What does ‘exchange of contracts’ actually mean? Find out with our quick guide.
Once everyone’s happy to go ahead, the next step is to sign and exchange contracts with your seller (and your buyer if you’re selling). This is the point when the transaction becomes legally binding.
Normally, you’ll exchange contracts somewhere between one and four weeks before completion (the point at which the keys are handed over), although it's technically possible to exchange and complete on the same day.
Your solicitor will check with you that you’re happy to proceed, and will speak to your seller’s (and/or buyer’s) solicitor to organise a time and date to exchange contracts.
The actual exchanging of contracts usually involves phone calls between all the ‘linked’ solicitors in the chain to confirm that the respective contracts are identical.
At the same time your solicitor will send your deposit funds to your seller's solicitor, and - if you’re also selling - your buyer’s solicitor will send their funds to yours.
Once you’ve exchanged, you, your seller, and your buyer if you’re selling are legally bound to complete on the completion date. Major financial penalties will apply if any party pulls out after this point.
For this reason, it’s extremely rare for a sale to fall through after contracts are exchanged, so you’ll be perfectly within your rights to heave a sigh of relief.
Around the time you exchange contracts, your solicitor will conduct a final search – known as a Priority Search or a Land Registry Search. This is to check that nothing has changed regarding the ownership of the property in the time since you made your initial offer.
This search also prevents anybody else from changing or making new entries on the property’s legal title, so you know you won’t get any nasty surprises after completion.
Around this time, your solicitor will send you a final statement – sometimes known as a completion statement – which shows you the total amount you’ll owe on completion. Your statement will include:
If you’re selling, your solicitor will also request a final redemption statement from your mortgage company confirming the exact amount you’ll owe on the day of completion. This will include any early repayment fees that apply.
Assuming you’re not exchanging and completing on the same day, you can also use this period to get organised fo the move, which usually happens on completion day.
The day you complete is the day when all remaining funds and keys change hands. If you’re buying, you’ll then be free to move into your new home. If you’re selling, you’ll have to completely vacate your former property.
On completion day, your solicitor will check that they’ve received the mortgage funds from your lender and chase them if necessary. They will then hold onto the money until formal completion.
Your solicitor will contact you to check that you’re happy to complete and will then phone your seller’s solicitor (and your buyer’s if you’re selling) to formally complete the sale.
Your solicitor will transfer funds to your seller’s solicitor and, once they’ve been received, you’ll be able to collect your keys from the seller’s estate agent ready to move in. There can often be a bit of a wait for the keys while the seller moves all of their belongings out (and, if you’re lucky, cleans the property), so it’s best not to assume that you’ll get much unpacking done on the first day.
If you’re selling a property and are completing on your sale at the same time as your purchase, your solicitor will normally wait to receive the funds from your buyer before transferring the money to your seller’s solicitor for the house you’re buying. They’ll also pay any money owed to your mortgage lender if you have one, plus any other outstanding funds owed to people such as your estate agent. If there’s any leftover cash, they’ll send this to you.
You’ll need to give your old house keys to your estate agent, ready for your buyer to collect.
Completion is usually arranged to take place at midday, but in practice it can be slightly later by the time money has been transferred.
Once your purchase is complete, your conveyancer will take the following steps to tie up the loose ends on your new property:
Typically, a sale or purchase in England or Wales will take around 8-12 weeks from the moment an offer is accepted to the point of completion.
However, the conveyancing process varies from case to case and it can take longer depending on the complexity of the transaction, the number of people in the chain (if applicable), and how quickly you can respond to queries from your conveyancer.
A freehold property is owned by you outright, together with the land it stands on. A leasehold property is ultimately owned by the landlord – or freeholder – but with ownership granted to the leaseholder for a specified time (normally 99 years for a standard flat).
If you’re buying or selling a leasehold property, the conveyancing process can take slightly longer as there will often be additional enquiries relating to the terms of the lease.
Find out more about the conveyancing process when buying a leasehold property.
Not always. If you opted for a conveyancer or solicitor offering a no-sale, no-fee deal, you shouldn’t have to pay your conveyancing fees if the sale falls through.
You may still be responsible for extra fees, though, such as any searches that have already been carried out.
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Exchange of contracts is the point in the process when both the buyer and seller commit themselves to a legally binding agreement.
To exchange, the seller's conveyancer draws up two copies of the same contract and both the buyer and seller signs their own copy. When both parties are ready to legally commit, the two contracts are exchanged.
Once contracts are exchanged, both the buyer and the seller are legally bound to go through with the house sale.
This is a penalty charged by your mortgage lender if you pay off the mortgage early. It compensates the lender for lost interest.
The amount paid by a buyer to a seller when contracts are exchanged to make a property sale legally binding.
The point at which the transaction (the sale, purchase, remortgage or lease extension) is completed. When buying a property, this is the date that you become the legal owner and get the keys to your new home.
A completion statement shows all the payments involved in the conveyancing process.
It includes the amount you are paying or receiving for the property, a breakdown of the legal costs, the outstanding amount on your mortgage and also shows any additional funds owed to or by you to complete the sale or purchase.
You’ll receive your completion statement from your conveyancer just before the exchange of contracts.