What Does Exchange and Completion Actually Mean?
While having your offer accepted on a property is an exciting time, nothing is guaranteed until you have exchanged contracts. If you are in the process of looking for a new home to buy, it’s important to understand what’s involved in exchanging and completing your new home.
What Does Exchange Mean When Buying a House?
The exchange occurs when the two solicitors representing the buyer and the seller exchange signed contracts, and the exchange deposit is paid by the buyer. At this point, the agreement to buy or sell the property will become legally binding and neither the buyer nor the seller can back out of the deal. Read on to find out more about the typical timelines and processes involved with exchange and completion, what you need to do to prepare, and what’s actually involved.
What Happens When You Exchange on a House?
Once the offer has been accepted by the seller, several necessary steps must be taken before the contracts can be exchanged. Being organised, proactive, and communicating well will help you avoid any hold-ups and reduce the risk of the sale falling through. Here are the necessary steps for each party involved in the process.
Exchange and completion – Buyers:
During this process, there are several things that buyers need to do to prepare for exchange and completion. These include:
- Survey: Now is the ideal time to arrange an independent house survey to check for any serious issues with the property
- Mortgage: If you are going to use a mortgage to buy the property, now is the time to get a mortgage offer in writing
- Insurance: It’s a good idea to arrange buildings insurance for the property since this will need to be in place from the exchange date
- Leasehold and Freehold: If you are buying a leasehold or a share of freehold property, take the time to carefully read the lease and ask any questions that you might have
- Help to Buy: If you have a Help to Buy or Lifetime ISA that you are going to use to purchase the property, let your provider know that you are about to buy a house so that they can request the government bonus
- Questions: Ask your solicitor about anything you’re not clear on or are concerned about when you get the results of the property searches
- Contract: Once the above steps are complete, sign the contract and return it to your solicitor
Exchange and completion – Your Solicitor:
To prepare for the process, your solicitor should:
- Make sure that any repairs that the seller has committed to make are noted in the contract
- Go through the lease carefully if buying a leasehold property
- Complete local searches to check for environmental and planning issues
- Raise any necessary queries to the results of the survey
- Check the contract and send it to you to sign
- Agree on a completion date with the seller’s legal representative
- Arrange to pay an exchange deposit on your behalf
Exchange and completion – The Seller:
The seller should do the following:
- Prepare to negotiate the property price based on the findings of the house survey
- Gather paperwork for any work that has been done on the property
- Complete all necessary forms
- Inform their buildings insurance provider that they are moving
The Seller’s Solicitor:
The seller’s solicitor will also have some steps to take to prepare for exchange and completion, which include:
- Complete and check all relevant forms with the seller
- Answer queries that the buyer’s solicitor may have
- Obtain title deeds and details of the seller’s current mortgage
- Draft a contract for the sale
- Agree on a completion date
What Happens on Exchange Day?
Contracts can be exchanged once the buyer and seller have all the required paperwork in place. The buyer and seller need to both sign identical documents, which are exchanged at a set time by the solicitors. The exchange may be done over the phone; your solicitors will read the contracts to you and get your agreement before exchanging them. The buyer will also need to pay an exchange deposit to the seller, which is usually set at 10% of the property price and might be different from the amount of mortgage deposit you are paying. Your solicitor might be able to negotiate this deposit down to 5% if needed.
How Long After Exchange is Completion?
The time between exchanging and completing can be anything from a couple of weeks to several months and is usually the longest part of the process of buying a home. You can speed the process sup by responding to queries quickly, being well-organised, and informing your solicitor and estate agent if you plan to go away. After exchanging contracts, your solicitors are legally bound to ensure that the completion date is upheld. Completion dates are generally set at two weeks after exchange, although this is just a guideline and it’s possible to ask for more time if nobody is in a hurry to move. Sometimes, the sale can be completed in less than two weeks.
What Happens Between Exchange and Completion?
When it comes to the best day for completion, most people choose a Friday since it gives you the weekend to get settled into your new home – but since it is the most popular option, bear in mind that Fridays tend to book up quickly. The time between exchange and completion is often used to get ready for moving into your new home, particularly when it comes to the practical aspects.
Is Exchange and Completion on the Same Day Possible?
While it’s possible to exchange and complete on the same day, this is not very common. It allows you to move without delay and means that you can avoid paying the exchange deposit. However, you will need to be ready to move on the day that you exchange, which can be tricky. It also gives you less time to fix anything that might go wrong.
Understanding the exchange and completion process is crucial if you are planning to purchase a home.