Conveyancing: The difference between exchange of contracts and completion
March 27, 2019
The exchange of contracts and the completion of your sale and/or purchase are two very important, but different, stages of your conveyancing process. They take place roughly one week apart from each other, but can occur a few days before or even simultaneously. Together, they form a legally binding agreement between the buyer and seller of a home.
Particularly as a first-time buyer, you may not fully understand what the “exchange” and “completion” terms mean or what they include. Knowing exactly what these steps of the conveyancing process entail, means that you understand exactly when you or the other party can and cannot walk away from a property purchase or sale.
The exchange of contracts
Once both the seller and purchaser are happy to proceed, the identical contracts are formally exchanged via the solicitors. When the contracts are exchanged and signed, the parties are then legally committed to the transaction and can be penalised should they pull out – if you are the purchaser of a property, this could result in you losing your deposit.
Before the signing and exchanging of contracts can take place, the purchaser must provide evidence that they have the funds to cover their purchase e.g. via a mortgage offer. It is also imperative, from a buyer’s point of view, that necessary title investigations and searches (Local Authority Searches, Drainage and Environmental) are undertaken on their potential future property before the exchange.
The Title Documents and Deeds related to the property will be checked over by the purchaser’s solicitor to ensure there are no unexpected problems with the land. If any queries are raised by the purchaser, the seller’s solicitor must reply before any contracts are exchanged. This is to protect the purchase, but also any mortgage lender who the purchaser’s solicitors will also represent in the transaction.
Once you have given authority to exchange contracts and the solicitor is happy with the legal title, they will request your deposit and mortgage funds from the lender in readiness for exchange. Most firms will not commit a purchaser to exchange until the lender has confirmed they will release the mortgage advance in readiness for the agreed completion date. The date for completion must be agreed by all parties in the chain before exchange can take place.
Completion occurs when a property is officially transferred from seller to purchaser. The completion date is always specified and agreed within the contracts which are exchanged prior to completion taking place.
On the day of completion, the purchaser’s solicitor transfers monies to the seller’s solicitor. Once the seller’s solicitor receives this money, a telephone call is made to the estate agents confirming that the keys can be released. They are then ready to be collected by the new owner.
We cannot guarantee the exact time at which completion will occur, especially when in a chain, but generally this is around midday.
If you have any queries on the conveyancing process, the exchange of contracts or completion, our Conveyancing Team is on-hand to provide you with expert advice. Get in touch today!