We look at the exchange of contracts, one of the final steps to take before your house is officially yours. Here's what you need to know.
The exchange of contracts is the point at which the agreement to transfer property ownership becomes legally binding.
Both parties become legally obliged to complete the transfer of the property on the agreed completion date.
You and the seller should have signed identical contracts, but they’ll sit with your solicitors until the exchange.
Until it happens, either party can pull out of the deal. Once the contracts have been exchanged, if either of you withdraws then it might be a breach of contract.
In the old days, solicitors from both parties would meet and physically swap contracts. Today, though, it’s typically done over the phone.
They read out the contracts to each other, make sure they’re the same and then exchange them by post.
Your solicitor or conveyancer is sent legal documents confirming the exchange, and the seller’s solicitor is sent the deposit – typically 10% of the agreed purchase price.
If you’re part of a chain of buyers and sellers, your solicitor or conveyancer won’t usually release the funds or post the contract until everyone in the chain is happy and agrees.
This means that a delay somewhere further along the chain can hold things up.
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When do I exchange contracts?
By the time you agree to exchange contracts, you should have completed all the admin work necessary to complete the purchase:
Valuations and surveys carried out
Your offer accepted
You have the funds needed to buy the property
All conveyancing searches completed
Completion date agreed
You might need to transfer the deposit to your solicitor before the exchange of contracts takes place.
How long does exchanging contracts take?
It’s normal to exchange contracts between one and four weeks before the completion date, although you can exchange and complete on the same day.
Can I change my mind after exchange of contracts?
As with any contract, there are penalties for breaching it – that’s the point of a contract. Once the exchange of contracts has taken place, both parties are obliged to honour it.
If you do pull out, you might have forfeited your deposit, which will have been transferred to the seller at the point of the exchange of contracts.
If the seller pulls out they might not face the same stiff penalties as they have no deposit to forfeit. But they could be liable for your costs, including your conveyancing, solicitor’s and survey fees.
That’s why neither party should sign and agree to exchange contracts until absolutely everything has been agreed.
What happens after exchange of contracts?
The good news is that you’ve done the hard work – legally, if not physically!
You can now look forward to the completion date. This is when the balance of the house price is sent to the seller and you get the keys to your new home.
Your solicitor or conveyancer should register the transfer of ownership with the Land Registry. If you have a mortgage, they’ll send a copy of the title deeds to your lender, who keep it as collateral until you pay off your loan.
You can get on with booking a removals company, redirecting mail, contacting utility companies and arranging home insurance.
With your home insurance, you can use our handy guide to work out how much home insurance cover you need.
Take a deep breath, safe in the knowledge that the home is now guaranteed to be yours.
Can I exchange contracts and complete on the same day?
Technically, yes, although it can be a bit of a logistical nightmare.
It’s not until the contracts are exchanged that you know for certain that you have got your new property. It’s not usually sensible to have arranged a removals firm until that point.
It’s also unlikely that the seller will have made final plans to leave the property until the exchange of contracts has happened. They’ll usually need time to pack and get ready to move.