What can hold up exchange of contracts?

What can hold up exchange of contracts?

What does exchange of contracts mean?

Exchange of contracts is one of the final stages in buying a house. The buyer and the seller sign and swap contracts that agree to the conditions of the sale. It’s also when the buyer will be asked to put down their deposit.

Once the contracts are signed and exchanged, the buyer is legally bound to buy the home, and the seller is legally bound to sell it. If either chooses to pull out after exchanging contracts, they could face serious financial consequences. After exchanging contracts, the buyer and the seller agree on the completion date, when the keys are handed over and the sale is complete.

For more information on the technical terms of mortgages, you can check out our blog ‘What is a mortgage illustration?

What needs to be done before exchange of contracts?

There are a lot of things to get done to be prepared for exchanging contracts. This is why it usually takes about 8 to 12 weeks from when a buyer receives a mortgage offer to exchange of contracts.

Before exchange of contracts, the buyer should:

  • Complete any property surveys
  • Get a written mortgage offer from their mortgage provider
  • Prepare the money for their deposit
  • Flag any of their concerns about the property to their solicitor
  • Tell their solicitor if they are involved in any government schemes, for example a Help to Buy ISA
  • Organise a buildings insurance policy to begin on the day of exchange

The seller should:

  • Gather all the relevant paperwork for the property
  • Complete any forms relating to the property, for example a property information form (TA6)

The buyer and seller should:

  • Agree if any repairs noted in surveys are to take place before completion
  • Agree on any changes to the house price
  • Agree which fixtures and fittings will be included in the sale
  • Agree a completion date for the sale
  • Read and agree to the contents of the contracts
  • Agree on a completion date

What happens at exchange of contracts?

Exchange of contracts happens once everything listed above is done. Exchange of contracts can happen at any time of day, any day of the week. Most of the process of exchanging contracts happens on behalf of the buyer and the seller, so it’s unlikely that you’ll need to be present. Here is what the solicitors will be doing:

  • Ahead of time, the two solicitors set up a recorded phone call, during which any issues are addressed and added to the contract.
  • During this call, the solicitors will also formalise the completion date.
  • Once both buyer and seller are happy with terms of the contract, the seller’s solicitor will draft the official contract and send it to the buyer’s solicitor to sign.
  • The buyer’s solicitor will sign the contract and send it back to the seller’s solicitor.

This is also the point at which the funds for the exchange deposit will be transferred over from the buyer to the seller. The exchange deposit is usually 10% of the property’s asking price, but this can vary depending on what has been agreed between the buyer and the seller.

For more information on the costs of buying a home, you can check out our blog ‘Hidden costs when buying a house UK

If a buyer pulls out of the sale after exchanging contracts, they could be sued by the seller for the full deposit, plus further compensation. If the seller pulls out after the exchange of contracts, the buyer should have the full deposit returned to them, and could be entitled to compensation.

What can hold up exchange of contracts?

These are the main factors that could hold up exchange of contracts:

  • Ongoing disagreements - If the buyer and seller are still unable to settle on the price of the property, any required repairs, or which fixtures are included, it can be difficult to agree on the terms of the contract.
  • Buyer or seller causing delays - If either is taking their time to prepare everything we've listed above, then it’s unlikely the sale will be able to move forward until everything is done.
  • Scheduling clashes - Both solicitors need to be available to exchange contracts, so if they’re unable to find a date that works for them both, it can hold up the process.
  • External factors - If the buyer’s waiting to get their mortgage in writing, or the seller is in a buying chain, exchange of contracts might have to wait until both parties are ready.

What happens after exchange of contracts?

The only big day left after the exchange of contracts is the completion day. On completion day, the seller hands over the keys to the property, and the buyer’s solicitor will transfer the rest of the money for the house to the seller.

Before completion, there are a couple of last things to do:

  • Book a removal company or ask your friends to help you move
  • If you’re buying a leasehold property, you’ll need to notify the freeholder that you’re the new owner
  • Confirm with your solicitor that they have registered the transfer of ownership with the Land Registry

Completion days usually happen between 7 and 28 days after exchange of contracts, but there are a few things that can delay the process:

  • If the buyer and seller have agreed that any repairs will take place before the completion day, they’ll need to be completed before a completion day can be set.
  • If the seller is in a long chain, the completion day will need to be agreed by everyone in the chain, which can cause delays.
  • Each transfer of funds in a chain will happen one after the other, so long chains can take more than a day to complete.

Completion days tend to be on Fridays, but this can mean that solicitors and moving companies are pretty busy on these days. If you are able to, it can save time and money to complete earlier in the week.

For more information on the mortgage process, you can check out our blog ‘How long does it take to get a mortgage?

A few final tips…

These are the last few things to remember about exchanging contracts:

  • Once contracts are exchanged, the buyer and seller are both legally bound to the sale.
  • Exchange of contracts tends to happen about 8 to 12 weeks after the buyer receives their mortgage offer, as there can be a long list of things to prepare.
  • Completion tends to happen about 7 to 28 days after exchange of contracts, but it can be even quicker.

Urban Jungle is not a financial advisor and information in this article should not be taken as advice or recommendation.