Published: 06/05/2020So as to help you understand everything you need to know about exchanging contracts, we have set out a step-by-step guide to help you during this daunting but exciting process.
What does the exchange of contracts mean?
Exchange of contracts is when the buyer and seller’s solicitors exchange documentation to signify an agreement between both parties regarding a property sale.
Why do we need to exchange contracts?
Neither party is legally bound to any offer made before contracts are exchanged,
If the buyer or seller decides to pull out after the contracts are exchanged, it is possible that they will be liable for severe penalties to compensate the other party.
When do I exchange contracts?
Exchange of contracts happens once the I‘s are dotted and the T’s are crossed. This makes the agreement legally binding, so it’s imperative to ensure everything is in order before moving forward.
Your solicitor must ensure you have covered every eventuality before the contract is exchanged, but some essentials include:
- You have agreed the offer
- You have checked the relevant Law Society forms, such as TA6 and TA10
- Surveys have been carried out
- Your lender has conducted a valuation
- Your conveyancer has completed the searches
- The EPC is in place
- Funding is there to pay the deposit
- The completion date has been agreed
- Buildings insurance is arranged as you are liable for the property from the exchange of contracts
- You have read through the contract and asked questions that are relevant
- You have read and understood the contract; the contract should be signed
The exchange of contracts takes place between one to four weeks before the completion date. However, it is sometimes possible to exchange contracts and complete on the same day.
Exchanging and completing simultaneously is a tall order and can present potential problems, i.e. is everything packed and ready to move? Some lenders won't even agree to it, as many will have a minimum timeframe of five working days between contracts being exchanged and a completion day.
How do I exchange contracts?
Exchanging contracts is handled by the solicitors and mostly conducted by phone and recorded. Each legal firm reads the contracts out loud to ensure they are identical. Once this has taken place, the contracts are posted to the other solicitor to finalise the exchange.
What happens once contracts have been exchanged?
Congratulations! The most challenging part is done and dusted and once contracts have been exchanged, you can start to prepare for your move.