How to make the experience smoother and less daunting
Whether buying or selling a property, it is one of the most significant transactions in a person’s life, both financially and emotionally. The process of exchanging on a property can often seem complex and intimidating. Understanding the steps involved in this process helps make the experience smoother and less daunting.
What does exchanging on a property mean?
To exchange on a property refers to the legal process where the buyer and seller enter into a binding contract to purchase and sell a property. This is the moment in the property transaction process where both parties agree to proceed with the sale under the terms outlined in the contract. After this stage, it becomes tricky and expensive to back out of the purchase or sale.
How do you prepare for exchange?
When you’re ready to exchange contracts, several key conditions must be satisfied. Both solicitors (representing the buyer and seller) must be content with the contract terms. A price must be agreed upon between the buyer and seller, and both solicitors should hold a signed version of the contracts. The seller’s solicitor must also have a signed ‘transfer of title deed’ called a TR1 form. The buyer’s solicitor must manage the cleared deposit funds, secure a mortgage offer, and obtain a buildings insurance policy if needed.
Both parties must also agree upon a date for completion. At this juncture, solicitors will communicate—typically over the phone—to confirm they possess all necessary legal documents. They then proceed to ‘exchange’ contracts over the phone, rendering the transaction legally binding for both the seller and buyer. This pivotal step marks a significant milestone in buying or selling a property.
Considerations for the completion and moving day?
On the mutually agreed-upon completion date, the remaining purchase price balance is transferred from the buyer (or their mortgage provider) to the seller. This transfer officially changes the ownership of the property. For buyers, this is the exhilarating moment when they receive the keys to their new home.
Sellers must ensure the property is vacated on time and in the agreed-upon condition for handover. Moving day can be hectic, but careful planning and organisation can help make the process smoother.
What are post-completion responsibilities?
Once the sale has been completed, the buyer is liable to pay any Stamp Duty Land Tax (SDLT) due to HMRC. This tax is typically handled by the buyer’s solicitor, who usually register the buyer’s ownership with the Land Registry. However, the buyer must ensure the payment is made and the ownership is registered.
How long does it take to exchange contracts?
The process of exchanging contracts can be completed within a few hours and is predominantly managed by your solicitors. Each party’s solicitor will meticulously review the contracts for their client. This is often conducted through a recorded phone call, during which both legal firms read the contracts aloud to ensure they are identical. Once satisfied, the buyer signs their contract and pays the deposit. They then instruct their solicitor to exchange contracts with the seller’s solicitor.
Does my solicitor inform me when we’ve exchanged contracts?
Yes, your solicitor will inform you of the planned exchange date in advance. They will only finalise this date once they are content with the responses to all local search, legal title, and contract queries they have raised. Understanding the significance of this part of the process, they will guide their client, whether buyer or seller, throughout. Several factors can delay the exchange of contracts. Some are within the control of the buyer or seller, while others are not.
What can hold up the exchange of contracts?
Your solicitor will only recommend proceeding once they have received satisfactory responses to all raised queries. If the property is leasehold, this can prolong the process. Similarly, non-standard construction can add to the number of queries. The Land Registry has been struggling to cope with the volume of local search requests, sometimes taking months to respond fully regarding a property’s legal title. Sometimes, the buyer or seller may inadvertently or deliberately slow the process by not providing the requested information or struggling to secure finance.
What is the role of mortgage lenders?
If the buyer is reliant on a mortgage, they are subject to the timelines of their mortgage lender. High loan-to-value (LTV) ratios or properties deemed “riskier” by the lender can further delay the contract process. When contracts are exchanged, the buyer pays an exchange deposit, typically 10% of the property price. This stage is sometimes called the ‘point of no return’, as backing out afterwards results in forfeiture of the deposit to the seller.
Who holds the deposit on the exchange of contracts?
The deposit remains with the seller’s solicitor until the transaction is concluded. Once both parties have signed their contracts, the buyer is legally bound to purchase the property. Legally, the seller retains ownership until completion day. However, the buyer must ensure the property is insured.
Although the seller can permit access to survey work, it should be supervised, and the buyer should only receive the keys after the sale’s completion. If damage occurs after the exchange, the seller must inform the buyer. Nonetheless, the buyer is responsible for insuring the property from the contract exchange date, arranging necessary repairs, and claiming on their insurance as needed.
Typically, how long is it between exchange and completion?
Usually, buyers and sellers agree to wait one to two weeks between the exchange of contracts and completion. This period allows both parties to properly organise their move, given they are now legally committed to the transaction.
However, it is sometimes possible to exchange and complete on the same day. Alternatively, a future date may be agreed upon. The essential factor is that both parties are committed, and the plans are communicated and agreed upon.
What potential delays may occur after exchanging contracts?
While not common, unforeseen issues can arise even at this advanced stage. For instance, the buyer might experience delays with their mortgage funds. Additionally, there could be a storm or flood damage to the property, or in tragic circumstances, one of the parties might pass away.
Such situations can be highly stressful for all involved, and this is where your solicitor will step in. The solicitor will issue a notice to complete to the defaulting party, requiring them to finalise the transaction on a new date, usually one to two days later, to address the issue.
What are the consequences of failing to complete?
If the buyer fails to complete on the new date, the seller is entitled to retain the 10% deposit paid at exchange and may claim additional damages. Conversely, if the seller fails to complete, the buyer will receive their deposit back and can charge daily interest for the delay period between the initial and revised completion dates.
A seller should only hand over the keys to their property on the day of completion and only after all funds have been received.
What is the exchange of keys protocol?
Should a buyer require access to the property before completion, it must always be pre-arranged and supervised to ensure proper conduct. This measure helps protect both parties and maintains the integrity of the transaction process.
Are you taking your first step or planning your next move?
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Please note: a mortgage is secured against your home or property. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
