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, a legally binding agreement between the buyer and seller and sets 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 – when the buyer will get the keys to the house.
What happens at the exchange of contracts?
Previously, the exchange of contracts used to take place in person. Nowadays, it is much more common for both parties’ solicitors to be contacted over the phone. The solicitors will read out and finalise the contract. 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 as to when the contract exchange will occur; it all 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 taken from the start of the process to get to the exchange of contracts is usually eight to twelve weeks, while the time between the exchange and the completion day is seven to twenty-eight days.
The standard process is as follows:
- 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.
- Both parties agree on what the offer includes, such as furniture and fittings.
- The buyer has an offer for a mortgage confirmed.
- The seller gathers all of the paperwork for the house.
- Both parties’ solicitors set up a phone call.
- The seller’s solicitor drafts up a contract and sends it to the buyer’s solicitor.
- Both parties sign their copy of the contract.
- Both parties agree on a completion date.
- The buyer’s solicitor will then transfer the deposit, which gets sent 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 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, if discussed and a completion date before signing the contracts.
Exchange of contracts hold-ups
If both the buyer and seller have completed all of their respective tasks, delays may then 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, where the buyer and seller agree on terms and conditions and the price of the property and proceed to 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 all that it involves, 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.
