If you are buying or selling a property, the agreement does not become legally binding until contracts are exchanged. We take a look at what this means and whether exchange and completion can happen simultaneously.
When someone buys a property, there is a substantial amount of work to be done beforehand. All of this must be dealt with satisfactorily before contracts can be exchanged and the agreement to buy or sell becomes legally binding. In some circumstances, people may want to complete as quickly as possible. In theory it is possible to exchange and complete on the same day, but there are several drawbacks to this that you must be aware of.
What has to happen before exchange of contracts?
On exchange of contracts, you become legally bound to complete your conveyancing transaction. For this reason, all of the enquiries must be dealt with beforehand. If you are buying a property, this includes obtaining searches and having replies to any questions your solicitor may have raised with the other side.
Once everyone in the chain is ready to go ahead, contracts are exchanged and at this point, the date for completion is agreed and written into the contract. A deposit is paid by the buyer on exchange.
What normally happens after exchange of contracts?
If you are the buyer, then after contracts have been exchanged, your solicitor will draft the transfer document and send this to the seller’s solicitor for the seller to sign. If you are taking out a mortgage, your solicitor will also report to your mortgage lender and order funds in readiness for completion.
You will be able to make final arrangements for your move, such as booking removals and notifying utility companies of the date.
Exchanging contracts and completing on the same day
It is usual to have at least a week between exchange of contracts and completion so that the necessary arrangements can be made. However, if you are in a hurry to complete, then it is possible to exchange and complete on the same day.
There are some risks involved in doing this and it is essential to be aware of them before you decide on this strategy.
Firstly, there are no guarantees that the other party will actually agree to complete when the chosen day arrives. You will need to prepare by organising removals and ordering your mortgage advance if you are buying, but the other side in the transaction is not legally bound to complete until contracts have been exchanged. This means that they could simply change their mind at the last minute. You would risk losing the money you have spent on removals and owing the mortgage lender money for the transaction fee and a day’s interest.
If you risk deciding to exchange and complete on the same day because some paperwork is not due to be received until that day, then there is a danger that it still might not be available. If funds have to be returned to the lender, then it will take longer to request them again, as there is a process that needs to be gone through before funds are sent and this can take several days.
Exchange and completion on the same day is generally only an option if there is no chain involved. A seller is more likely to agree to this if the property is empty. As a buyer, the risk is reduced if you do not have to physically move on the day of completion, for example, if you can stay in rented accommodation or if you are buying an investment property.
Simultaneous exchange and completion is a risk and can be stressful. For this reason, it does not often happen. If it is something you are considering, you should speak to your solicitor and discuss the situation to ensure that it is the right option for your circumstances.
Contact us
If you are thinking of buying your first home and you would like to speak to one of our expert property lawyers, ring us on 0333 305 5189 or email us at info@lpropertylawyers.co.uk
