Once a property has been sold the focus of both seller and buyer will usually turn to the key stages of exchange of contracts and completion. Exchange of contracts is the point at which both the buyer and seller are legally committed to the sale.
It occurs when all legal investigations have been concluded and contracts have been signed – at this point the buyer pays a 10% deposit. The completion date is then set, usually a week or two after exchange, when the remaining balance is paid by the buyer, and ownership of the property is transferred.
Our guide aims to explain everything you need to know about these important steps.
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Exchange of contracts – what does it mean?
What does exchange of contracts mean? In literal terms, this is the stage in the property sale where the buyer’s signed contract and the seller’s signed contract are physically exchanged. These documents are swapped between the solicitor representing the person selling the property and the solicitor representing the person buying it. This exchange makes the sale legally binding.
Historically, exchange of contracts would be carried out by the solicitors in person, however these days the act of exchanging property contracts is conducted by verbal agreement over the phone, with the hard copy contracts being posted out immediately after this.
Before exchanging contracts, a buyer can change their mind and pull out of buying the property without any penalty. Once contracts are exchanged, the buyer will need to pay a deposit to the seller. If the buyer decides not to buy the property after this, they may lose the deposit and potentially face legal action.
When does exchange of contracts happen?
Exchange of contracts between the buyer and seller should only proceed when all legal and property investigations have been concluded. This includes conducting surveys, completing searches, and ensuring any enquiries raised by the buyer’s conveyancer have been resolved.
Your conveyancer will advise you when contracts are ready to exchange. At this point, you need to agree on a completion date (or moving date) to be included in the contract.
What happens on the day you exchange contracts?
On the day you exchange contracts the solicitors acting for the buyer and seller will read the contracts to each other over the phone. This is to ensure that both parties have correct and identical information, in terms of the parties, price and other important details.
Once this has been confirmed, the solicitors will confirm the legal completion date and agree the time at which exchange of contracts has taken place. Hard copies will be sent by post once the exchange over the phone has been made. This phone call is binding and does not rely on the hard copies arriving for the exchange to be complete.
If you happen to be in a property chain you will need your conveyancer to only confirm the exchange if everyone in the chain has given the go ahead. This is to make sure you don’t end up in a situation where your sale is legally binding but your purchase isn’t, or vice versa. A conveyancer will always ensure that this risk is managed but if you are in a chain, you might find that the process of exchange takes a bit longer.
Can you exchange and complete on the same day?
Exchanging contracts and completing the sale on the same day is technically possible. However, it is a good idea to think carefully about whether this is the right way forward for you.
Exchanging and completing on the same day can be more stressful as the move isn’t certain as, without exchange, the transaction isn’t legally binding. It also makes planning your move tricky as you won’t know until the day if you will be able to move straight into your new home – essentially you will need to plan for the outcome that completion will go ahead, by booking removals etc, but at the same time any party can actually pull out or request to change the completion date.
You would also need to guarantee that all parties involved from conveyancers to lenders are available at the same time to be able to complete, which can be difficult and lead to stressful situations.
Exchange of contracts to completion – how long does it take?
The most common period you can expect to wait between exchange of contracts and completion is between one and two weeks. This gives all parties involved time to make arrangements for their respective moves, knowing that everyone is legally committed to the moving date.
The timeframe for the sale can vary. It can range from same-day exchange and completion to several weeks. This depends on the agreement between the seller and buyer.
Also, when purchasing a newbuild property that is still in the process of being built, you can exchange contracts without knowing the exact completion date. This means that you can finalise the sale agreement without having a specific date for when the property will be finished. This allows the buyer to secure the property and move forward with the purchase process.
What can delay exchange of contracts?
Delays in exchanging contracts can happen for various reasons. The most common are:
- Not all parts of a chain being ready to move forwards
- Issues with the buyer’s mortgage
- Information missing from the seller
- The property survey highlighted unexpected issues.
- Problems with the property title
What happens on completion day?
Completion typically takes place between 7-28 days after exchange of contracts.
Completion day is the final step in the sales process. This is when the final funds are sent from the buyers’ solicitor to the sellers’ solicitor and the ownership of the property is transferred from the seller to the buyer. The buyer can now pick up the keys to their new home and move in. It is important that the seller has moved out of the property by this point.
If multiple properties in a chain need to be completed on the same day, the process can become more complex and time-consuming. Each property in the chain must be completed before moving on to the next one. This continues until the final completion is reached.
It’s normal for completion to take place at around 1-2pm, but it can be earlier or later, depending on how quickly the money moves and by what time the seller is able to vacate the property.
Exchange of contracts and completion step-by-step:
Step 1 – Contracts are signed
Step 2 – The buyer pays their deposit
Step 3 – The respective conveyancers exchange contracts and fix the completion date
Step 4 – The seller and buyer start getting ready for completion and the moving date
Step 5 – If the buyer has a mortgage, the mortgage money is requested
Step 6 – Any further purchase money is paid by the buyer
Step 7 – On the completion day, the buyer’s conveyancer sends the purchase money to the seller’s conveyancer. The seller’s conveyancer releases the money for the sale to the vendors – or, if the seller is also buying a property, the purchase money for that transaction is sent on to the next buyer’s conveyancer in the chain
Step 8 – The seller’s conveyancer confirms to the estate agent that keys can be released
Step 9 – The buyer collects the keys to their new home from the estate agent
Step 10 – Time to move in!
