“Exchange of contracts” in a residential property transaction is a significant step in the buying and selling process. It is the moment when the legal contract becomes binding between the buyer and the seller. At this stage both parties have signed identical copies of the contracts and the contracts are then exchanged or “swapped” to confirm the property sale is legally binding.
Until contracts are exchanged neither party are legally bound to proceed with the transaction.
Key points to note about exchange of contracts are:-
- Binding agreement. This means the buyer and seller are obligated to go ahead with the transaction on the date agreed for completion.
- On the day exchange of contracts takes place the deposit is also transferred from the buyer to the seller’s solicitor and serves as a safeguard for the seller and a commitment from the buyer.
- The Price. The sale/purchase price is fixed.
- Completion date. On exchange of contracts a specified date for completion will be agreed to suit the parties within the chain and to ensure that parties have allowed time to make necessary arrangements for removals, temporary accommodation if necessary, transferring funds in readiness for completion.
- Penalties for non-compliance. If either party fails to complete the transaction on the date of completion they may be liable for serious financial penalties. The party in breach of the contract may have to forfeit the deposit and the other party may also pursue additional damages if losses have been incurred due to the breach.
Exchange of contracts only takes place :-
- When the purchase price has been agreed
- Mortgage valuation/survey carried out
- Mortgage offer received and conditions complied with
- Buyer’s deposit funds in place
- All relevant searches carried out
- Fixtures and fittings agreed between parties
- Buyer has arranged buildings insurance in readiness for exchange of contracts
- The completion date has been agreed
Exchange of contracts is an important day for both the buyer and seller, although the process itself carried out by the solicitors is very straightforward. Authority is obtained from respective clients to proceed to exchange of contracts and solicitors will then agree a time to exchange, verbally agreeing the contents of the contract and then physically “swapping” contracts.
Once contracts have been exchanged clients, estate agents and lenders will immediately be informed to prepare all parties involved in the transaction for the agreed completion date.
How we can help
Your solicitor will be able to guide you through the conveyancing process and ensure that the exchange happens smoothly.
For more information about buying and selling your home, please contact Judith Manser in the residential property team at [email protected]
Email us : [email protected]
call one of our offices:
South Devon 01803 213251
Exeter 01392 274006
North Devon 01271 342268
You can also complete an online enquiry form. One of the Wollens team will contact you as soon as they are available.