What Is Involved in Exchanging Contracts
When it comes to buying or selling a property, one of the most important steps in the process is exchanging contracts. This is the moment when both parties become legally bound to the transaction, agreeing to the terms of the sale and confirming the completion date. In this article, we’ll go over everything you need to know about exchanging contracts.
The first thing to understand is that exchanging contracts is not a casual or informal process. It requires careful consideration and attention to detail, and it is usually handled by a solicitor or conveyancer on behalf of the buyer and seller. Once the buyer and seller have agreed on the terms of the sale and signed the contract, the solicitors will exchange these documents, making the sale legally binding.
Before the exchange can take place, there are a few important steps that need to be completed. These include:
1. Searches and surveys: The buyer`s solicitor will carry out a series of searches to ensure that there are no issues with the property, such as outstanding debts or planning restrictions. The buyer may also arrange for a survey to be carried out to check for any structural issues.
2. Mortgage offer: If the buyer is using a mortgage to finance the purchase, they will need to obtain a mortgage offer from their lender. This will confirm how much they can borrow and on what terms.
3. Deposit: The buyer will need to pay a deposit, typically around 10% of the purchase price, to the seller`s solicitor. This will be held as security until completion.
Once these steps have been completed, the parties are ready to exchange contracts. This usually takes place over the phone, with the solicitors reading out the key details of the contract and confirming that the other party agrees. Once both solicitors have confirmed that the contracts have been exchanged, they will be posted to each other.
At this point, the sale is legally binding, and the completion date is set. This is usually a few weeks after the exchange, giving both parties time to arrange the necessary paperwork, such as transferring funds and obtaining insurance.
It`s important to note that once contracts have been exchanged, there is no going back. If either party pulls out of the sale at this point, they could be liable for significant costs and damages.
In summary, exchanging contracts is a crucial part of the property buying and selling process. It involves careful preparation and attention to detail, and once contracts have been exchanged, the sale is legally binding. By working with experienced solicitors or conveyancers and following the correct procedures, both buyers and sellers can ensure a smooth and successful transaction.