By the end of this chapter you’ll understand:

✓ What exchange of contracts is

✓ How does exchange happen

✓ How you pay your deposit

Estimated Reading Time: 8 minutes

What is exchange of contracts?

Exchange of contracts is the point at which both you and the developer become legally committed to completing the purchase. In simple terms:

• You agree to buy the property.
• The developer agrees to sell it to you.
• The contracts are exchanged between the solicitors.
• The purchase becomes legally binding.

Once contracts have been exchanged, both parties are expected to complete the transaction under the agreed terms.

Why does exchange happen before completion?

This is one of the questions we’re asked most often. With many new build homes, the property may still be under construction when contracts are exchanged. Developers need the confidence of knowing buyers are committed before continuing with the final stages of construction. For buyers, exchanging contracts secures the property and allows everyone involved to continue working towards completion.

What happens before exchange?

Before your solicitor is ready to exchange contracts, several important steps need to be completed. These typically include:

• Your mortgage offer has been issued.
• Your solicitor has completed their legal investigations.
• Searches have been returned.
• Any enquiries have been answered.
• Your deposit is available.
• You’re happy to proceed.

Once everything is in place, your solicitor will ask for your authority to exchange contracts.

What is my solicitor doing?

Your solicitor has a lot of work to complete before exchange can take place.

This includes:

• Reviewing the contract.
• Checking the legal title.
• Reviewing planning documentation.
• Raising enquiries with the developer’s solicitor.
• Checking warranties.
• Reviewing management information.
• Confirming mortgage instructions.
• Preparing the transfer documentation.

Although you may not hear from your solicitor every day, they are working behind the scenes to ensure everything is legally correct before you commit to the purchase.

Exchange itself is usually much less dramatic than people imagine. You probably won’t be sitting in a solicitor’s office signing paperwork. Instead, the solicitors exchange contracts over the phone. Once they’ve confirmed everything is in place, they’ll officially exchange contracts and let everyone know. Your solicitor will then contact you to confirm that exchange has taken place. It’s often a very exciting phone call to receive!

What happens to my deposit?

Before exchange, your solicitor will normally ask you to transfer your exchange deposit. They’ll then send this to the developer’s solicitor as part of the exchange process. Your solicitor will explain:

• How much is required.
• When it needs to be transferred.
• Where it should be sent.
• Any deadlines you need to meet.

Always ensure you’re following your solicitor’s instructions carefully when transferring funds.

Can I still change my mind after exchange?

Exchange is the point where your purchase becomes legally binding. That means withdrawing after exchange could have significant financial and legal consequences. This is why your solicitor won’t exchange contracts until they’re satisfied that:

• You’ve reviewed the paperwork.
• Your mortgage is in place.
• Your deposit has been received.
• You’re ready to proceed.

If you have any concerns before exchange, it’s important to discuss them with your solicitor before authorising the exchange of contracts.

What happens after exchange?

Once contracts have been exchanged, everyone begins preparing for completion. Depending on the stage of construction, this could happen quite quickly or several weeks, or even months, later. During this period:

• The developer continues preparing your home.
• Your solicitor keeps your file moving.
• Your mortgage adviser monitors your mortgage offer.
• You’ll begin planning your move.

You’re now entering the final stages of your home-buying journey.