Exchanging contracts

Exchanging contracts is the final step in house purchase, under English law, and occurs after a solicitor has carried out all necessary searches and there is agreement to the contract terms. Once each party has signed the contracts and they have been exchanged, they are binding.

The contracts will include a completion date, which is the date that the property becomes acquired by the purchaser. At exchange of contracts, any deposit needed has to be paid, and arrangements for building insurance must be made so that the property is insured from that day. Usually, the present insurer will cover this new property free of increased premium until the completion date.

This is a system that only occurs under English law, and the exchange of contracts can occur many weeks or months after a sale offer has been agreed in principle. This contrasts with most countries where the house sale becomes legally binding very quickly.

Steps to Exchange There are nine main steps in the process to get to Exchanging Contracts.[1]. Generally this is where you get your finances sorted (mortgage, liquidating investments to cash for your deposit, etc), get all the information you need (home survey, searches, inventory), negotiate terms, and satisfy yourself before you commit legally to the purchase.

However, each home purchase is unique and therefore there might be further steps required, and some steps might take much longer than usual. During the journey the getting to Exchange, most of the actions to be done are by the buyer, not the seller. This part of the home buying process is for the benefit of the buyer, but also the riskiest for the buyer. This is where you get all the detailed information you need, the chance to ask all the question you want, and make demands as conditions for exchange. However, it is also the part of the process where you sink in financial cost and where the seller can still pull out of the transaction at any time.