What Does the Exchange of Contracts Mean?

See what our customers have to say about us

The exchange of contracts is a crucial step in the house-moving process and is one of the last stages. It occurs when both parties swap and sign the contracts, which constitute a legally binding agreement between the buyer and seller and set the stage for the completion of the transaction. In this blog, we will explore what the exchange of contracts entails, what happens during this process, its timing and duration, and how to prepare for it.

What is the Exchange of Contracts?

The exchange of contracts occurs when both the buyer and seller sign and swap contracts, obligating the buyer to purchase the property. The buyer typically puts down a deposit, which serves as security. If the buyer withdraws from the transaction after the exchange, they will forfeit their deposit. Conversely, the exchange protects the buyer if the seller backs out. Once the contracts have been exchanged, both parties can agree on a completion date—the date the buyer will receive the keys to the house.

What happens at the exchange of contracts?

Previously, the exchange of contracts took place in person. Nowadays, it is much more common for both parties’ solicitors to be contacted over the phone. The solicitors will read the contract and finalise it. This is your chance to vocalise anything you’re unhappy with or any concerns you may have. For example, as the buyer, you may share any repairs required in the house you are buying, so these can be noted in the contract to hold the seller liable. The solicitors set the completion date, which is when the house is yours, you get the keys, and you can move in. If both parties are happy with the date and deal, then the contracts are signed and exchanged.

Timing and duration

There is no set time of day for the contract exchange; it depends on the solicitors’ schedules. It can also get pushed back if there are delays and tasks that still need to be completed. The time from the start of the process to the exchange of contracts is usually eight to twelve weeks, while the time between the exchange and completion day is seven to twenty-eight days.

The standard process is as follows:

1. A survey will be conducted, and the lender’s valuation will take place to identify any necessary repairs. Following this, both parties must agree on a price.
2. Both parties agree on what the offer includes, such as furniture and fittings.
3. The buyer has a mortgage offer confirmed.
4. The seller gathers all of the paperwork for the house.
5. Both parties’ solicitors set up a phone call.
6. The seller’s solicitor drafts up a contract and sends it to the buyer’s solicitor.
7. Both parties sign their copy of the contract.
8. Both parties agree on a completion date.
9. The buyer’s solicitor will then transfer the deposit to the seller.

What is the completion day?

In the buying and selling process, completion day is the last step. It’s when ownership is transferred from the seller to the buyer, and the money is transferred between the parties. An exciting time for both the buyer and seller!

How to prepare for the exchange of contracts

Failing to prepare for the exchange of contracts can cause delays, which can be annoying for both the buyer and the seller. As the buyer, you should:

• Obtain written proof of the mortgage offer.
• Arrange the deposit funds.
• Schedule a property survey.
• Inform your solicitor about any government schemes you are part of, such as Help to Buy ISA.

As the seller, you should:

• Prepare all relevant house paperwork for the buyer.
• Complete any repairs identified in the property survey.
• Fill in any required forms or documentation.

Both should agree on a new price and a completion date before signing the contracts.

Exchange of contracts hold-ups

If both the buyer and seller have completed their respective tasks, delays may occur due to scheduling issues with the solicitors. Both will have other clients to tend to, so finding a date that works for everyone may be a challenge.

To summarise

The exchange of contracts is vital to the house-moving process, in which the buyer and seller agree on terms and conditions, including the price of the property, and then sign identical contracts. The contracts are then exchanged between the respective solicitors, and the buyer pays a deposit. The contract legally binds both parties to fulfil the contractual obligations and determines the completion date. If you’d prefer to chat with a reliable UK conveyancer about the exchange of contracts and everything that goes with it, talk to the team at Muve. Muve is a UK conveyancing firm focused on making the moving process less stressful with minimal paperwork, proactive case progression and access to a 24/7 online case portal. Please don’t hesitate to get in touch for more information about the snagging survey process.