What Does Exchange Of Contracts Mean?
If you are not familiar with the house buying or selling process then you will hear the terms “exchange of contracts” a lot. Despite being one of the final stages in the conveyancing process, it is also one of the most important stages. Understanding what exchange of contracts means is therefore key to ensuring that your sale or purchase goes as smoothly as you want it to.
In simple terms, the exchange of contracts commits you by law to buying the property. Once the contracts have been exchanged, the buyer and seller are contractually committed and cannot back out. You can compare it to “engagement”. Everyone is committed and it’s very expensive and stressful if one party or the other changes their mind.
Things to consider before you commit to exchange of contracts
Given that the exchange of contracts is such a pivotal part of the conveyancing process, it is vital that you are prepared for this step and have the appropriate documentation and arrangements in place ahead of exchanging.
When buying a property, there are a number of key things to consider before you commit to the exchange of contracts. These include:
- You have a valid mortgage offer from your lender and all of the conditions have been satisfied
- You have had your survey and are happy with the results
- You’ve agreed what’s included in your offer (i.e. white goods, curtains, blinds etc)
- You’ve signed your copy of the contract
- You’ve have paid your conveyancer the deposit (typically 10% of the price)
- You’ve arranged buildings insurance to cover against the cost of damage to your new home from things like fires and floods
- You’ve agreed a moving date
What can hold up exchange of contracts?
Delays are one of the most frustrating parts of buying or selling a home and these can often come at the exchanging stage. While there are often avoidable circumstances which may push the date of exchange back, there are a number of things that can delay exchange of contracts which you can be prepared for. A few are listed below:
- The mortgage must be in place
- There may be some delays with your search reports
- You may be waiting for your survey report
- You and your conveyancer should be happy that all surveys carried out on the property and all queries are answered
- There may be multiple parties in a chain of transactions who all would all have progressed at different speeds or may change their mind beforehand
- You may have difficulty finding removal companies at busy times of the year
How long does exchange of contracts take?
One of the most common queries we receive about the conveyancing process is the question ‘how long does exchange of contracts take?’. The average is usually around 8 to 12 weeks to reach the point where you are ready to exchange contracts. This varies dependent on the parties involved. Sometimes it can be quicker (for example if there is no chain or if there is no mortgage involved) but other times it can drag on for months. Once everyone is ready, the actual process is quite quick, just needing a phone call between the buyer’s and seller’s conveyancers.
What time of day does exchange of contracts happen?
There’s no set time of day for the exchange of contracts to happen. It is usually as soon as the conveyancers have checked everything is in place and all sides are ready.
What happens afterwards?
Once your contracts have been exchanged, you have the certainty of a completion day so you can start to arrange some things:
- Book removal companies
- Pack up your contents
- Notify the utility companies
- You insure the new property (if it burns down you are still contractually obliged to buy it even though you may not have completed or moved in!)
How long before completion?
It’s important to understand that the exchange of contracts is a different process to completion. However, your conveyancer will discuss dates for completion with you before your contracts are exchanged. Typically, the completion will happen within a period of one week but it can all happen on the same day. This is a conversation for you to have with your conveyancer. Quite often it also involves the estate agent and other conveyancers who may be involved in a chain of transactions.
Hopefully this sheds some light on the conveyancing terminology and the importance of having everything in place before you exchange contracts. However, if you have further questions when it comes to the conveyancing process or wish to seek expert legal advice from a conveyancer you can trust, don’t hesitate to get in touch with the residential property team at GA Solicitors.
Our solicitors in Plymouth have years of experience advising on all aspects of buying or selling a property and can support you both locally and beyond. The team has won a range of awards, attesting to the quality of service we provide. Call 01752 203500 or email enquiries@GAsolicitors.com to discuss your requirements.
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