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What Does Exchange of Contracts Mean?

Zenyx Griffiths

Written by Reviewed by Gareth Brooks

13th Nov 2018 (Last updated on 18th Mar 2022) 8 minute read

The exchange of contracts is when both the buyer and seller's conveyancers hold signed contracts and agree to 'exchange' them. It occurs at the end of the conveyancing process when the buyer has paid the deposit.

The process is often 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 article will cover the following:
  1. What Happens at the Exchange of Contracts?
  2. How Do Solicitors Exchange Contracts?
  3. When Do You Exchange Contracts?
  4. How Long Does It Take to Exchange Contracts?
  5. What’s the Difference Between Exchange of Contracts and Completion?
  6. How Long Between Exchange and Completion?
  7. Can You Exchange and Complete on the Same Day?
  8. What is an Exchange Deposit?
  9. Can You Pull Out of a House Purchase After Exchanging Contracts?
  10. How to Achieve a Quick Exchange Process
  11. What Happens After Exchanging Contracts?
  12. Need More Information?

What Happens at the Exchange of Contracts?

Both parties must agree to the conditions and then sign the contracts. Before the exchange of contracts, either party is allowed to change their mind and pull out of the sale.

The seller’s conveyancer should possess the signed transfer of title deed form at this stage. The buyer’s solicitor must then collect the deposit and proof of a mortgage offer. Once these documents and the contracts have been exchanged, all parties involved are legally bound to the sale and the agreed completion date.

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

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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 exchange contacts. Now, 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. The contract will then be deemed "exchanged".

When Do You Exchange Contracts?

The exchange of contracts will usually take place during week 8 of the process. It's often planned for a weekday at around midday.

As the exchanging 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

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 to be left behind. This will be stated on the TA10 fixtures and fittings form.

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. They will also have to comply with any requirements they have before the funds can be released. You will likely need proof of funding for the mortgage deposit.

3. Property search results have been received

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.

4. All parties understand the contract and paperwork

All parties must read through the contract and 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.

5. Your conveyancer holds all signed paperwork

The buyer’s conveyancer will need to be satisfied that all issues have been resolved, that the property is legally sound and that any requirements from their mortgage lender have been met. Whether you’re buying or selling, your conveyancer will need to hold the relevant signed paperwork before proceeding.

6. The completion date has been agreed

A date for completion will need to be agreed upon by both the buyer and seller. This date must be physically written into the contract. Completion dates are usually discussed and agreed upon via the estate agent.

It’s recommended to only discuss completion dates once both conveyancers confirm all legal issues have been resolved. There is no point in discussing dates at an early stage of the transaction as it can cause unnecessary stress.

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How Long Does It Take to Exchange Contracts?

Once all parties are ready, the actual process of exchanging contracts should only take a few hours.

The time frame can vary depending upon the type of transaction and the length of the property chain.

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

The exchanging of contracts is when both parties sign and exchange the required legal documents. This ensures 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 complete.

To learn more, read what happens on completion day?

How Long Between Exchange and Completion?

On average, the exchange of contracts occurs 7-28 days before the completion day.

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.

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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. There’d be a lot to get organised in a very short amount of time with no guarantee that the transaction will go ahead.

It is most common amongst cash buyers or when there is no property chain. It’s least likely to occur if a mortgage is required 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.

What is an Exchange Deposit?

When exchanging contracts, the buyer will be required to pay a 10% deposit of the property price. This percentage can vary, with some sellers prepared to accept a lesser amount.

Negotiations may 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. Your conveyancer may have to come to a new agreement with the seller’s solicitor.

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

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

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.

Once the contracts have been exchanged, both the buyer and seller are legally bound to the sale. If you pull out after this stage, the contract could be rescinded by the other party and there’s even the risk of you being sued.

To learn more, read can you pull out of a property sale or purchase?

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How to Achieve a Quick Exchange Process

To help avoid potential issues or delays, you can follow these top tips to help speed up the process:

1. Avoid property chains

Being in a chain that contains three or more transactions will most likely slow down the process. If one person in the link faces delays, it can potentially affect the whole chain.

You should be able to exchange contracts quicker if you’re not in a chain as you will be reliant upon fewer people. When inquiring about the property, make sure you ask the estate agent whether there is a chain involved.

2. Choose the right conveyancer

Take the time to find an experienced conveyancer that’s regulated by the CLC, SRA, LSS, LSNI or CILEx.

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.

For more information, read how to choose a conveyancer or solicitor.

3. Consider online conveyancing

Online conveyancing can be quicker as everything is conducted online rather than during face to face meetings. You won’t have the added wait time that comes with booking appointments in-person.

Whilst some people doubt the reliability of online conveyancing, the conveyancers featured on comparison websites should be fully regulated.

For more information, read what is online conveyancing?

4. Organise your mortgage early

If you need a mortgage then it’s recommended that you obtain an ‘agreement in principle’ before you start searching for a property. Once you have this you will know precisely how much money you can borrow.

It’s also quicker to receive a full mortgage offer from the lender if you have previously received an agreement in principle.

What Happens After Exchanging Contracts?

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.
  • Confirm the completion date with their removal company.
  • Start 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.
  • Start packing.
  • Notify utility companies and other services that they’re moving to a new address.
  • Set up mail redirection.
  • Leave any sets of keys they have with the estate agent.

Need More Information?

This article is part of our what is conveyancing guide. Finally, we take a look at what happens on completion day. To learn 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, 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.

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