If you have just had an offer accepted on your dream home, you might be breathing a sigh of relief. But don’t relax too much – there are a few more legal hurdles before the place is truly yours.
Anyone new to buying property might be confused by the process. So, if you’ve been wondering about the difference between exchange and completion, we explain what happens when you buy a home and what you need to do to keep things ticking along.
What is the difference between exchange and completion?
Put simply, exchange and completion are the two big stages in the house buying process.
Exchange of contracts is the point at which the buyer and seller’s solicitors or conveyancers do just that – exchange the signed contracts they have drawn up for they clients.
The buyer will also pay a deposit to the seller – usually 10% of the purchase price. At this point, the sale becomes legally binding and neither party can pull out without serious penalties. The solicitors will also agree a completion date.
Completion is the final point in the process, when legal ownership of the property is transferred to the buyer, the balance of the sale price is paid, they keys are handed over and the place is legally yours.
What needs to happen before I exchange contracts?
If you are buying property, the first thing you need to do after your offer is accepted is to appoint a solicitor or conveyancer, to act for you in the sale. They will get to work on the necessary property searches and paperwork to prepare for the sale.
It might feel like not much is happening at this stage. You can help speed things up by being proactive and communicative – the quicker you are at responding to queries, the faster the sale might go through.
The key things you need to do to get to the point of exchange are:
• Commission a professional survey of the property you are buying.
• Get a written mortgage offer.
• Check the terms of the contract, the lease (if a leasehold property), the results of the searches and any other relevant documents carefully and ask your solicitor about anything you are not sure of.
• Sign the contract and any other documentation and return it to your solicitor immediately.
Put your solicitor in funds for the deposit that has to be paid.
What happens at exchange?
Once all the paperwork is complete, the buyer and seller will sign identical contract documents and the exchange will take place. This will usually happen over the phone with both solicitors dating the signed contracts then mailing them to one another. If you are in a chain, each party in the chain will exchange at the same time. At this point the sale becomes legally binding and the exchange deposit is paid.
A completion date will also be set – usually this will be two to four weeks from exchange, although it is possible to complete on the same day, or much later. If there is no chain, you will have more flexibility around a completion date.
When exchange has happened, you are committed to buying the property. Should you wish to pull out now, for any reason, you are likely to lose your deposit and may be liable for other costs incurred by the seller – they may also sue you.
Once you have exchanged contracts, you should begin finalising your house move, confirming with the removal company and getting on with your packing. You should also contact the relevant companies to arrange to take over the utilities.
What happens at completion?
Once lawyers on both sides have completed their final checks, your solicitor will request any mortgage advance from your lender and transfer the balance of the purchase price into the seller’s solicitor’s bank account in return for the signed deed transferring the property to you. You will receive a phone call when the sale has completed and can collect the keys to your new home from the estate agent.
More than half of sales in England complete on a Friday – popular because it gives buyers the weekend to get the house organised and unpack. However, choosing a mid-week day can be beneficial if there is a delay for any reason – lenders will be open to sort out any issues, avoiding the risk of your being homeless over the weekend!
What happens next?
It is likely that you will owe stamp duty on the property. This is usually paid by your solicitor on your behalf, having collected the amount due from you in advance. Your ownership of the property is then registered by your solicitor at the land Registry.
If you are selling, It is worth organising all the paperwork for your sale as soon as you decide to move, including mortgage information, correspondence with solicitors, energy performance certificate guarantees and if applicable, service charge accounts, so it is easily found if needed.
If you are thinking of buying or selling property in the Wimbledon area, we’d be happy to help you through the steps you will need to take, and show you our current selection of properties. Contact us to find out more today.