In any house sale or purchase, everyone is usually focused on two key events, the first being “exchange of contracts” and the other being “completion”. This article will aim to explain more about this process.
At any point up to exchange of contracts, the agreement to buy or sell a property is not legally binding. This means the seller or buyer can withdraw from the transaction at any time. This uncertainty is one key reason why everyone want to exchange contracts as quickly as possible but unfortunately, exchange of contracts can only take place when all finances are in place (e.g. a mortgage offer has been received) and the vast majority of the legal work has been completed.
If you are in a chain of transactions, exchange can only happen when every party in that chain is ready to go ahead.
How does exchange work in practise?
The actual process of exchanging contracts is dealt with in a telephone conversation between the acting lawyers. In this conversation, the terms of the contract are confirmed and the buyer’s lawyer will confirm the amount of the deposit being handed over on exchange. This is usually 10% of the purchase price.
Once exchange of contracts has taken place, both buyer and seller are legally committed to the purchase. If the buyer did not go ahead with the purchase, they would lose their deposit at a minimum and, if the seller refused to go ahead, the contract could potentially be enforced through the courts and the seller forced to vacate, or the buyer could be awarded damages.
What happens after exchange?
When exchanging contracts, the “completion” date is also confirmed. The completion date, put simply, is moving day. It’s the date on which the seller must vacate the property and the buyer will get the keys and can move in. Fundamentally, on completion, the buyer must, through their lawyer, hand over all the remaining money required to purchase the property.
It’s really important when exchanging contracts that the date set for completion is achievable and that the seller knows they can remove themselves and their belongings on or before the agreed date and that the buyer knows they will have the money ready, either through a mortgage offer or their own resources.
Failing to complete can have financial consequences so it’s really important that buyers and sellers understand their obligations on moving day.
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