their respective clients. The exchange of contracts will usually take place during week 8 of the process, around 7-28 days before completion day

As the exchange of contracts is legally binding for all parties involved, certain actions must be taken before you can continue. You can only exchange contacts after the following milestones have been achieved:

1. An Offer Has Been Agreed

Agreeing on a price is the most important part of the contract. Only once the seller has agreed and accepted an offer will you be able to progress towards the exchange of contracts. This should also include an agreement on any fixtures and fittings involved. 

2. A Mortgage Offer Has Been Issued 

When buying a property with a mortgage, your conveyancer will need to receive a copy of your written mortgage offer and comply with any requirements they will have before the mortgage funds can be released. You will also likely need proof of funding for the mortgage deposit.

3. Property Search Results Have Been Received and Reviewed

Your conveyancer will apply for the necessary property searches to discover vital information about the property. They will need to be in receipt of the results and review them before you can progress to the exchange of contracts.

4. All Parties Understand the Contract and Land Registry Paperwork

You should read through the contract and all the Land Registry paperwork for the property. Your conveyancer should have provided you with any and all detailed reports. Take your time reading through them and ensure you’re completely happy to proceed with the transaction. 

5. Your Conveyancer is Satisfied and Holds All Signed Paperwork 

When buying a property, your conveyancer will need to be satisfied that all issues have been resolved, that the property is legally sound, and any requirements of your mortgage lender have been met. Whether you are buying or selling, your conveyancer will need to hold the relevant signed paperwork from you before the exchanging of contracts can begin. 

6. The Completion Date Has Been Agreed

A date for completion will need to be agreed upon by both the buyer and seller before you can exchange contracts. This date must be physically written into the contract. 

It is recommended to only discuss completion dates once both conveyancers confirm that all legal issues have been resolved. There is no point discussing dates at an early stage of the transaction as this can cause unnecessary stress for all parties involved. Usually, completion dates are discussed and agreed upon via the estate agent. Once a date is agreed, you should contact your conveyancer.

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How Long Does It Take to Exchange Contracts?

Exchanging contracts usually happens around week 8 of the conveyancing process. The time frame can vary greatly depending upon the type of the transaction and the length of the property chain.

Once all parties in the chain are ready, the actual process of exchanging contracts should only take a few hours to be achieved. Again, the actual time will depend upon the size of the property chain and the availability of the conveyancers involved.

How Long Between Exchange and Completion?

The length of time between exchange and completion is usually decided by both the buyer and seller. However, it can sometimes be delayed by other parties within the property chain. If the buyer is waiting to sell their own property, for example, they may not want to complete until the other transaction is at a certain stage of the process.  

 On average, the exchange of contracts typically occurs 7-28 days prior to the completion day. It should be noted that it is possible to exchange and complete on the same day, but it is a fairly rare occurrence.

Can You Exchange and Complete on the Same Day?

Although fairly rare, it is possible to exchange and complete on the same day. It does, however, make for a more stressful process as there’d be a lot to get organised in a very short amount of time with no guarantee that the transaction will go ahead. 

A simultaneous exchange and completion is most common amongst cash buyers or when there is no property chain. It’s least likely to occur if a mortgage is required, however, as the lender may require a minimum period of time between exchange and completion. For many lenders, this is often at least 5 working days. 

Having both occur on the same day does greatly speed up the process but, as previously mentioned, it does make it more stressful and limits the time you’ll have to plan your moving day. It also means that you have less time to deal with any issues or delays that may arise, such as last-minute mortgage issues or paperwork not being received.

Exchange of Contracts Deposit

When exchanging contracts, the buyer will be required to pay a 10% deposit of the property price to the seller. This percentage can vary, with some sellers occasionally being prepared to accept a lesser amount. For example, if you’re buying with a 95% mortgage and only have 5% left for the deposit before the mortgage completes, then your conveyancer will have to liaise with the seller’s conveyancer to confirm what deposit will be acceptable. 

Negotiations may also occur if the buyer is waiting to use the funds from their Help to Buy ISA to pay for the deposit. The bonus on a Help to Buy ISA can only be paid after the exchange of contracts so again, your conveyancer may have to come to a new agreement with the seller’s solicitor. 

If you’re able to get a bigger deposit than the initial 10%, then it’s likely you’ll have to pay the 10% during the exchange and then the remaining amount during completion. 

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Can You Pull Out of a House Purchase After Exchanging Contracts?

In short, it is possible to pull out of a property purchase after exchanging contracts, however, there will be severe repercussions and added costs if you do. The contract could be rescinded by the other party involved, and there’s even the risk of you being sued. 

Once the contracts have been exchanged, both the buyer and seller are legally bound to the sale. As they have contractually agreed to the transfer of the title on completion day, both parties will be expected to conclude the transaction. It is rare for people to walk away from a sale once they’ve exchanged contracts, but it is technically possible. However, there are consequences to consider. 

If the buyer pulls out at this stage, the seller can rescind the contract and the buyer will lose their 10% deposit. The seller will then be within their right to re-sell the property and any fixtures or fittings that were included in the contract. The buyer will have to return any documents they possess regarding the property and the seller may even go on to claim damages. 

If the seller pulls out after the exchange of contracts, the buyer can instead rescind the contract and demand the deposit be repaid. The buyer will again have to return any documents acquired, but this time, it will be at the seller’s expense.  

For further information regarding pulling out of a house purchase after exchanging contracts, it’s recommended you speak to your conveyancer or conveyancing solicitor. 

How to Achieve a Quick Exchange of Contracts

There are a number of factors that could cause a delay in achieving the exchange of contracts. To help avoid these potential issues, you can follow these top tips to help speed up the process and get the ball rolling:

1. Avoid Property Chains

Being in a property chain that contains three or more transactions will most likely slow down the process. If one person in the link was to back out or faces delays for whatever reason, it can potentially affect the whole chain. By not being part of a chain, you should be able to exchange contracts quicker as you will be reliant upon fewer people to be ready at the same time. When inquiring about the property, make sure you ask the estate agent whether there is a chain involved.  

2. Choose the Right Conveyancer

If you take the time to find a conveyancer that’s regulated by the CLC, SRA or the Law Society and is highly experienced, then this should help the process. By using a comparison website like Compare My Move, you'll be provided with a number of verified and trusted conveyancers to review and choose from.

3. Consider Online Conveyancing

Whilst some people doubt the reliability of online conveyancing, online conveyancers featured on comparison websites should be regulated by the CLC, SRA or the Law Society. Online conveyancing can be quicker than traditional conveyancing as communication and paperwork are conducted online rather than requiring face to face meetings. You won’t necessarily have the added wait that comes with booking appointments in-person.

4. Organise Your Mortgage Early

If you need a mortgage to buy a property then it is recommended that you obtain an ‘agreement in principle’ from the lender before you start searching for a property. Once you have an agreement in principle you will know precisely how much money you can borrow. It is also quicker to receive a full mortgage offer for the property if you have previously received an agreement in principle from the lender.

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What Happens After Exchanging Contracts?

Once the contracts have been exchanged, the transaction is legally binding and a completion date will be set.

After exchanging contracts, the buyer should:

  • Ensure they have paid all required funds to their conveyancer the day before the completion date. 
  • Send a copy of the title deeds to their mortgage lender.
  • Ensure that their conveyancer requested the mortgage funds from the lender to arrive in time for the completion date.
  • Confirm the completion date with their removal company and begin packing.
  • Contact the necessary utility companies and services to inform them of the change in address.

After exchanging contracts, the seller should:

  • Make sure everything in the property is as it was described in the contract, with all fixtures and fittings included.
  • Have a removal company booked to ensure they can move out on or before the completion date.
  • Notify utility companies and their bank that they’re moving to a new address.
  • Set up mail redirection.
  • Leave any sets of keys they have to the property with the estate agent ready for the handover. 

Next Steps of Buying a House

This article is part of our home buying guide. Completion day comes shortly after exchanging contracts, depending on your property chain. We'll explore the day of completion in our next article, from how long after exchanging to what to expect on the day. To find out more read what happens on completion day.

Zenyx Griffiths

Before Compare My Move, Zenyx once wrote lifestyle and entertainment articles for the online magazine, Society19 as well as news articles for Ffotogallery.

Gareth Brooks

Reviewed by Gareth Brooks

Solicitor and Partner at RMNJ Solicitors, RMNJ Solicitors

With 19 years of experience in the residential conveyancing industry, Gareth Brooks is a partner and head of management for the conveyancing department at RMNJ Solicitors.