We take you through what happens during the exchanging of contracts. This is part of the final steps to take before your house is officially yours.
Until the exchange of contracts happen, 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.
Here's what you need to know.
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What does exchange of contracts mean?
The exchange of contracts is the point at which the agreement to transfer property ownership becomes legally binding.
Once the exchange has happened, 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 stay with your solicitors until it's time for the exchange. You may withdraw from the purchase at this point, but it'll be difficult to do so after the exchanging of contracts happen as you risk losing your deposit.
Once a completion date is agreed and contracts are exchanged, you'll get the keys to your new home.
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.
How to prepare for exchanging contracts
The exchange of contracts is largely dealt with by your solicitors, so they should make sure everything is covered beforehand. But things to check are:
You have a mortgage offer from your lender in writing (this doesn't apply if you're a cash buyer)
Valuation and survey's have been completed
Searches have been completed by the conveyancer
You know what's included in your offer (i.e. furniture and fixtures)
You've got buildings insurance
A completion date is agreed
Your deposit has been transferred
You've signed the contract
The process of exchanging contracts
There's a lot to prepare before exchanging contracts. But here's a quick step-by-step overview of what you'll experience during the exchange of contracts process:
- Take the time to carefully read the contract. It's legally binding so you need to make sure you understand what you're agreeing to.
- If you notice something in the contract you don't agree with, inform your solicitor.
- The solicitors' set up a phone call with each other to address the contract and discuss any issues.
- Once both parties have agreed, the seller's solicitor sends the contract to the buyer's solicitor to sign.
- The contract is signed and returned to the seller's solicitor.
- Pay the deposit to your solicitor, who'll transfer the money to the seller's solicitor for holding.
- Both solicitor's agree on a completion date.
Once the exchange of contracts has taken place, both parties are obliged to honour it.
If you pull out, your deposit can be forfeited. If the seller pulls out they could be liable for your costs, including your conveyancing, solicitor’s and survey fees.
That’s why neither party should sign and exchange contracts until absolutely everything has been agreed.
When does exchange of contracts happen?
Contracts are typically exchanged between 7 to 28 days prior to the completion date.
But it may take even longer depending on the size of your chain.
What time of day does exchange of contracts happen?
There's no exact time of the day for this, it's based on your solicitors schedule.
You can experience a delay if the solicitors have a conflict in their schedule and can't find a time to agree on a completion date. There may even be a delay in exchanging if there are issues with either party on the details of the contract.
Can you exchange 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've got your new property.
And it's unlikely that the seller's made any plans to leave the property until the exchange of contracts has happened. They’ll usually need time to pack and get ready to move.
Who holds the deposit on exchange of contract?
The seller's solicitor holds on to the deposit until completion.
When legal documents are sent confirming the exchange, the buyer's solicitor arranges to send over the deposit to the seller's solicitor.
Once the deposit has been transferred to the seller's solicitor, you likely won't get your money back if you suddenly change your mind.
What happens after you exchange contracts?
The good news is that you’ve done the hard work – legally, if not physically!
You can now look forward to getting the keys to your new home on completion date.
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 started with booking a removals company, redirecting mail, contacting utility companies and arranging home insurance.
When it comes to working out your home insurance, you can use our guide to help figure out how much contents insurance cover you need.
Take a deep breath, safe in the knowledge that the home is now guaranteed to be yours.