Exchange of contracts explained

With the exchange of contracts you legally commit to buying the property. Exchanging contracts is exciting but can also be tricky. We take a look at how to exchange contracts, what you should expect and what to watch out for.

Angela Kerr Director, Editor

What is exchange of contracts?

Until you exchange contracts as part of the conveyancing process, neither side has any legal obligation to buy or sell the property, and both can pull out without any penalty (or only the deposit on agreeing offers, if one was made). Both buyer and seller sign identical contracts, but only when they are formally exchanged by the solicitors does the deal become legally binding.

Between exchange of contracts and completion, either side will almost certainly pay major penalties if they pull out. However, it is extremely rare for anyone to pull out after exchange of contracts, and in practical terms, this is when you can breathe a sigh of relief – once you exchange contracts, you can be pretty sure your house sale will go through.

How long does it take to exchange contracts?

It usually takes around 8 to 12 weeks to reach the point where you’re ready to exchange contracts.

When do I exchange contracts?

Exchanging contracts means you are legally committed to buying the property so you have to make sure you have everything in place beforehand so that nothing can go wrong. There are a range of things your conveyancing solicitor will do to ensure you are ready for the exchange of contracts.

The exchange of contracts can be done once:

• You have agreed on an offer, including for fixtures and fittings
• You have had the mortgage valuation and any surveys you want
• You have been formally offered a mortgage in writing
• You have arranged funding for the mortgage deposit
• Your conveyancing solicitor has done all relevant searches
• You have organised building insurance. After you exchange contracts, you are liable for the property, and so you need to have buildings insurance in place before hand
• You have sorted out funding for the contract deposit (traditionally 10% of the purchase price, but nowadays often less)
• You have agreed on a date of completion for the sale, which will be written into the contract
• You have read, understood and signed the contract

Once you have done these things you will agree on a date and time to exchange contracts.

What’s the average time between exchange and completion

The average time between exchange and completion is 7 days. Although the exchange of contracts can be on the day of completion (see below) and in many cases the period of time between exchange and completion is much longer.

What time of day does exchange of contracts happen?

Most exchanges happen before lunchtime, between 10am and midday. But this will depend on factors such as your conveyancer’s schedule as they will exchange contracts for you.

How long does it take from exchange to completion?

The average length of time from exchange to completion is typically one week. However, how long between exchange and completion can be any time agreed between all parties in the chain. And it can differ depending on the circumstances of the buyer or seller. Chain free or cash buyers may have a shorter time frame between exchange and completion. While those buying with a mortgage may need longer to complete.

Can you exchange and complete on the same day?

Yes, it is possible to exchange and complete on the same day. There are advantages to exchanging and completing on the same day, for example it speeds up the conveyancing process. Although it’s generally only an option if there is no chain and it’s easier if you’re a cash buyer so you don’t have to worry about transferring money from the mortgage lender.

If you are keen to exchange and complete on the same day, the things to consider are:

• Exchanging and completing on the same day can be very stressful; you won’t definitely know that you are moving until the day that you move which makes arranging a removals service and forwarding post more complex. You will need to have your house packed up with the removals firm ready, while you are waiting to hear that contracts are being exchanged.
• If anything does go wrong, you don’t have any time to put things right.
• Some mortgage lenders are happy with the exchange of contracts and completion on the same day, but others require a minimum period (such as five working days) between.
• You and the mortgage lender should transfer the funds to your solicitor the day before, to ensure there are no money transmission problems.
• You are making yourself more vulnerable to an unscrupulous seller demanding something extra at the last moment, as you will be all packed up and ready to go, and not really in a position to negotiate.

Need a conveyancing solicitor? Compare conveyancing quotes and appoint your legal team today

The risks of exchanging and completing on the same day are highlighted in the following interview given to BBC Radio 4’s You & Yours programme in July 2021, featuring our Chief Executive Paula Higgins.

What can hold up exchange of contracts?

The most common issue that can hold up exchange of contracts is with the buyer or seller, or their conveyancing solicitors, taking their time when responding to enquiries.

Other factors that can hold up exchange of contracts are:

• Building survey revealing problems. Read our guide A bad house survey report: What to do next.
• Problems with the property title
• Missing information from the seller
• Issues with the buyer’s mortgage application
• A probate sale
• Delays in getting back local authority searches
• Being in a chain
• Buying a new build property that isn’t ready (see below)
• Buying a leasehold property

See our guide for more advice on what causes delays and how to speed up conveyancing.

How do I exchange contracts?

The exchange of contracts is usually done by both solicitors/conveyancers reading out the contracts over the phone (which is recorded) to make sure the contracts are identical, and then immediately sending them to one another in the post.

If you are in a chain, your solicitor/conveyancer will do the same thing, but will only release it if all the other people in the chain are happy to go ahead. This means if one person pulls out or delays, everything gets held up. Find out how to break the housing chain.

Once you have exchanged contracts you will be in a legally binding contract to buy the property. If you do not, you will lose your deposit and you can be sued. Equally though, the seller has to sell or you can keep their deposit and sue them.

What is the process for the exchange of contracts?

The exchange of contracts involves:

• Checking you’re ready to exchange: Have all your enquiries been satisfied, is your funding arranged, have you arranged building insurance?
• Signing the contract: When you’re ready to exchange, review and sign the contract
• Paying the deposit: When you must lodge your deposit with your conveyancer. This is usually 10% but you may agree less.
• Instructing your solicitor to exchange contracts: This is done by both solicitors reading the contracts over the phone then immediately posting them to one another.

Looking for a conveyancing solicitor? Compare conveyancing quotes from our panel of quality assured conveyancers:

What happens after exchange of contracts?

After exchange of contracts there are a number of things that need to happen before completion. These are:

• You and your estate agent should visit the property just before completion day to ensure that all the fixtures and fittings you agreed on are in place and that nothing has been damaged in the meantime.
• If you’re a buyer, you’ll need to make sure all the funds are in place for the completion of your house.
• Arrange your contents insurance for your new house. You should already have buildings insurance for your new property in place from exchange of contracts. Find out more in our guide on Insurance when moving house (read on for more on this).
• Sort out your broadband. Now your completion day is fixed you can book broadband for your new house. Read more in our guide on Broadband and moving house explained.
• Your conveyancer should notify the freeholder if you’re buying a leasehold property.
• Your conveyancer should register the transfer of ownership with the Land Registry
• Contact your bank, credit card company and any other companies you have accounts with of your new address and the date you’ll be moving.
• Organise post forwarding
• If you’ve already chosen your removals firm, contact them to confirm your moving date. If you haven’t got your removals company firmed up, get removals quotes as soon as possible.

To find out more about about the next step, read our guide What happens on completion day?

Home insurance and exchange of contracts

When you’re buying a house you should get buildings insurance in place from exchange of contracts because that’s when you become legally responsible for the property. Make sure to shop around and compare home insurance quotes to make sure you get the best deal.

However, if you’re buying a leasehold property, buildings insurance is often arranged by the freeholder. So check this before putting a policy in place. Find out more in our guide on Insurance when moving house.

Video: Conveyancing process explained