How House Contract Exchanges Work

The exchange of contracts is one of the most crucial steps towards buying or selling a house, as it is at this moment that the sale becomes partially bound by law. Before the contracts are exchanged, neither the buyer nor the selling party is obligated to go through with the sale.

There is still the possibility of backing out, but the exchange of contracts also involves the buyer paying an exchange deposit, which the seller keeps if the sale breaks down due to an unjustifiable change of mind by the buyer. Because of this, back-out rates are obviously very low once the exchange of contracts has occurred.

The final step of the house selling process will be the completion of the sale which occurs somewhere between one week and a month after the exchange of contracts. The exchange itself can take up to two months to go through, which is another element that causes the traditional method of selling a house to take so long.

What Happens During the Exchange of Contracts

While it might sound like a simple one-off interaction, the exchange of contracts actually involves multiple interactions between the solicitors representing the buyers and the sellers.

The buyer’s solicitor and the seller’s solicitor begin by agreeing to the house sale contract verbally, usually over the phone. They then must check that the two contracts being exchanged between the parties are completely identical. Once this part of the exchange has been completed, the solicitors send a copy of the contracts to each other in the post, which each solicitor will then give to their client.

Paying the Exchange Deposit

To secure the sale, the buyer must pay an exchange deposit which will usually – though not always – be around 10% of the selling price that the seller accepted. The deposit is paid first to the buyer’s solicitor who then transfers it to the seller’s solicitor during the final stage of the exchange of contracts.

How Buyers Should Prepare for the Exchange of Contracts

Buyers will need to commission an independent survey of the property to identify any issues, as well as prepare a formal mortgage offer in writing.

The money for the exchange deposit to secure the sale of the property should be gathered in preparation to be paid to the buyer’s solicitor.

Buyers will also need to organise their buildings insurance for the new property to make sure they are covered from the date of completion.

Finally, examine the contract in minute detail and resolve any and all queries before signing it.

How Sellers Should Prepare for the Exchange of Contracts

Sellers will need to check the results of the buyer’s independent survey and be open to negotiating the selling price should any unforeseen problems with the property be discovered.

All the relevant documentation will need to be gathered together, such as energy certificates or any proof of planning permission if the likes of an extension have been added.

The seller will also have to contact their building insurance provider to cancel their policy or arrange to have it transferred to a new property.

Solicitor Duties During Exchange of Contracts

As well as handling the actual contracts and the payment of the deposit, both solicitors will be busy with a number of other duties which are covered by the conveyancing fees they charge.

The buyer’s solicitor must communicate and help resolve any queries their client has with the contract. They will also need to check local area risks and planning permission possibilities. They will then arrange the completion date with the seller’s solicitor.

The seller’s solicitor will need to acquire the property’s title deeds and any necessary mortgage details. Another important duty is to ensure the buyer’s finances are all in good order and that the deposit payment will have no problems being paid.

This process obviously takes a long time which is why many sellers look for a cash house buyer to remove all the stress and time-consuming processes.

For help quickly selling a property fast, contact us on 0203 916 5960 or email [email protected] and take the three easy steps that will result in a quick cash offer.