Fri 08 Nov 2019
If you’re in the process of buying or selling a property, you may have heard your agent talking about “exchange of contracts” – or just “exchange” – and “completion” – but what exactly do these terms mean, and what do you do at each step?
Exchange of Contracts
At the exchange of contracts, both the buyer and the seller sign their own copy of an identical contract and their solicitors will give a copy to the opposite party.
At this moment, both parties are legally committed to the sale, and if either the buyer or the seller decide not to proceed after exchanging contracts they will face a heavy financial penalty. Consequently, before you get to the moment of exchange you should be very sure that you wish to proceed with the sale, and are able to do so.
For the buyer, this means that you should have a written mortgage offer – if you’re not buying using ready cash – and buildings insurance for the property you’re buying, and you should have conducted an independent survey into the property to check for any serious issues. If you plan to finance your new home by selling your current property, you should ensure that this sale is also ready to exchange contracts, as once you have exchanged on your purchase you will be obligated to pay for it.
The seller should meanwhile prepare responses to any of the buyer’s queries and inform their buildings insurance provider that they will soon be moving. They should also ensure that their onward move is also ready to exchange contracts, if they are buying another property as part of a chain.
Two other steps occur at the exchange of contracts. Firstly, a date for the completion will be set, and secondly, the buyer will pay their exchange deposit – which will be given to the seller on the completion day.
The completion date, agreed at the exchange of contracts, is the day that the sale finishes, and the buyer takes ownership of their new property.
The completion will be confirmed by the seller’s solicitor, when they receive the buyer’s deposit. They will then authorise the estate agent to release keys to the buyer, which should have been left for them beforehand by the seller.
There is no set timescale between the exchange of contracts and completion, and it can even happen on the same day, though this would require both parties to have the necessary funds in place and be ready to move immediately. It is more common that between a week and a month is left between the two dates to arrange the logistics of the move. Where the sale is part of a long chain, this can be slightly longer as there may be complications with other sales which could delay the process.
If you're renting or living at home, it can be a good idea to arrange your completion date to take place slightly before you are due to move out of your current accommodation, as this gives you some flexibility in case there is a delay, and gives you the chance to do some work to your new property if you need to – it’s much easier to clean, paint or build new furniture in an empty property than one full of boxes of your belongings!
To start your journey towards exchanging and completing on a new home, take a look at our properties for sale here.
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