What is Exchange of Contracts?
Until ‘exchange of contracts’ either the seller or buyer may withdraw from the deal. The other party cannot claim any fees or expenses from the party who withdraws. When contracts are exchanged a binding contract between the parties comes into effect. You should not rely on the sale proceeding until exchange of contracts.
If you are selling your property privately it is important to avoid a contract being created inadvertently. Therefore any letters to the buyer should be clearly marked ‘Subject to Contract’.
We prepare a contract for the sale of the property in draft form and send it to the buyer’s solicitors for approval. The solicitor who acted for you when you purchased the property may have sent the documents and papers to you. Some of these documents will be very important so please make sure that you pass all of them on to us at an early stage. We will let you know when the draft contract has been sent out.
The buyer’s solicitors will often raise ‘enquiries’. These are questions about the property based upon the draft contract, the copy title deeds we have supplied, the forms you have completed or the result of searches. Some of these enquiries we will be able to answer and others we will refer to you. We may need to apply to the local council for copies of planning consents and/or building regulation approvals if these are not with your papers or supplied by you. Sometimes you may have carried out work without obtaining the necessary consents from the council or a third party or have breached a restrictive covenant which affects the property. This can cause difficulties so if that is the case please seek our advice at an early stage in the transaction.
We will ask your lender to let us have a redemption statement for information purposes. If a penalty is payable for early redemption of the mortgage details of the penalty will be shown on the statement.
If you have a second mortgage or other secured loans we will need details of those as well because on completion we will be required to discharge all mortgages. If there is insufficient money to do this then the sale cannot proceed. You should continue to make your usual mortgage or loan payments until completion.
If you receive more than one offer for your property or your buyer is being slow it can be tempting to ask us to send out another contract. There are strict rules about ‘contract races’ which we have to comply with so that buyers are aware of the risks involved before they pay for searches and survey fees and incur legal costs. The usual expectation is that you withdraw from one sale before issuing a contract to another buyer. If you do want to proceed on the basis of a contract race please seek our advice.
When the contract has been approved we will send you the contract to sign and return in readiness for exchange of contracts. We will also ask you to sign the Transfer Deed if this is available at this stage. It must be signed before completion.
On exchange of contracts, the buyer will usually be expected to pay a 10% deposit. If the buyer is not offering a full 10% deposit we may want to seek your authority to proceed. However if you have a related purchase and the deposit is acceptable to your seller then we will assume that this is acceptable.
If you are selling jointly with another then we will account to you jointly with the net sale proceeds unless we receive joint written instructions to the contrary prior to completion.
Exchange of Contracts
When everything is in order; everyone is satisfied as to the terms of the contract; the buyer has made the necessary financial arrangements and their buyer is ready to proceed (and so on down the chain) contracts can be exchanged. A completion date is agreed and then contracts in identical terms are exchanged with the solicitors acting for the buyer and the deposit is paid. It is only when we have exchanged the two parts of the contract that the buyer is committed to buy the property, and you are committed to sell.
We always advise sellers to keep their property insured until completion.
After Exchange of Contracts
Following exchange of contracts, we will contact your lender(s) for a final redemption statement made up to the date of completion and your estate agents will send us their commission account for settlement. Once contracts have been exchanged you should make removal arrangements.