If you`re in the process of buying a home, you`re likely to come across the term « exchanging contracts » at some point. So what exactly does it mean?
Exchanging contracts is a crucial milestone in the home buying process in the UK. It`s the point at which the sale becomes legally binding for both the buyer and the seller. In other words, after exchanging contracts, both parties are committed to completing the transaction.
The exchange of contracts typically occurs several weeks after the buyer`s offer has been accepted and both parties have agreed on the terms of the sale. It`s important to note that until contracts are exchanged, either party can pull out of the sale without penalty, although there may be costs associated with doing so.
Once the contracts are exchanged, a completion date will be set. Completion is the point at which the funds are transferred, and ownership of the property is transferred to the buyer. This usually takes place a few days to a few weeks after contracts are exchanged, depending on the parties` preferences and any outstanding issues that need to be resolved.
Before exchanging contracts, both parties will need to have a solicitor or conveyancer who will handle the legal aspects of the sale. The solicitors will review the contract to ensure that all of the terms of the sale are clear and fair to both parties, and they will also handle the exchange of the deposit. The deposit is usually 5-10% of the purchase price and is paid by the buyer to show their commitment to the sale.
It`s important to note that exchanging contracts doesn`t mean that the sale is guaranteed to go through. There are still potential pitfalls that could prevent a successful completion, such as issues with the property`s title or the buyer`s ability to secure a mortgage. However, exchanging contracts does provide a degree of certainty to both parties and is a significant step towards completing the sale.
In summary, exchanging contracts is an essential step in the home buying process in the UK. It`s the point at which the sale becomes legally binding, and both parties are committed to completing the transaction. Before exchanging contracts, both parties will need a solicitor or conveyancer to handle the legal aspects of the sale, and a completion date will be set. While there are still potential issues that could arise, exchanging contracts provides a degree of certainty and is a significant milestone towards completing the sale.