The exchange of contracts when homebuying

Exchange of contracts is the process of signing and exchanging contracts with the buyer or seller of the home. At this stage you are both legally bound to the agreement and any pulling out will likely incur fees except it is mutually agreed to pull out and even so there are some costs such as conveyancer, mortgage fees etc which are none refundable .This brief guide looks at the exchange of contracts process and what you can expect if you abandon a sale after the exchange of contracts.

What happens in an exchange of contracts?✔⬇

The exchange of contracts is the stage at which a buyer and seller exchange their signed contracts. At this point they will have come to an agreement on the terms of the sale.

The exchange of contracts is usually handled by both solicitors or conveyancers acting on behalf of the seller and the buyer. The identical contracts will usually be read out in a recorded conversation and copies sent to each party for safekeeping.

At this point the buyer is legally bound to buy the property and if he or she does abandon the property then they could be sued.

A letter will be sent to the freeholder or leaseholder informing him or her that you are the new owner.

Your conveyancer will then go ahead and register the transfer of ownership with the land registry

If you are purchasing a share of a freehold then a share certificate will be drafted and sent to you displaying the shares you have in the property.

If you are shopping for a conveyancer or solicitor to assist you in the buying or selling of a house then read our brief guide on how to find the perfect conveyancer.

What should you consider for your exchange of contracts?👀

Before agreeing to the contract requiring you to buy a home you will like to know that you have crossed all your t’s.

Here are a few things to consider before agreeing to an exchange of contracts:

• You are happy with any conveyancing searches
  
• You are happy with any comments from the local planning authority
  
• You are happy with the level of home survey you have carried out
  
• You are happy with the energy performance certificate
  
• You are happy with the council tax band and your assumed future council tax payments
  
• You have a mortgage offer in writing and not just an agreement in principle
  
• You have sorted out any necessary home insurance required by your mortgage lender
  
• If your home is in a flooded region, you have relevant flood insurance and have begun flood planning in the event of a flood. You can see other flood planning and safety guides here.
  
• You have your mortgage deposit ready
  
• You have agreed on a completion date
  
• You have reviewed the contract with your solicitor and gone over any things you are not happy with
  
• You have funds for any holding deposit required
  
• You know what is included in the home sale and it is documented e.g furniture, curtains, washing machines etc
  

Before the exchange of contracts the seller can pull out of the sale without any liability to him or her.

How long does an exchange of contracts take?😶

Exchange of contracts can take anywhere from hours to weeks depending on how fast the buyer and seller are able to come to an agreement.

It is also dependent on how fast each solicitor or conveyancer is able to work.

If the exchange of contracts goes fast you should get to completion date quicker.

If you are in a chain( where your seller is also buying and trying to complete on a home purchase at the same time as you) then your exchange of contracts might take longer as your are dependent on your seller agreeing with their respective seller.

Completion date is the day you finally get handed the keys to your new home or in the case of a seller, the day you hand over the keys of your old home.

Completion day is a busy day. There are a lot of things going on such as:

• Your mortgage lender is transferring the funds to your solicitor
• Your solicitor is transferring the funds to the sellers solicitor or estate agent
• If you are in a chain( hence your seller is also buying a home somewhere else), then it is very likely your seller will be completing their own purchase on the same day. Fingers crossed nothing goes wrong in the chain.

For those with a share of a freehold you will be told how to register your name on the company register.

• Organise your post to be forwarded to your new address using the Royal mail redirect service.
  
• Notify your utility providers you have moved address. Some may allow you port your accounts and if not you can simply switch to a different supplied
  
• Notify your current council you have moved and notify your new council you are now living there so you can clear any council tax balances and open a new council tax account.
  
• Ensure you have all the keys to the house and change the locks if you feel like
  
• Ask for warranty and manuals for any electrical goods being left behind
  
• Tell the major organisations and anyone else that you have changed address e.g the DVLA, your banks(or any financial account provides) and your employer.
  
• Ask where the meters are
  
• Ensure everything agreed inn the contracts are present e.g furnitures, curtains, electrical goods etc
  

Use a mortgage broker for your mortgage in principle

You may want to use an independent mortgage broker to help you get a mortgage on your new home.

Mortgage brokers are important as they can access mortgage products from across the whole of the market in some cases.

This could be over 11,000 mortgage products. This may have some advantages rather than going directly to a mortgage lender.

A mortgage broker will look to understand your financial circumstances and then provide recommendations on which mortgage products may be suitable for you based on your mortgage affordability.

After giving you these mortgage recommendations, most mortgage brokers will seek your consent to apply for a mortgage in principle. 

This will allow you to shop for your home as more estate agents and sellers may take you seriously and it will also give you confidence that your mortgage is indeed a possibility before you make a full mortgage application. 

Once you have found a home you want to buy and are satisfied with the mortgage offer for your mortgage then the mortgage broker will then look to get you a mortgage offer.

This will come with a key facts illustration document that details the features of your mortgage including how much you will pay per month.

It will also contain information on if there are any limits such as early repayment fees, or annual overpayment limits.

If you are happy with everything you can then go on to secure your mortgage with the help of a conveyancer.

Your conveyancer will manage the legal searches on the property to ensure there aren’t any issues with it.

They will oversee the sales agreement to ensure it is in your best interest, they will manage the transfer of mortgage funds, exchange contracts with the seller or their conveyancer, and set a completion date with the seller or their conveyancer.

This will then bring an end to the conveyancing process, at which point you will receive the keys to the house and move in.

If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.

You can also contact the debt charity “Step Change” if you are in debt and need help.