What happens after exchange of contracts when buying a house?
When buying your home one of the critical points referred to by everyone is ‘exchange of contracts’. But what is it and why is it important?
Too many people still think that once they have their offer accepted on a property they have bought it. Sadly, it’s not that simple. In fact, this is just the start of a process which can be long-winded and frustrating.
After agreeing terms, the lawyers get to work. They will need to undertake searches, prepare the contract for sale, arrange the mortgage offer and acceptance with your mortgage adviser and generally formalise the process so that it is (i) legally enforceable and (ii) does not leave you exposed to foreseeable risks.
It is really only once you have entered into a contract to purchase (or sell) that you are committed. Your lawyer should make sure this does not happen until all the necessary formalities have been completed. He or she will then ask you to sign the contract. He can exchange without you physically signing if you agree to let him do so, but most times a signature is required. The other side will also sign their copy of the contract.
Once both parties have signed contracts, the lawyers may exchange. The buyer’s solicitor will normally transfer a deposit to the seller’s solicitor at the time of exchange and this deposit is usually 10% of the purchase price. It is important to know that once the contracts are exchanged, any non-returnable deposit paid is likely to be at risk if the buyer does not proceed with the purchase.
Exchange of contracts is, therefore, when you become committed to buying and the seller commits to selling to you. The subsequent completion of that contract is the actual sale and at that time the remaining purchase monies are paid over to the buyer’s solicitor by your solicitor and you will receive the keys. Now you own the place!
How long do exchange of contracts take?
Exchange of contracts usually takes between 4 and 8 weeks from the date the purchase is agreed. Most contracts for the purchase of a modern freehold property are no more than a standard piece of double-sided A4 paper with the names of the parties, the title number and the purchase price included. However, the background work undertaken during the conveyance can be more time consuming to complete.
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