What Happens After Exchange of Contracts?
Following the exchange of contracts is completion, but there is usually some time for the buyer and seller to make final arrangements. All parties are legally bound following the exchange of contracts. This means that they can face legal consequences if they withdraw from the sale.
Whether you are buying or selling a property, there are certain tasks you will need to carry out before you complete. The more organised you are during this time, the more seamless your completion will be.
In this guide, we have gathered everything you need to know about what to expect following the exchange of contracts.
Before Exchanging Contracts
Both parties need to ensure that they are happy to proceed before signing their contracts.
Exchanging contracts is when the transaction becomes official and the parties are legally bound. Before this stage, there is no legal obligation for either party to go through with the sale.
The exchange of contracts is usually a verbal agreement over the phone between the parties’ solicitors. This means the actual process of exchanging is done very quickly.
Here are some things to keep in mind before you exchange contracts:
1. Get a Property Survey
It’s imperative that you are happy with the survey results before proceeding.
In England, Wales, and Northern Ireland, the buyer must hire a surveyor. The HomeBuyers Report is best for newer properties and buildings with standard construction. The Building Survey is ideal for older and listed properties as well as buildings with non-standard construction. A snagging survey is best for new-build homes.
In Scotland, it is the seller’s responsibility to hire a surveyor. Hiring a surveyor is not a legal requirement in the rest of the UK, but is legally required in Scotland. The survey is called a Home Report and the report is available for all potential buyers to read through.
If you receive negative survey results, the buyer has a couple of options before exchanging contracts. They can renegotiate their offer or withdraw from the transaction altogether.
2. Receive a Mortgage Offer
Most buyers apply for a mortgage when purchasing a property. Before giving you a written mortgage offer, your lender will conduct a mortgage valuation to determine how much they are willing to give. The buyer can then arrange a date to receive their mortgage advance before completion.
3. Ensure Your Finances are Ready to Go
The buyer will need to make sure that they have their deposit ready to transfer. They will also need to make sure that they have the funds for any remaining fees that will be paid on completion such as solicitor fees.
4. Book Your Removal Company
Both the buyer and seller will need to make arrangements for moving day. Compare My Move can connect you with up to 6 removal companies, allowing you to compare quotes and save money on your moving fees.
5. Get Buildings Insurance
Buyers should organise buildings insurance from the date of exchange. Most mortgage lenders require buyers to take out a building's insurance policy to proceed with the mortgage offer.
6. Agree on a Completion Date
Your completion date will be confirmed once the signed contracts have been exchanged. However, it’s best to enquire about a rough time frame for when completion will take place. This allows you to make final preparations.
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How Long After Exchange of Contracts is Completion?
Completion usually takes place up to 2 weeks after exchanging contracts. The date will be agreed to by all parties and allows the buyer and seller to make their removal arrangements. They will also have to arrange service transfers and ensure that their mail redirection is complete with Royal Mail.
There are instances when completion happens a few months after exchanging contracts. This can be the case for those currently living in a rental property who have to give a certain period of notice to their landlord. Tenants are often advised to wait until the exchange of contracts to hand in their notice.
If you are buying a new-build property, you may find that you are waiting a long time for completion if the property has not been fully built on exchange.
What Happens After Exchange of Contracts?
Once contracts have been exchanged, the transaction becomes legally binding. This means that if the buyer or seller decides to drop out of the transaction, they will most likely face financial penalties. Both solicitors then agree on a completion date.
The buyer’s solicitor will transfer the title documents to the Land Registry. This then states that ownership of the property has been transferred from the seller to the buyer. They will also transfer the funds to the seller’s solicitor. The seller will then receive the completion funds from their solicitor.
The buyer should conduct final checks such as examining the EPC (Energy Performance Certificate) and taking out home insurance. They should also ensure that they have submitted the required documentation to their solicitor.
Both parties should liaise with their removal company and make sure that moving logistics have been arranged. Using this time to pack up your belongings means that you don’t have to stress when the moving day arrives.
The buyer’s solicitor will liaise with the lender and review the mortgage offer, ensuring that there are no last-minute issues. They will also conduct pre-completion searches. These are final checks before completion takes place.
Those selling a leasehold property will have to submit up-to-date documentation. This paperwork should include ground rent and service charges.
Lastly, both parties will have to arrange new utility providers. This includes setting up energy providers, water supply, and broadband suppliers.
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Can I Pull Out After Exchange of Contracts?
Pulling out after the exchange of contracts is not advised as both parties are committed to the transaction. It’s not common for either party to pull out at this stage as they will be liable for legal action as it is seen as a breach of contract. This can lead to various financial consequences.
However, there are reasons why people pull out following the exchange of contracts. If you do have to pull out, you should keep this in mind:
If You’re a Buyer
Buyers have the most to lose financially in the transaction if they pull out. You will lose the full deposit funds if you pull out after exchanges and may be expected to pay a percentage of the unpaid purchase price.
The seller may also request that you cover any costs that they have made throughout the conveyancing process.
If You’re a Seller
Sellers are expected to cover the buyer’s costs up to this point. Typically, this is the solicitor fees and surveying costs. In some cases, there may be additional accrued interest paid. The buyer does have the right to pursue further legal action if they wish. Therefore, if you are dealing with an unforeseen situation, it’s best to explain this to the buyer.
While the seller does not have as much to lose financially as the buyer, it can cause issues further down the line. Estate agents may be sceptical about assisting you in the future. This is because they do not receive payment until completion.
Read more on How to Pull Out of a House Sale
Can I Exchange and Complete on the Same Day?
It is possible to have a simultaneous exchange and completion. However, exchanging and completing on the same day comes with the risk of the buyer and seller not being fully organised and prepared to move. Most of these transactions involve cash buyers or no property chain, such as first-time buyers.
While it can be viewed as convenient, especially for sellers who have already vacated their property. It does mean that the buyer will have to embark on a last-minute move. Hiring a removal company in these cases can minimise the stress.
In most cases, there is a gap between the exchange and completion. This allows the buyer and seller to make removal arrangements in time. Those buying with a mortgage may also have to wait as some mortgage lenders demand a minimum time frame before completion can take place.
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What Happens on Completion Day?
Completion day is the final stage in the home-buying process. The seller will receive the rest of the remaining money via their solicitor. These bank transfers typically consist of the deposit and funds from the buyer’s mortgage lender.
The buyer will then be able to collect the keys from the estate agent and can move into the property. They will also receive a signed transfer copy of the title deeds.
Both parties will have to pay their final solicitor fees. For the seller, this can include paying any estate agent fees. On the other hand, the buyer will need to make sure that they have paid all legal costs and disbursements.
The buyer’s solicitor will then pay any Stamp Duty on the buyer’s behalf. At this stage, the buyer should check that the Stamp Duty has been paid and that they have been registered with the Land Registry.
Read more on: What Happens on Completion Day?
Finding a Conveyancer
At Compare My Move, we have a conveyancing partner network, allowing you to compare quotes and save money on your conveyancing fees.
All our conveyancing partners have passed a strict verification process. This includes providing proof that they are regulated by one of the following:
- SRA (Solicitors Regulation Authority)
- CLC (Council for Licensed Conveyancers)
- LSS (Law Society of Scotland)
- LSNI (Law Society of Northern Ireland)
- CILEX (Chartered Institute of Legal Executives)
Once on our network, we then monitor our partners to ensure that they adhere to our code of conduct.
