The exchange of contracts is, for all intents and purposes, the finish line when you buy a property. After what can be a months-long process, it’s the part where you can start to breathe a sigh of relief. The keys to your new home are within touching distance. If it’s your first time buying a home, you probably have questions about exchanging contracts and what happens. That’s the purpose of this guide, which dives into what to expect when exchanging contracts on a home.
What does exchange of contracts mean?
In the context of buying or selling a property, the exchange of contracts takes place after the buyer and seller agree on the terms of the sale. Including the price and any conditions that need to be met. Once contracts have been exchanged, the transaction becomes legally binding. The final step is completion, when the remaining balance is paid, and the property is transferred to the buyer.
What happens at exchange of contracts?
The exchange of contracts is a vital step in the process of buying and selling a property. It marks the point at which the buyer and seller are legally bound to complete the transaction. Here’s what typically happens during the exchange of contracts:
- The buyer and seller agree on the terms of the sale, including the price and any special conditions.
- The buyer’s solicitor or conveyancer prepares the contract of sale, which includes the terms and conditions.
- The seller’s solicitor or conveyancer reviews the contract and makes any necessary changes or additions.
- The buyer and seller sign the contract of sale, either in person or electronically.
- The buyer’s solicitor or conveyancer arranges the deposit payment, which is usually 5%-10% of the purchase price.
- The buyer’s solicitor arranges for the transfer of the balance of the purchase price to the seller’s solicitor.
- The buyer’s solicitor arranges for the transfer of ownership of the property to the buyer. Including the preparation of any necessary documents and the payment of stamp duty.
- The seller’s solicitor arranges for the transfer of any mortgage on the property to the buyer.
At this point, the exchange of contracts is complete. The buyer and seller are legally bound to complete the sale, with a completion date set for the buyer to take possession of the property. The completion date usually occurs a couple of weeks after the exchange of contracts.
Can you pull out of a house sale when you exchange contracts?
It is generally tricky to back out of a property sale once contracts have been exchanged. After the exchange, the buyer and seller are legally bound to complete the sale. If the buyer backs out without a valid reason, they may be required to pay damages to the seller.
There are, however, certain circumstances where a buyer may be able to back out of the sale without incurring any liability. These include:
- If there is a clause in the contract allowing the buyer to cancel the sale under certain circumstances, such as if they cannot obtain a mortgage.
- If the seller breaches the contract by failing to disclose material information about the property or by making false representations about the property.
- If the property is significantly different from what was described in the contract. The buyer can show this difference would have affected their decision to purchase the property.
These circumstances are rare, and it’s difficult to back out of a property sale once contracts have been exchanged. Anyone considering backing out of a property sale should seek legal advice to understand their options and potential liabilities.
When should you exchange?
The exchange of contracts is the final step in the process of buying a property. Once you’ve exchanged, it’s time to start thinking about the move itself and putting a pre-moving checklist together detailing everything you need to do. After exchanging, all that’s left to do from a legal side is name the completion date.
How long after exchange of contracts do I need to wait until completion?
The length of time between the exchange of contracts and completion varies and is agreed upon by the parties involved in the transaction. It’s common for the completion date to be set at around four to six weeks after contracts have been exchanged.
The completion date can be set sooner, with many opting for two weeks. Essentially, it depends on several factors, including the type of property being purchased, the availability of mortgage finance and any legal or other issues that need addressing.
What time of day does exchange of contracts happen?
Exchange of contracts can happen at any time of day, as long as both parties are available and ready to complete the process. The exchange is typically carried out by solicitors or conveyancers acting on behalf of the buyer and seller. They coordinate the exchange of contracts and ensure that both parties are ready to proceed.
The exact time of day for the exchange depends on several factors, including the schedules of the solicitors or conveyancers involved, the availability of the parties and any other logistical considerations.
Ready to exchange
Exchanging contracts involves the buyer and seller each signing a copy of the contract and exchanging them. At which point they are legally bound to complete the transaction on the agreed-upon completion date. It’s the final hurdle of buying a property, one that signals the moment when you can start to think about the future in your new home.
Last Updated: December 21st, 2022