Exchanging of Contracts Explained
Exchanging contracts happens 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 done over the phone, with each conveyancer agreeing to send to the other their client's signed contract. Once exchange of contracts is achieved, the transaction becomes legally binding. The seller is bound to sell, and the buyer is bound to buy the property for the sale price on the completion date agreed in the contract.
This is a vital part of the conveyancing process. If either seller or buyer breaches the contract after the point of exchange, then they risk incurring severe financial penalties
To further explain the process, we’ve put together this guide to help explain everything you need to know about exchanging contracts. From how to get started to how long it takes, we’ve got you covered.
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 before completion day. The exchange of contracts will usually take place between 7-28 days prior to the completion day.
You can only exchange contacts after the following milestones have been achieved:
1. Agreed Offer
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 exchange of contracts.
2. Mortgage Offer Issued
If buying a property with a mortgage, your conveyancer will need to receive a copy of your mortgage offer and comply with any requirements they will have before the mortgage funds can be released to put towards the sale price.
3. Property Search Results 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 have reviewed them before you can progress to exchange of contracts.
4. 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 detailed reports. Take your time to read them and ensure you are happy to proceed with the transaction.
5.Your Conveyancer is Satisfied and Holds All Signed Paperwork
If buying a property, your conveyancer needs 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 exchange of contracts can be achieved.
6. Agree the Completion Date
A date for completion will need to be agreed upon by both the buyer and seller before you can exchange contracts.
It is recommended to only discuss completion dates once both conveyancers confirm that all legal issues have been resolved and they are ready to exchange contracts. There is no point discussing dates at an early stage of the transaction, 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.
What Does Exchange of Contracts Mean?
When you exchange contracts, the transaction becomes legally binding on all parties. The seller is bound to sell, and the buyer is bound to buy the property for the sale price on the completion date agreed in the contract. If either party breaches the contract after the point of exchange, then they risk incurring severe financial penalties
Before exchange of contracts, either party are allowed to change their mind and pull out of the sale.
How Do I Exchange Contracts?
Your conveyancer will exchange contracts on your behalf. Contracts are exchanged by both the buyer's and seller’s conveyancers via a phone call. They go through the contract together over the phone and ensure they are identical. The conveyancers will then agree to send their client’s signed contract in the post. The contract will then be deemed "exchanged"
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 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 to Achieve a Quick Exchange of Contracts
There are many things that could cause a delay in achieving exchang of contracts. To help avoid these delays, 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 probably slow down the process. If one person in the link was to back out or faces delays for whatever reason, this will 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 less people to all be ready at the same time. When enquiring 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 experienced in conveyancing, then this should help the process. By using a comparison website like Compare My Move, you'll be provided with verified and trusted conveyancers to 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 is conducted online rather than needing to meet with your conveyancer face to face and booking appointments.
4. Organise Your Mortgage
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.
Exchange of Contracts Deposit
When you exchange contracts, as a buyer, you will be required to pay a 10% deposit of the property price. Occasionally, the seller may be prepared to accept a lesser amount. Your conveyancer will liaise with the seller’s conveyancer to confirm what deposit will be acceptable if for any reason a full 10% deposit is not available.
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.
- 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.
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 completion date.
- Notify utility companies and your bank that you’re moving to a new address.
Saving Money on Your Conveyancing
To save both time and money throughout your conveyancing process, Compare My Move will connect you with up to 5 licensed conveyancers or conveyancing solicitors to help take away the stress. We only work with fully regulated solicitors and conveyancers to give you extra peace of mind and a first-class service.