What Does 'Exchange Of Contracts' Mean?
- AuthorBrian Farrell
If you are buying or selling a property, your conveyancer will talk about “exchange of contracts”. What does that mean and what exactly does it involve?
I will explain this by reference to the sale of your property but it is just the same if you were buying.
When you find a buyer for your property, whether you sell through agents or privately, the legal process (known as “conveyancing”) will then begin. At this point in time and although your buyer’s offer has been accepted as there is no legal contract between you either you or your buyer can still withdraw from the sale and can do so without any legal liability or obligation.
When both you and your buyer are ready with all the legal formalities having been satisfied your conveyancer will ask you to sign a legal contract. The contract will include the details of the seller, the buyer, the property, the sale price and any additional terms which may have been agreed. The contract will also include the “completion date”, which is the date when the sale will be legally completed. From the seller’s position “completion” will mean moving out of the property, handing over the keys and receiving the sale proceeds, less any money to be repaid on mortgage. For the buyer, “completion” means paying over the purchase money, collecting the keys and being able to move into the property.
The process of “exchange of contracts” involves the seller’s conveyancer sending to the buyer’s conveyancer the contract signed by the seller. The buyer’s conveyancer does the same with the contract signed by the buyer and at the same time pays the deposit to the seller’s conveyancer so then the contracts have then been “exchanged”. At that point in time the sale then becomes legally binding for both seller and buyer.
Often the parties’ conveyancers will exchange contracts initially by telephone but will then send the signed contract to the other conveyancer involved.
Whether you are selling or buying, you should not commit to exchange of contracts until you are ready and able to proceed to legal completion, as there are penalties for late completion or if you fail to complete at all.
If you require any assistance with buying or selling your house, please contact our team who will be happy to assist and to take you through the conveyancing process.
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