Exchange of contracts is the moment when buying or selling a property becomes legally binding. Before exchange, either party can withdraw from the transaction without financial penalty. After exchange, both the buyer and seller are legally committed, and pulling out would result in the forfeiting or returning of the deposit and potential legal action.
At exchange, the buyer's conveyancer transfers the deposit (typically 10% of the purchase price) to the seller's conveyancer, and both parties sign identical contracts. A completion date is agreed, which is often two to four weeks after exchange, though it can be on the same day in some cases.
Exchange usually happens over the phone between the two solicitors or conveyancers, following a specific legal protocol. Before exchange, you should ensure your mortgage offer is in place, your buildings insurance is arranged to start from the exchange date, and you are satisfied with the results of all searches and enquiries.
After weeks of legal work, your conveyancer confirms that everything is in order. The solicitors exchange contracts at 2pm on a Tuesday, with completion set for two weeks later. You transfer the 10% deposit and take out buildings insurance from the exchange date.
Key Points
- Makes the transaction legally binding for both parties
- The deposit (usually 10% of the purchase price) is transferred at exchange
- A completion date is agreed at the same time
- Pulling out after exchange can result in losing your deposit
- Buildings insurance should be in place from the exchange date