The exchange of contracts is such an important part of purchasing a home. It signifies the ownership of the house has legally changed. At this point, the buyer and seller can relax knowing that the contract has been legally bound.
At the end of the conveyancing process the buyer and seller’s conveyancers exchange the signed contracts. The buyer will have paid their deposit, and this exchange typically occurs over the phone. The conveyancers agree to send the contract. When each party has received their contract, the sale then becomes legally binding.
In this article, we will be talking you through everything you need to know about the exchange of contracts.
What Happens When Contracts are Exchanged?
The exchange of contracts is a fairly straightforward process, but both parties must agree to the conditions of each contract. When everyone is satisfied, then the contracts can be signed. Here is a breakdown of the process:
Both parties agree to the conditions of the contract
Both parties sign their respective contracts
The buyer’s solicitor collects the deposit and proof of a mortgage offer
A date for completion is made
The contracts and these documents are exchanged
The buyer and seller are then legally bound to the sale and the completion date agreed
Before the exchange of contracts, either party is allowed to change their mind and pull out of the sale. If either party breaches the contract after the exchange of contracts, they risk incurring severe financial penalties. It's useful to Home Buyers Protection Insurance to help cover the costs if your sale falls through.
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How Do Solicitors Exchange Contracts?
When it comes to the exchanging of contracts, this is something your conveyancers will do on your behalf. While a handful of conveyancers will carry out the exchange in person, the vast majority now do this via a recorded phone call.
The phone call consists of the conveyancers discussing the contracts in detail. This ensures they are identical and correct. Once complete, a date is set for the process to be completed.
Each member within the property chain must agree on the finalised terms. The conveyancers agree to send their client’s signed contract in the post. The contract will then be deemed as "exchanged".
How Long Does It Take to Exchange Contracts?
The 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.
When Do You Exchange Contracts?
The exchange of contracts will usually take place during week 10 of the overall timescale when buying a house. You can only exchange contracts after the following milestones have been achieved:
An Offer Has Been Agreed
The contract should include an agreement on any fixtures and fittings to be left behind. This will be stated on the TA10 fixtures and fittings form.
A Mortgage Offer Has Been Issued
Your conveyancer will need a copy of your written mortgage offer and proof of funding for the mortgage deposit. They will have to comply with any requirements before the funds can be released.
Property Search Results Have Been Received
Your conveyancer will apply for the necessary property searches. This is to discover vital information about the property. The results will need to be reviewed before progression.
All Parties Understand the Contract and Paperwork
All parties must read through the contract and Land Registry paperwork and be happy to proceed. Your conveyancer should have provided you with any and all detailed reports.
Your Conveyancer Holds All Signed Paperwork
The buyer’s conveyancer will need to be satisfied that any issues have been resolved. The property should be legally sound and any requirements from the mortgage lender should be met.
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.
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What’s the Difference Between Exchange and Completion?
The exchanging of contracts occurs when both parties sign and exchange the required legal documents. This ensures the sale is legally binding.
‘Completion’ is the date both parties physically move house and the transfer of legal ownership of the property is complete.
How Long Between Exchange and Completion?
Completion typically happens no later than 2 weeks after the exchange of contracts. This will be longer if the property is a new build.
The length of time between exchange and completion is decided by the buyer and seller. It can sometimes be delayed by other parties if you’re part of a property chain.
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Can You Exchange and Complete on the Same Day?
People can exchange and complete on the same day. It requires a lot of organisation in a very short amount of time. There would be no guarantee that the transaction could go ahead.
It’s more common amongst those buying a house with cash or when there is no property chain. For many lenders that require a mortgage, the process can take at least 5 working days.
What is an Exchange Deposit?
A buyer should pay a deposit of 10% of the property price. This percentage can vary, depending on the seller and requirements.
Negotiations may occur if the buyer is waiting to use the funds from their Help to Buy ISA to pay for the deposit. Your conveyancer may have to come to a new agreement with the seller’s solicitor.
If you’re able to provide a larger deposit, 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 repercussions and added costs.
If you pull out after exchanging contracts, the contract could be rescinded by the other party. There is also the risk of being sued.
To learn more, read can you pull out of a property sale or purchase?
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How to Prevent Delays During the Exchange Process
To prevent issues and delays, follow these tips:
Avoid Property Chains
Being in a chain that contains three or more transactions will slow down the process. If one person experiences delays, it can affect the whole chain. Without a chain, you’re reliant on fewer people and contracts will be exchanged quicker.
Choose the Right Conveyancer
Find an experienced conveyancer that’s regulated by the CLC, SRA, LSS, LSNI or CILEx. By using our comparison service, we can place you in contact with up to 6 trusted and verified conveyancers.
For more information, read how to choose a conveyancer or solicitor.
Consider Online Conveyancing
Online conveyancing can be quicker. You won’t have the added wait time that comes with booking appointments. Some people doubt the reliability of online conveyancing, but all companies should be fully regulated.
For more information, read what is online conveyancing?
Organise Your Mortgage Early
Obtain an ‘agreement in principle’ before searching for a property. It displays how much money you can borrow. It’s quicker to receive a full mortgage offer from the lender with one.
What Happens After Exchanging Contracts?
After exchanging contracts, here is what the buyer and seller should do respectively.
The Buyer:
Pay all required funds to their conveyancer before the completion date.
Send a copy of the title deeds to their mortgage lender.
Ensure their conveyancer requests 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.
The Seller:
Make sure 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.
Set up mail redirection.
Leave keys with the estate agent.
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