When you`re buying a house, there are a lot of steps involved, from finding the right property to getting financing to making an offer. Once you and the seller have agreed on the terms of your purchase, the next step is to exchange contracts. But when exactly does this happen, and what does it mean?
In the UK, the process of buying a house is typically divided into two stages: exchange of contracts and completion. Exchange of contracts is a legally binding agreement between you and the seller that sets out the terms of the sale, including the purchase price, completion date, and any other conditions that need to be met before the transaction can be finalised.
So when does exchange of contracts happen? Typically, this occurs after you`ve made an offer and the seller has accepted it. You`ll then need to hire a solicitor or conveyancer to handle the legal aspects of the process, including conducting searches to ensure the property is free from any legal issues or disputes. Once all of the necessary checks have been completed and any issues resolved, your solicitor will draw up a contract and send it to the seller`s solicitor for review.
At this point, you`ll need to pay a deposit, usually around 10% of the purchase price, which will be held by your solicitor until completion. Once the seller has signed the contract and your solicitor has received the deposit, exchange of contracts can take place. This is typically done over the phone, with both solicitors confirming that they have a signed and dated copy of the contract and that the deposit has been received.
Once contracts have been exchanged, both you and the seller are legally bound to complete the purchase. This means that if either party pulls out of the deal, they may be liable for financial penalties or legal action. Completion usually takes place a few weeks after exchange, when the remaining balance of the purchase price is paid and the keys are handed over.
In summary, exchange of contracts is a crucial step in the process of buying a house. It legally binds both you and the seller to complete the purchase, and ensures that all of the terms of the sale are agreed upon ahead of time. While the process can be complex, hiring a solicitor or conveyancer with experience in property law can help ensure that everything runs smoothly and that you`re protected throughout the process.