The terms ‘exchange’ and ‘completion’ are always used when dealing with the sale or a purchase of a property because they are the two most important parts of the process.
Exchange means that the terms under which the sale/purchase has been agreed are now binding because the both parties have signed the contracts and their Conveyancers have confirmed that both parties are willing to proceed in line with the contract terms.
The exchange of contracts usually takes place during a telephone conversation, after which the contract you’ve signed is sent to the other party, and vice versa. So if you are selling the property your signed contract is sent to the buyer’s Conveyancer, and your Conveyancer will receive the contract signed by the buyer.
Getting to the point of exchange may seem like a long process, but it’s important that all terms are agreed and what you expect, because after exchange there are consequences for not proceeding with the sale/purchase. At any point up to exchange you can walk away from the sale/purchase without a contractual penalty.
Matters which you must ensure are satisfactory and correct before the exchange of contracts include:
- The correct price is on the contract
- The correct fixtures and fittings are included in the sale
- The correct date for completion is set
- Your funds are ready – as a buyer you will usually need to pay 10% of the agreed sale price as a deposit in order to exchange (this percentage can be varied if all interested parties agree)
- Check that any required mortgage offers are in place
- For buyers, the report and searches from your Conveyancer has not highlighted any issues that would unduly affect your use of the property
- That the property insurance is in place from the date of exchange, as the standard residential contract means that insurance will become the responsibility of the buyer following exchange of contracts
There is usually a gap between the exchange of contracts and the completion date. This allows time for parties to arrange their personal belongings and also to arrange funds from mortgage lenders.
The time of completion is found in the contract and usually happens between midday and 2pm. The timing is dictated by how many people are involved in the chain (how many buyers and sellers there are) and how long all of the bank transfers will take.
Completion is the day when the sale or purchase is finalised. The terms of the contract have been met, the money is with the correct party and the keys can be released to the new owners.