The final two hurdles to get through in the home buying process are exchange and completion.
Here’s the low-down on what these terms mean and when they happen.
What does exchange mean when buying a house?
Exchange means the buyer and seller have both signed a contract agreeing to the sale of the property. These contracts are then swapped between the solicitors representing the buyer and seller.
At this point, the sale becomes legally binding. So, you will lose money if you pull out.
You also have to pay a deposit to the seller - usually around 10% of the sale price. Your solicitor can negotiate for it to be less, such as if you are buying with a 95% mortgage.
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What happens before you can exchange contracts?
Most of the hard work involved in buying a property happens before the exchange of contracts.
You’ll need to arrange to have a survey done on the property to ensure there are no nasty surprises. You should also get a written mortgage offer from your lender.
While you are busy with these things, your solicitor will be working through a different list of jobs.
They’ll look after:
The drawing up of contracts between you and the seller
The stamp duty payment
The payment transfer for your new property
The local authority searches - checking for things like flooding risk, if the property’s near a contaminated area or if there are any plans for new road developments
The Land Registry documents - checking for things like previous ownership, handling ‘the deeds’ and registering them in your name, the property boundaries and if the home you want sits on any public rights of way
Information on the lease if you're buying a leasehold property.
You can try to renegotiate the price before you exchange contracts if your survey finds a problem with the property. But once you have exchanged contracts, the purchase price can’t be changed.
You also can’t back out of the purchase without losing money after exchanging contracts. So, it’s really important to make sure you understand everything. Don’t be afraid to ask your solicitor to explain something if it is unclear to you.
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What happens when you exchange contracts?
In the past solicitors used to meet in person to hand over the contracts.
Today, they just confirm by telephone that they have a signed copy of the contract. The buyer’s solicitor will also confirm they have the deposit.
The solicitors may read the contracts out loud to ensure they are both the same. They will then post them to each other.
They will also confirm the date on which the sale will be completed.
If you are part of a property chain, the exchange of contracts will start at the bottom of the chain and work its way up. This should all happen on the same day.
What does completion mean when buying a house?
Completion is the final stage of the home-buying process. It is the point at which the property is legally yours.
Money to cover the full purchase price of the property will be transferred to the seller’s solicitor on the day of completion. They must confirm they have received it before the sale is finalised.
They then transfer ownership of the property to you. This is done by listing you as the new owner with the Land Registry.
The seller has until 1pm on the day of completion to leave the property. You can then pick up the keys from their estate agent and move into your new home.
What do you do between exchange and completion?
Most of the hard work takes place before exchange but there are still a few things that need doing.
Your solicitor will ensure that all conditions for your mortgage have been met. And your lender will send the money for the purchase to them.
Less excitingly, your solicitor will also create a so-called completion statement. This document sets out any payments that have been made by them and any money they have received.
They will also let you know if there are any outstanding bills you need to pay them when you complete.
How long does it take from exchange to completion?
As most of the work has been done by the time contracts are exchanged, there isn’t any need to have a long gap.
In fact, in some cases, people exchange and complete on the same day. But this can be tricky to arrange and is generally not recommended.
People usually have between one week and 28 days between exchange and completion.
Who chooses the dates for exchange and completion?
The buyer and seller agree the dates for exchange and completion in advance.
Things are a bit more complicated if you are part of a property chain because everyone in the chain will have to complete on the same day.
But don’t worry about this too much, as you are paying your solicitor to sort it out on your behalf.
Completions normally happen on a weekday, rather than a weekend.
Solicitors need to be working to confirm that the money for the purchase has been sent and received. You also need the seller’s estate agent to be open so that you can pick up the keys for your new home.
Do I have to do anything after completion?
While your main focus may now be unpacking in your new home, you aren’t quite done with the process yet.
You will still need to pay your stamp duty.
Your solicitor will handle this on your behalf, just make sure you have transferred the money to them.
The good news is that first-time buyers don’t pay stamp duty on the first £425,000 of their home, as long as they've paid less than £625,000 for it.
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