POSTED 12 October 2018 General

Exchange of Contracts - Process and Completion

The exchange of contracts is perhaps the most pivotal point of a house purchase or sale. But why is it so important, and how soon after does completion take place?

What is the exchange of contracts?

The exchange of contracts signifies that a buyer and seller have agreed on a deal and are happy for it to go through. The process is normally carried out by both parties’ respective legal representatives, who will confirm the terms of the contract and deposit amount to be handed over on completion.

Why is the exchange of contracts so important?

Up until the point of the exchange of contracts, the buyer or seller could theoretically pull out of a deal without the danger of having to pay any major penalties. Once the exchange takes place though, the agreement becomes legally binding. The buyer is committed to buying and the seller is committed to selling.

If either party backs out at this stage, they will almost certainly face hefty financial sanctions. However, deals breaking down after this point are extremely rare, so both sides should be able to look to the future with a good degree of confidence.

exchange of contracts 

When does the exchange take place?

The day and location of the contract exchange are agreed by the buyer and seller, normally through their solicitors. The exchange is traditionally held at midday on the chosen date, but this can be changed if both parties agree to it.

Because the exchange of contracts legally locks in your commitment to buy or sell a property, it’s important that all other aspects of the deal are in place beforehand. This should ensure that there are no nasty surprises between the exchange and completion.

You should only exchange contracts after:

  • Both parties have agreed an offer, including fixtures, appliances and fittings
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  • All desired valuations and surveys have been carried out and a solicitor has completed all necessary conveyance searches on behalf of the buyer
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  • The buyer has been offered a mortgage in writing and organised building insurance
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  • Funding has been arranged for the deposit amount (this is usually around 10% of the purchase price)
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  • Both parties have read, understood and signed the contract

Once the exchange has taken place, a date can then be set for completion.

What is completion?

Simply put, completion is moving day.

The actual date is agreed by the buyer and seller, and normally takes place anywhere between one week and a month after the exchange of contracts.

If both parties are willing, exchange and completion can be carried out on the same day. This has the advantage of speeding up a property deal but leaves very little leeway should any issues arise.

On the agreed day of completion, the buyer’s solicitor will transfer the deposit into the account of the seller’s legal representative. Once funds have been received, the keys to the house will be released, normally to be held at the premises of seller’s estate agent. The buyer is then notified of completion and is free to move into their new property.