If you are embarking on a property purchase, there are some key aspects of the process you should understand. One of these is the stage at which contracts are exchanged.
You will, of course, need a professional to undertake the conveyancing process on your behalf. A good place to start is the Law Society list of specialist conveyancers.
What does the exchange of contracts mean?
The conveyancers, one representing the seller and one representing the buyer, will prepare a contract that sets out the duties of each party during the transaction. Typically, the vendor’s agent will prepare the initial document. This will cover details such as the price of the property, the fixtures and fittings, and a date for the completion of the transaction.
Two copies of the document will be signed by the parties to the sale and forwarded to the other side. This is known as the exchange of contracts and makes the agreement legally binding.
Reputable conveyancers such as https://www.samconveyancing.co.uk/conveyancing-process will be happy to answer any questions you may have about this process.
Requirements prior to exchange
Before the exchange can take place, much of the onus is on the buyer. They must have agreed on a price and carried out local authority and other searches on the property. These searches may raise issues, such as planning applications and environmental issues, which may need to be answered by the vendor’s agent before the contract can be agreed.
A mortgage offer should be in place, if required, and a deposit will need to be made available at the time of exchange, which is normally ten per cent of the asking price. Should you decide to withdraw from the deal after the exchange of contracts, you will lose this deposit.
If the property is freehold, the buyer will need to have organised insurance for the property. A date for completion of the sale will be included in the contract.
How are contracts exchanged?
Contracts can be exchanged by post, although contracts are now typically exchanged over the telephone. The Law Society has outlined three formulae for telephone exchange, at which point the contract becomes legally binding and the contracts are subsequently physically exchanged. In all cases, the agent must have their client’s authority to make the exchange.
When does exchange take place?
This is usually a few weeks before the completion date, but much will depend upon the position of the parties in any sales chain. It is possible to exchange and complete on the same day, but remember that there will be no binding contract in place and either party can withdraw up to the point of exchange of contracts. Furthermore, if the buyer needs a mortgage, the lender may require exchange to take place sometime before completion.
Having your finances and documentation ready will speed up the process, as will responding quickly to enquiries.
Finally, remember to choose an experienced conveyancer to represent you.