So you’re asking yourself…”What is an Exchange of Contract and how do I do it?”
The point at which you exchange of contract is just about the most exhilarating time when buying a house but why is the Exchange of Contract so important and what exactly does it mean? In England (Property Law in Scotland is different) either side can pull out of buying a property at any point up until contracts are exchanged without penalty, although the deposit (usually 10%) will be forfeited if an offer has been made and accepted, once it has been paid.
Both buyer and seller sign identical contracts but only when they are formally exchanged by the solicitors does the deal become legally binding.
If either side pulls out after contracts have been exchanged but before Completion, then major penalties will be incurred. However, this is extremely rare. You can take out insurances against this happening and certainly we know of one gentleman who suffered a heart attack during this stage and had to pull out, fortunately, the vendors were most understanding in the circumstances as it was not the buyer’s intention to pull out.
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So, in practical terms, this is when you can breathe a sigh of relief – you can be pretty sure your house sale will go through.
In terms of timescale, contracts are usually exchanged between one week to one month before completion, although you can exchange contracts on the day of completion
Because exchanging of contract means you are legally committed to buying the property, you have to make sure you have everything in place.
So, only exchange if you have agreed an offer including any fixtures and fittings; you have had the mortgage valuation and survey conducted; you have a formal offer in writing of a mortgage; you have arranged the finances and for the bank to release the deposit and the final fees due on completion and their solicitor is aware of this; all the relevant searches have been done by your solicitor.
Other things you will need to do include arranging buildings insurance because you are liable for the property after exchanging contracts; arranged to have the monies in place to pay the deposit; agreed the completion date.Then you need to read, understand and sign the contract.
Contracts are usually exchanged at midday on any given day by your conveyancer or solicitor acting on your behalf. This happens over the phone and is recorded. Then it is legally binding once you have signed it.
Sometimes people do exchange and complete on the same day but it is much more stressful and there is no room for error. Your house needs to be packed up and the movers on stand buy. Some mortgage lenders may require a minimum period (such as five working days) between exchange and completion. You are making yourself more vulnerable to an unscrupulous seller demanding something extra at the last moment, as you will be all packed up and ready to go, and not really in a position to negotiate.
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Visit the property just before you complete to ensure that everything you agreed on is in the property; Send a copy of the title deeds to your mortgage lender who will hold them until you pay your loan off.Notify the freeholder if the property is leasehold; Register the transfer of ownership with the land registry; tell utility companies that it is now your property; tell any banks that you have moved; change your address on your driving license (Free); organise post forwarding.
Of course, working with Zevizo Properties we are used to handling complex negotiations smoothly and expertly, that’s why we are able to offer a fixed, low cost, fee for handling the sale of your property – money that you can put in your pocket towards any other expenses, or new things for your home or to go on holiday. Whatever you spend it on, it’s up to you, we just know we are delighted to be able to save you money!