As a buyer, you will be required to pay an exchange deposit to the seller, which is typically 10% of the purchase price.
In England and Wales, the seller can choose to pull out from the process without penalties until contracts have been exchanged unless you have entered into a lock-out agreement.
The Exchange of Contracts process
Exchange of contracts takes place once:
- The buyer has received a mortgage offer and it has been checked by the solicitor.
- The buyer and seller are satisfied with the terms.
- All the searched and enquiries have been carried out.
- All the necessary paperwork has been completed.
- You have arranged the payment for your deposit.
- You have agreed on a completion date, which will be stated in the contract.
Exchange of Contracts is managed by solicitors or conveyancers who have been appointed by the buyer and seller over the phone.
On exchange of contracts, you are required to pay your deposit, which is typically 10% of the purchase price. Furthermore, this is the stage where you will pay other essential costs, such as stamp duty (if applicable) to your solicitor, and to have buildings insurance cover and life insurance in place.
Can I exchange contracts and move in on the same day?
Typically, completion takes place one or two weeks after exchange as this would give sufficient time for you to organise insurance, packing and removals.
While it is possible to exchange and complete on the same day, there are risks that both you and the seller should be aware of. Conversely, there are also circumstances where this might be a suitable option for you. We have covered this topic in more detail in our Completion guide.
What happens after the Exchange of Contracts?
As this is the stage where you and the seller become legally committed to the sale, the only step left following the exchanging of contracts is Completion day.
To put it simply, the completion day is when the property becomes yours and you are able to move into your new home. This is also the stage when you are required to transfer the remaining balance to the seller.
Attended Exchange of Contracts
An attended exchange of contracts refers to the process where the buyer and seller attend the same location and meet in person, together with their own solicitors. This typically takes place at the seller’s solicitor’s office.
This is an option that aims to exchange contracts as quickly as possible by coming to an agreement on the same day.
Despite the obvious benefits of exchanging contracts on the day it’s not an option that is very commonly used for a number of reasons, such as:
- Cost – An attended contract exchange means you will need to pay more for the experienced solicitor’s time – which can sometimes be in the region of thousands.
- There is very little cooling-off time for consideration.
- You may fail to overlook important issues.
- You will have no opportunities for gathering information, such as local search results.
With all these points considered, this is a method used by buyers and sellers who are committed from the beginning, such as property developers.
What can hold up the Exchange of Contracts?
There can be a few factors that can hold up the exchanging of contracts, typically these are as follows:
- There are chains involved where just one seller/buyer’s error can have knock-on consequences for everyone involved.
- The seller or the solicitor is not answering the enquiries or providing all the necessary information promptly.
- Local authorities are taking longer to provide search results.
We have listed several things you can do to speed up the exchange process below. However, please note that although some of the issues that arise may be out of your control, or not a viable option for you.
- Aim to find and purchase a chain-free property.
- Arrange an attended exchange of contracts if you are fully committed to purchasing the property.
- Instruct a good mortgage broker (unless you are a cash buyer)
- Instruct a good reputable solicitor who can be efficient carrying out the conveyancing process.
- Be in regular contact with your solicitor to be informed of the progress – and vice versa be easily contactable by your agent and solicitor.
- Be quick to reply to your solicitor’s requests, such as providing all the relevant information and documents as soon as requested.
- Organise home insurance and life insurance as soon as possible.
What happens if I change my mind?
As you are legally bound to purchase the property once contracts have been exchanged, it is difficult to back out at this stage.
If you fail to complete the purchase, you will lose the deposit at the very least and the seller can also sue you for any costs they incur. As a result, it is highly recommended that you ensure that you are happy with all the details prior to reaching this stage.