What Happens When You Exchange Contracts on a House
When you`re in the process of buying a house, one of the most significant milestones is exchanging contracts. This is the point at which the sale becomes legally binding, and both parties are committed to completing the transaction. So, what exactly happens when you exchange contracts on a house? Here`s a breakdown of the process.
What is contract exchange?
Before we delve into the details of what happens when you exchange contracts, let`s first define what it is. Contract exchange is the point at which the buyer and seller sign and exchange the contracts of sale. At this stage, the buyer typically pays a deposit, usually 10% of the purchase price, to the seller or their solicitor.
What happens when you exchange contracts?
Once contracts are exchanged, a few things happen:
1. The completion date is set
The completion date is the day when the buyer takes ownership of the property. This is usually two weeks after the exchange of contracts, but it can vary depending on the buyer and seller`s requirements.
2. The buyer`s solicitor prepares a transfer deed
The transfer deed is a legal document that transfers the ownership of the property from the seller to the buyer. The buyer`s solicitor will prepare this document and send it to the seller`s solicitor.
3. The buyer and seller`s solicitors arrange for the remaining funds to be paid
Once contracts are exchanged, the buyer`s solicitor will send the remaining funds to the seller`s solicitor. This includes the purchase price of the property, minus the deposit already paid.
4. The buyer and seller`s solicitors finalise all legal paperwork
The solicitors will finalise all legal paperwork, including the transfer deed and any other relevant documents. They will also make sure that any outstanding issues, such as searches and enquiries, are resolved.
5. The buyer`s solicitor registers the property with the Land Registry
After completion, the buyer`s solicitor will register the property with the Land Registry. This is to ensure that the ownership of the property is officially recognised and recorded.
What are the implications of exchanging contracts?
When contracts are exchanged, both the buyer and seller are legally bound to complete the sale. If the buyer pulls out at this stage, they risk losing their deposit and may also be liable to pay other costs to the seller. Similarly, if the seller pulls out, they risk losing the deposit paid by the buyer and may also face legal action.
In conclusion, exchanging contracts is a significant milestone in the process of buying a house. It`s important to understand what happens at this stage and the implications of doing so. If you`re unsure about any aspect of the process, it`s always best to seek advice from a professional, such as a solicitor or conveyancer.