What is Exchange of Contracts?

Buying or selling a house involves carefully navigating various stages. One of the key milestones in the home buying or selling process is the exchange of contracts, because this transforms the transaction into a legally binding commitment for both buyers and sellers. This article will guide you through the intricacies of the exchange of contracts, shedding light on what it means for all parties involved.

What Does Exchange of Contracts Mean?

The exchange of contracts is a pivotal stage in the process of buying or selling a house. It signifies the point at which the sale becomes legally binding for both the buyer and the seller. Before this point, either party can pull out of the sale with littlle or no consequence.

What is the process for exchange of contracts?

When contracts are exchanged, signed contracts are physically or electronically exchanged, and a deposit (usually 10% of the property’s purchase price) is paid by the buyer. Once this exchange occurs, both parties are committed to completing the sale on the agreed-upon terms and the conveyancers will work towards agreeing a completion date. At this point, your mortgage will be in place, your solicitor will have confirmed with you the funding for your deposit, you will have arrange buildings insurance on the property and both parties will have read and signed the contracts. Your conveyancer and the conveyancer acting for the buyer will agree on a date to exchange contracts.

Does exchange of contracts happen on the same day as completion?

Exchange of contracts typically takes place one or two weeks before completion, but it is possible to do both on the same day. Exchanging and completing on the same day will speed the process up and reduce the risk of any further delays following exchange of contracts, however, some lenders require a minimum period between exchange and completion. The downside of exchanging and completing on the same day is that you have less time to plan things like removals. Once you have that set date for exchange and completion, you will essentially have to be ready to go.

When are contracts exchanged?

Contracts are typically exchanged at least one week before the estimated completion date, although it is possible to exchange and complete on the same day in certain circumstances.

What Can Go Wrong Between Exchange of Contracts and Completion?

While the exchange of contracts is a significant step towards property ownership, challenges may arise before the final completion. Delays, unforeseen issues, or changes in circumstances can jeopardize the smooth progression to completion. Common concerns include problems with the property’s condition, possibly revealed from a survey, financing issues, errors in information, delays in the conveyancing process or legal complications, such as with a probate sale, and unforeseen issues from another party in the sales chain, that may emerge during the pre-completion period. You can help to mitigate against these issues by proactively helping to speed up the conveyancing process.

What Can Hold Up Exchange of Contracts?

Several factors can contribute to delays in the exchange of contracts. Legal complexities, outstanding queries, or issues identified during property surveys may need resolution before both parties are comfortable proceeding. Additionally, the speed of the process may be influenced by the responsiveness of solicitors, mortgage lenders, and any other relevant parties involved in the transaction.

How Long Does It Take to Get to Exchange of Contracts After the Offer?

The duration from making an offer to the exchange of contracts can vary. On average, it takes several weeks to a few months to reach this stage, depending on factors such as the complexity of the transaction, the efficiency of conveyancers, and any specific requirements or negotiations. Having said that, exchange and completion can take place on the same day in certain circumstances. In order for your conveyancer to make the exchange of contracts, both parties need to agree on terms, and the necessary legal and financial checks must be completed. Clear communication and prompt action is key during this period to ensure this part of the process happens smoothly and seamlessly and you can transition towards completion.

What happens after exchange of contracts?

Once contacts have been exchanged, your conveyancer will work with you and the conveyancer acting for the buyer to agree on a completion date. This is typically a week or two after the exchange of contracts to allow buyers and seller to make moving arrangements. Usually, provisional dates will have already been discussed prior to this and the only remaining actions will be to confirm a date. Once this date has been agreed formally, you can take steps to prepare for moving day, by arranging a removal company and starting packing, leaving essentials to hand. Between exchange and completion, your solicitors will inform the freeholder if your property is leasehold and make the final steps to ensure funds are transferred correctly on the agreed completion date. At this stage, you should think about creating a moving checklist to make sure you don’t forget to do any moving admin such as notifying utility companies and changing your address.