Until you actually exchange contracts with the seller of a property, nothing is set in stone. It can be a stressful part of the buying process, but once completed, also the most rewarding. If you are wondering how the exchange process works, we explain everything you need to know below.
What happens when you exchange contracts?
When contracts are exchanged between the conveyancers/solicitors representing the buyer and seller, the transaction becomes legally binding and the buyer is then required to provide the exchange deposit.
Legally this means both parties have to go through with the deal and are unable to change their minds.
Should you withdraw from the agreement after the contracts have been exchanged you could lose your full deposit and be required to pay compensation to the seller. This also applies to the seller if they withdraw after the exchange of contracts.
When should you exchange contracts?
The exchange of contracts is one of the last parts of the buying process and should only happen after certain steps have been completed:
- Arrange for an independent house survey to be carried out on the property. This will identify any major structural issues and if any come to light you may be able to negotiate a lower price with the seller.
- Any mortgage required for the property has been confirmed in writing by the lender.
- The contract has been reviewed and any issues for either party addressed and resolved.
- As the new person legally responsible for the property you will also have to arrange buildings insurance. If the property is at risk of subsidence or is in a flood-risk area you should ask the seller for details of the current insurance company as they will have full details about these issues.
- Ensure you have the funds available to pay the deposit (Help to Buy/Lifetime ISA users may need to apply for a government bonus).
- Money is available to pay for all other costs such as stamp duty, removal costs etc. A bank charge may also be applicable for the transfer of funds.
When the contracts are being exchanged, your legal representative will also have to provide a completion date to the other party, which is usually around 2-4 weeks later – this is when you can move in or begin work on the property.
What are the conveyancer’s responsibilities?
As the person overseeing the legal aspects of the exchange of contracts, the conveyancer should also ensure that:
- Any repairs agreed to by the seller have been included in an amended contract.
- Searches related to planning and environmental issues have been carried out satisfactorily.
- Any leasehold sale is looked at in detail to ensure nothing has been missed.
- Issues raised by the results of the survey are addressed with the seller’s solicitor, before being explained to the buyer in full.
- They have checked through all the details of the contract before sending it to the buyer to be signed.
- A date of completion has been agreed with the seller’s solicitor.
- The buyer’s exchange deposit is transferred in full to the designated bank account.