Exchanging contracts on your home is a significant and exciting milestone that marks your property transaction as legally binding. All of the groundwork has been laid, and you just have to wait for your completion day to finalise your house purchase or sale.
If you're wondering what happens after the exchange of contracts, we've got you covered. We have utilised our expertise to create this comprehensive guide, covering everything you need to be aware of, from the typical wait time to potential delays you may encounter.
What Does the Exchange of Contracts Mean?
The exchange of contracts is when the parties are legally bound to complete the sale. Both parties' solicitors will exchange identical signed contracts. From this point, the transfer of property ownership has changed. If either party wishes to withdraw, they could be liable for financial and legal repercussions.
The exchange of contracts typically happens over the phone, with both solicitors, but it can occur in person. Once the signed contracts have been exchanged, the buyer’s and seller’s solicitors will agree on a completion date.
In Scotland, the exchange of contracts is replaced by missives. These determine the terms and conditions of the contract.
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What is Completion?
Completion day marks the final stage of the conveyancing process. Ownership has been fully verified and transferred to the buyer, and all funds will have been paid. The seller must vacate the property on this day, and the buyer receives the keys and can move in.
Traditionally, completion day takes place on a Friday, giving buyers the whole weekend to move into their new property. However, it is possible to complete earlier in the week.
Following completion, the buyer's representative can contact the Land Registry and pay any Stamp Duty Land Tax (SDLT) and estate agent’s fees on the seller's behalf. They will then confirm the signed transfer.
Read our Completion Day Checklist
How Long Does the Exchange of Contracts to Completion Take?
Completion typically occurs between 7 and 28 days after exchanging contracts. This period gives the seller and the buyer time to prepare for their move, though there is no legal time limit for completion to take place.
If completion hasn’t occurred after a month, this could cause significant problems for both parties. If the delay is because of the seller, the buyer may wish to renegotiate their offer, which would restart the conveyancing process.
Read more about How Long Does Conveyancing Take?
What Can Delay the Process Between Exchange of Contracts and Completion?
Completion day can be delayed due to various unforeseen circumstances. Here are the most common reasons that delay completion day:
Break in the Chain
Purchasing a property with an ongoing chain will take longer due to multiple pending transactions. If there is a break in the chain where a sale has fallen through, this can put your transaction in jeopardy. This is more common with property transactions involving multiple people.
Change in Financial Circumstances
Financial issues, including problems with mortgages, redundancy and bankruptcy, cause delays. While these cannot be predicted, they can cause the mortgage offer to be withdrawn or the property transaction to fall through.
Buyer or Seller Pulls Out
The buyer or seller may have changed their mind about the sale and wish to withdraw. If either party changes their mind after exchange, they are liable to cover the fees the other party has paid and may be taken to court for extra damages.
Unresolved Legal Issues
Unresolved legal issues include not providing the correct documentation or receiving the relevant clearances, and party wall disputes. Submitting the correct documents as soon as possible and hiring a solicitor to deal with party wall issues can help prevent this.
Defects Found in Final Inspections
Final inspections may identify issues that were previously unnoticed. This includes the pre-completion search, which confirms to the seller and mortgage lender that the buyer has the funds available to go through with the purchase.
Read more on What Stops You From Getting a Mortgage?
Miscommunication Between Parties
It’s essential to be as detailed as possible in any messages you want to relay. Ensure you thoroughly read the other parties’ requests before responding. This will encourage a positive rapport and help prevent delays.
Removal Company Delays
Delays can happen if the seller’s removal company is delayed, which can cause a change in the moving day for the buyer, which is a breach of the contract.
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Can you Exchange and Complete on the Same Day?
To exchange and complete on the same day, the buyer and the seller's solicitors must negotiate a 'release' time and date when the signed transfer is complete.
Simultaneous exchange and completion are suitable for the following scenarios:
Chain-free Buyers
Chain-free buyers, including first-time buyers and cash buyers, are in a position to move within a minimum timeframe. Therefore, they may be able to exchange and complete on the same day.
Investment Properties
Investors without plans to use the property as a residence do not need to worry about arranging removals. When buying a property with tenants in situ, they can complete quickly if they allow the tenants to carry on living in the property.
Vacant Property
If the seller has already moved, the buyer can move into the empty property with no delay. The seller may be in a position where they want to receive their completion funds and are happy to return their keys once contracts are exchanged.
Drawbacks of Exchanging and Completing on the Same Day
Here are some of the disadvantages to bear in mind:
Lack of Preparation
The buyer and seller won’t have enough time to prepare for quick house moves. The seller must vacate the property on completion and return their keys. This can be a major problem if the seller has not made arrangements.
Transaction May Fall Through
Plans to exchange and complete on the same day come with a high risk of the transaction failing. This is because the sale is not legally binding until the contracts are exchanged. If either party gets cold feet and decides to withdraw, they can do so without facing any legal ramifications.
Mortgage Lenders
If you are buying a property with a mortgage, you may struggle to find a lender that allows you to exchange and complete on the same day. Most mortgage lenders require a minimum period between exchange and completion.
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How Can I Speed Up the Exchange and Completion Process?
If you are determined to exchange and complete on the same day, there are steps you can take to minimise the risk of things going wrong. Here are some things to consider and prepare:
Both Parties:
- Be contactable throughout the agreed date
- Ensure all signed paperwork is submitted on time
- Book removals to assist with their respective moves
- Take final meter readings and arrange mail redirection with Royal Mail
- Arrange utilities and broadband for moving
- If dealing with leasehold property, both parties must inform the freeholder
Buyers:
- Have all finances in place, including the exchange and mortgage deposit
- Liaise with their mortgage broker to receive mortgage funds in time
- Ensure all searches and surveys have been conducted
- Take out contents insurance and buildings insurance policy from the agreed day
- Those living in rented accommodation must pay for their allotted notice period
Sellers:
- Return their keys in advance
- Fully vacate the property in time
- Transfer the title deeds over to their solicitor
Conveyancing Process Timeline
The conveyancing process for buying a property typically involves more steps than selling. In complex cases such as leasehold properties or listed buildings, there may be additional paperwork needed before completion due to extra checks that are needed.
Here is a typical conveyancing process timeline:
Finding a Conveyancer
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Frequently Asked Questions:
What Happens Before the Exchange of Contracts?
Before exchanging the signed contracts, the buyer and seller will have to work through the negotiations. The buyer’s solicitor will also have to carry out conveyancing searches. These detect any environmental issues that may negatively impact the value of the property.
In England, Wales, and Northern Ireland, the buyer should hire a surveyor to inspect the property. A RICS-regulated surveyor can highlight problems found in the property. In Scotland, it is the seller’s responsibility to hire a surveyor to conduct a Home Report, which is available to all potential buyers.
What if a Party Pulls Out After Exchanging?
After exchanging contracts, the transaction becomes legally binding. This means no party can pull out of the transaction without facing legal ramifications. It is viewed as a legal breach of contract, meaning that there may be severe financial penalties for the party that has withdrawn.
Buyers have more to lose if they pull out after exchanging contracts, including any deposit paid so far. The seller may also claim extra damages, such as the market depreciating, after accepting the buyer’s offer.
Any additional fees the buyer has spent thus far will also be lost. This includes mortgage-related fees, legal fees, and disbursements.
Sellers must return the buyer’s deposit if they withdraw from the sale. They may also be liable to pay for the buyer’s fees up to that point.
The buyer will have to send back any crucial documents, which are done at the seller’s expense. In certain circumstances, the buyer may also take the seller to court.
Read more on Solicitor Fees When a Buyer or Seller Pulls Out
