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What does 'Exchange of Contracts' mean?

Exchange of Contracts

This is the moment when the buyer and seller agree legally to buy and sell and a date when the legal ownership of the property (completion) is set. This can be on the same day that the sale price is agreed or any time after.

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How to Really Buy a Property

"... make an offer to get things your way; Who to trust and who, with the best intentions, may be misleading you; Why you should work to minimise the time between offer agreed and exchange; Making sense of a property survey including; What type of survey to get and why structural surveys can..."

"... you have cash and you are simply looking for an investment, not a home, then property is not always the best option. If you know and understand the currency markets, for example, maybe you should put your investment there. If you have a good idea about the way shares rise and fall it could be that your funds would give you a better return on the stock market. Do not for one second believe making money in property is easy. As with stocks, currency exchange or anything else you will need to be educated and you will need a little luck because there will always be events, beyond your control, that will change your fate for better or for..."

"... about £240,000. She made her offer and was at lengths to insist that her evidence was passed onto the vendor. The offer was rejected and three weeks later the flat went to sealed bids with two completely different buyers and exchanged a month after that for £302,000. Tanya's evidence..."

"... of those who live in a country, or even a given location. The truth is property prices are held up by, and increase because of, confidence. But then so are the stock exchanges, the banks and the whole of the capitalist system. It is little wonder that Russian socialists during the Cold..."

"... large number of unsold properties also meant that the developer decided to rent out unsold properties as they were finished which lead to dozens of apartments being available at the same time. Private buyers found it difficult to find tenants who were prepared to pay the rent needed cover the buy-to-let mortgages. So extreme was the situation that several buyers seriously contemplated failing to complete and loosing their £30,000+ exchange deposits as a better alternative to completing and selling for far..."
"... is a kind word. In reality people were buying over-priced properties that were impossible to rent at the rate that had been promised because they had simply not done their own homework. They were expecting substantial profit in exchange for no effort or risk on their part and some were stretching themselves financially on the naive assumption that everything they had been told was..."

"... always that the individual negotiator is usually paid on commission and they know they are more likely to get that payment (i.e. get a property to exchange) from a buyer who is prepared, focused and listening than someone who thinks they are fantastic and knows it all. The latter will often end up on an endless and fruitless..."

"...Finding the right solicitor has nothing to do with price, this is truly a field of getting what you pay for. If you are at offer stage and almost all of your savings have been taken up in deposit money and stamp duty it's tempting to try and save a few hundred pounds on the legal services. It's also a mistake that you will kick yourself for as you sit on hold, or wait for your fourth call of the day to be returned, or chase them to raise the enquiries that will allow exchange. ..."
"... confidence in you as a serious buyer and pull out of the deal. Remember above everything that swift progress to exchange is crucial (see Chapter 19: Time Costs Deals). An efficient solicitor who knows this should work as follows: Receives contract and title deeds (or office copy entries) and..."
"... searches come back, perhaps prompting a couple of queries, which can be resolved quickly He asks you for the funds to allow exchange and gets you to sign the contract, even before all enquires are back The mortgage offer arrives He calls you, informs you of any unusual circumstances, and..."
"... and gets you to sign the contract, even before all enquires are back The mortgage offer arrives He calls you, informs you of any unusual circumstances, and confirms you are happy to exchange In other words everything happens at once which dramatically reduces timescales. An inefficient..."
"... 1-2 weeks) He receives these replies and posts you the contract (2-3 days) You sign it and return it with a cheque (1 week to clear) You exchange The traditional approach will easily take three to four months from offer to exchange whereas the modern approach can usually keep the..."
"... traditional approach will easily take three to four months from offer to exchange whereas the modern approach can usually keep the timescales to within four weeks! The traditional solicitor will argue that if anything were to go wrong at any stage he has saved you money. If your survey is a problem, for example, at least you will not have paid for local searches or his time to look at the contract. It's a contradiction - the longer a sale drags on, the more likely it is to fall through (see Chapter 19: Time Costs Deals) and cost you money..."
"... to most people solicitors have their own postal system known as DX (Document exchange) which allows them to move large documents rapidly between each other. Very small solicitors or extremely old fashioned ones have not invested in this and so much backwarding and forwarding is reliant on the post. Considering the number of strikes at individual sorting offices over the last few years the last place you want your signed contract is in a sorting office while postal workers argue over health and safety or pay and..."
"... your solicitor disappears off on his spring break he will either leave your case to one of his partners or hire a locum (a temporary solicitor). They may want to read over the paperwork again and, knowing that it is them who will take the fall for any issues they allowed to get through at exchange, raise some more enquiries. The result is that when you thought you were exchanging on Tuesday morning, suddenly your solicitor wants a bunch of new questions answered. Depending how rocky the transaction has been to date this can often be the straw that breaks the camel's back for the..."
"... sure the solicitor you choose has a colleague (not a temporary solicitor drafted in from somewhere else) who will handle your case in his absence and that within the firm there are agreed protocols on what questions must be answered before exchange to avoid any nasty delays. Most importantly check your solicitors holiday plans at the start of the transaction and make the vendor and/or agent aware so no one is taken by..."
"... a city centre solicitor should understand the urgency of taking an agreed price to exchange in a highly competitive market. A point often lost on a solicitor in North Wales who may constantly tell you to relax and not worry about anything as he gazes out over the green hills contemplating what to do when he leaves at three o'clock that..."
"... A solicitor with a poor understanding of the local area may well have taken the news of a dangerous structure to the buyers who could have panicked and pulled out. If they had not the solicitor would have had to write to the local council which may have delayed the exchange by another two weeks. ..."

"... means repossessions can be cheaper than the normal market rate but only slightly, about ten percent. There are often far stricter requirements placed on you as the buyer. The lender may say they are only prepared to accept offers from buyers able to exchange within two weeks so check these restrictions..."
"...An accepted offer simply means you enter the no mans land that exists between 'Sale Agreed' and 'exchange of Contracts'. There is absolutely nothing binding about having an offer accepted so its worth knowing what has to be organised in order to get a more concrete deal. This twilight zone is covered in Part III, From Offer to exchange...."

"... In exchange for offering the asking price you should expect, and request, that the vendor withdraws his property from the market although they may not be prepared to do this until you have instructed a solicitor and paid for a survey (i.e. spent some money yourself to show you are serious). ..."
"... confirm that I wish to offer £235,000 on 10 High Street, London, E6 2JN. The offer is to include the curtains, carpets and cooker. My offer is made up of a £200,000 mortgage from Barclays Bank and £25,000 in cash. I have nothing to sell and would want to exchange in four weeks time and complete four weeks after that. I attach my Agreement in Principle and a copy of a bank statement to confirm my finances. The solicitor I will be using is ... and their telephone number is..."
"... vendor could, at this stage, come back to you and say he is interested in considering your offer but would not move out until he has found something to buy himself. You could then counter that by offering to pay more if he will consider moving out and renting or you could agree the exchange date but then offer a long completion date (say 6 months later) to allow the vendor to find and buy. In this way you will lock your property in and have a definite move in date, even if it isn't as soon as you might..."
"... scenario as we will see in Time Costs Deals Solicitors that do agree to try and sort out such deposit can take weeks agreeing terms when they could be getting on with doing the paperwork that would allow you to exchange, complete and move in! - Summary - Many agents are poorly..."

"... fee solicitors - in this situation the solicitor knows he will get paid no matter what the outcome is. However he knows that if you exchange and complete on the property, and then later find he did not make you aware of some points which you feel were important, he can be sued. It is thus in his vested interest for you to pull out of the purchase - fee paid, no risk. For this reason very small firms of solicitors often appear extremely over protective and often present you with reasons why you should not proceed further on a particular purchase. Reasons a larger and more financially resourced, firm would not..."
"... purchase, no fee' solicitors - these firms usually calculate into their business model that a certain percentage of purchases will fall through. Those clients that do buy cover these costs which means they are generally more expensive. This aside a 'no purchase, no fee' solicitor has a vested interest in your offer going through to exchange and so may gloss over points that they really should bring to your attention. The likelihood of this will rise if the percentage of fall-throughs they are experiencing is rising above that of their business..."
"... when considering comments made by them, be aware that: They know the longer the time period between sale agreed and exchange, the more likely the buyer will pull out and you will loose your property. (See The Balance of Power) They know, if they are experienced, when the surveyor or..."

"... believe should occur. Arching over all of this is the essential concept that the longer it takes to move from Offer Agreed to exchange of Contracts, the more likely it is that the purchase will fail. To understand this specifically see Chapter 19: Time Costs Deals. Once your offer has..."
"... a Property Purchase - As a buyer your responsibilities are to: Instruct a solicitor to act on your behalf Specify an exchange and completion date that can be agreed with the vendor Raise the finances to purchase the property Organise for professionals to inspect the property Sign the..."
"... the finances to purchase the property Organise for professionals to inspect the property Sign the contract Give your solicitor funds to exchange and complete - Instructing a Solicitor - Once your offer is agreed you will need a solicitor to act on your behalf. This..."
"... a Solicitor or Conveyancer) You choose a solicitor who is a "one-man-band". He then falls ill or goes on holiday - Specifying exchange and Completion Dates - It seems obvious to agree a date for the exchange of Contracts. This is the moment that you agree to definitely buy the..."
"... Dates - It seems obvious to agree a date for the exchange of Contracts. This is the moment that you agree to definitely buy the property and the vendor agrees to definitely sell it. Up to this point the sale is only agreed subject to contract, and often subject to survey. Subject to..."
"... enough even though a sale may be agreed subject to contract you can still decide at any point before exchange not to purchase for any reason you wish. It can have nothing to do with the contract or the survey but could simply be because you don't feel like it. As such the wording is slightly..."
"... of Contracts is not the date at which you take possession of the property. It is the date which you agree Completion. Completion is the date when the vendor must be out and you can move in, the property legally becomes yours. Completion can take place on the same day as exchange or months..."
"... Can Go Wrong It seems strange then that someone who agrees to buy something from another person should do so without actually agreeing when they want to do it but this is often the case when purchasing a property. Agreeing exchange and completion dates are often sidelined because: Both..."
"... parties believe it is "obvious". The vendor may, for example, have chosen a solicitor in Wales. His solicitor has told him that it normally takes about twelve weeks to move from agreed offer to exchange. In the meantime your solicitor in London tells you there should be an exchange within three weeks. Both you and the vendor sensibly expect that your respective solicitors will have said the same thing and plan your lives accordingly. Fireworks will occur..."
"...Neither party actually wants to talk about it. You may be concerned that if you express a wish to exchange quickly the vendor will perceive you as a desperate buyer in absolute love with their property. This could lead to them being slow or lazy in providing paperwork, relaxed that you are not going anywhere. The vendor may not want to tell you that he wants a rapid exchange because he does not want to appear desperate. He may believe that this will encourage you to attempt a renegotiation of the price before exchange. ..."
"... are two ways to buy a property. You can purchase for cash or by borrowing. Either way you will need to put down a deposit when contracts exchange and pay the balance on completion. The deposit is normally between five and ten percent of the agreed price although it is possible to exchange with anything from zero to one hundred..."
"... deposit is seen as a way of tying the buyer in and insuring the vendor will have some compensation should you disappear. Zero percent deposits are therefore usually only acceptable if you are carrying out a simultaneous exchange and completion. This is often the case with one hundred percent mortgages or where the property is empty and the buyer wants to get in..."
"... this report will be a contract for you to sign. Putting your signature on this paper is not the end of the matter. Your solicitor will usually call you again once he receives it to confirm that you still want to exchange. He will also need: To have a deposit in his bank account to give to..."
"... to the vendor's solicitor (see below). To know the date you want completion to occur on Once you give the green light he will call the vendors solicitor and effect the exchange of contracts. What Can Go Wrong The contract gets lost in the post and your solicitor did not keep a..."
"... signed contract gets lost in the post causing a delay No one can agree the date for completion You go on holiday and your solicitor does not exchange because he is waiting for your verbal go ahead - Funds for exchange and Completion - As discussed in Specifying exchange and Completion..."
"... date for completion You go on holiday and your solicitor does not exchange because he is waiting for your verbal go ahead - Funds for exchange and Completion - As discussed in Specifying exchange and Completion Dates (see above) your solicitor will usually need a cash deposit to give to..."
"... discussed in Specifying exchange and Completion Dates (see above) your solicitor will usually need a cash deposit to give to the vendors' solicitor when exchanging contracts. The only exception is when you are using a one hundred percent mortgage or the vendor has agreed that you will provide a deposit of zero..."
"... any further enquiries from the vendor's solicitor Apply for searches Check your mortgage offer Issue you with a report exchange Contracts Complete - Checking the Paperwork - Your solicitor will receive a set of papers from the vendor's solicitor. If the vendor is well..."
"... Contract - this is a short document and basically says that you agree to buy and the vendor agrees to sell the property. The contract is only signed by the vendor and you once all the other checks have been made. Once you have signed your part and the vendor has signed theirs the documents are exchanged between the solicitors. Hence this moment is known as exchange of Contracts or more often as simply the exchange. It is the moment of no return when you must buy and they must sell even though, usually, no full payment has been made. The first contract that your solicitor receives is usually known as the Draft Contract as it has not yet been..."
"... you have applied for a mortgage in order to purchase the property then, all being well, the lender will issue you with an offer. Your solicitor will not want to exchange until you have this and he has a copy. To do so would mean that you would be liable to complete and pay the balance, without any guarantee that someone will lend you the cash...."
"... before exchanging. What Can Go Wrong You think you have signed everything you need to sign and disappear off on holiday, assuming your solicitor will exchange. He does not have your final verbal instruction and so does not do it. Your solicitor goes on holiday or is off ill and..."
"... solicitor will exchange. He does not have your final verbal instruction and so does not do it. Your solicitor goes on holiday or is off ill and there is no one else available to affect the exchange. Your solicitor goes on holiday or is off ill but there is someone else available. They check..."
"... to affect the exchange. Your solicitor goes on holiday or is off ill but there is someone else available. They check the paperwork and decide there are some enquiries missing that they want answered and refuse to exchange until the vendor's solicitor replies. The money you gave to your..."
"... enquiries missing that they want answered and refuse to exchange until the vendor's solicitor replies. The money you gave to your solicitor for him to exchange has not cleared into his account. - Completion - When Exchanging Contracts all parties agree the completion date. Completion is..."
"... any further enquiries from the vendor's solicitor Apply for searches Check your mortgage offer Issue you with a report exchange Contracts Complete - Checking the Paperwork - Your solicitor will receive a set of papers from the vendor's solicitor. If the vendor is well..."
"... vendor's solicitor always starts the transaction as the most relaxed party. He hopes that he will send off the paperwork that he believes your solicitor requires and wait for a call to exchange contracts. Ask a vendor's solicitor if he is ready to exchange and, so long as he has sent out the original set of paperwork, the answer is always,..."
"... are "not relevant" or "too picky" and persuades the vendor to instruct him not to reply The Vendor's solicitor winds the vendor up by stating how ready he is to exchange every time the vendor calls - Sending the Approved Contracts - Once the arguing has subsided and both sides have..."
"... your solicitor has your signed contract and funds for the deposit, and the vendor's solicitor has the vendor's signed contract, exchange of contracts can take place. The money is sent electronically between the solicitors and they verbally agree that exchange has taken place at a specified time (say..."
"... time (say 3.45pm). What Can Go Wrong The vendor thinks he has signed everything he needs to sign and disappears off on holiday, assuming his solicitor will exchange. He does not have the vendor's final verbal instruction and so does not do it. The vendor's solicitor goes on holiday or is..."
"... exchange. He does not have the vendor's final verbal instruction and so does not do it. The vendor's solicitor goes on holiday or is off ill and there is no one else available to affect the exchange - Completion - There is very little for the vendor's solicitor to do on the big day..."
"... property his responsibilities are to: Sign the Estate Agents Terms and Conditions (if using an agent) Instruct a Solicitor Agree to an exchange and completion date Reply to any enquiries raised Sign the Contract - Signing the Estate Agent's Terms and Conditions - This is actually..."
"... By doing this, and saving themselves the risk of extra work, there is more risk. What Can Go Wrong The vendor assumes everything is in hand and goes on holiday making exchange impossible The vendor's solicitor only sends the vendor the contract once you have signed your copy. It spends time..."

"... and lost it all. From the moment you make an offer to the time you negotiate a completion date and exchange the person with the upper hand can vary considerably. This is yet another reason to get an agreed deal through to exchange as quickly as possible. - Real and Perceived Power..."
"... that matches your requirements and budget the market is rising your rental lease is running out you have a buyer on your property who has offered an extremely good price and wants to exchange fast this is your dream property All of these factors can change very quickly. Imagine you have..."
"... was now being unreasonable in his demands and so they withdrew from the sale. If Simon had stayed quiet and not overcooked his bargaining the vendors would probably have exchanged but greed got the better of him. True Story - Chipping the price at Swan YardMelissa had made an offer on a..."
"... Melissa's offer came in at £195,000 he was relieved and agreed to it immediately. The transaction moved through to the point of exchange within five weeks. At this point Melissa thought she would take a chance and, giving lots of arguments about a falling market (which did not exist) told the vendor that if he wanted to exchange he would have to reduce the price by a further..."
"... the good news. Melissa offered to exchange immediately at the original agreed price of £195,000 but this was still £10,000 short of an offer from buyers who had an excellent motivation to exchange on this particular property. She lost the property and all of her expenses. ..."

Chapter 19: Time Costs Deals
"... take stock and change the bigger plans we have, such as moving house. The longer the time period between offer and exchange of contracts, the more likely it is that the deal will fall through, often for no good reason. Here are just a few events that can stop either the buyer or the vendor..."
"...Sonya and Mark instructed a solicitor who was not only painfully slow, but also painfully thorough to the extent that the sale dragged on for ten weeks. Their solicitor added new enquiries each week including a request that the freeholder should have all the windows in the building assessed, and get quotes for repainting and repairs, before they would exchange. ..."
"... in the meantime, was close to exchange on his purchase when the vendor pulled out after loosing his job. David called the agent to talk about new properties he could buy and asked after Seymour Street. He was shocked to find that after nearly three months, and in the middle of a busy Spring market, it had not exchanged and immediately offered to pay the asking..."

"... the absence of sold signs he calls any local agents and asks them what they have sold recently in the area and tries to match it up. There is nothing more to it than that. If you want to try it for yourself find a sold sign, call up the agent and say, "Hi, this is Fred Smith from Island Surveyors, I see you have sold something in the High Street, can I ask what it was and how much it sold for?". You'll get the complete run down including the actual price it sold for, not its asking price. Note that Estate Agents, by law, are not allowed to tell you (a buyer) the actual price a property has sold for until it exchanges as this is confidential information. Agents are however, always trying to please surveyors because they don't want properties down valued, so if you pose as a surveyor you will find out..."

"... cost you a fortune; When to take a view and when to take a stand; How to stop small details delaying the purchase; How to exchange within hours of agreeing a sale price; In Chapter 12 (Choosing a Conveyancer or Solicitor) we covered how to choose a good solicitor that will take your..."
"... hours of agreeing a sale price; In Chapter 12 (Choosing a Conveyancer or Solicitor) we covered how to choose a good solicitor that will take your agreed offer through to a quick and timely exchange so that everyone is locked into the deal. In Chapter 17 (The Property Buying..."

"... the Paperwork - There is a set of basic paperwork which your solicitor is going to need from the vendor's solicitor if exchange of contracts is going to take place. If this has not been prepared prior to your offer there will be immediate delays unless: you have chosen a good..."
"... questioned by your surveyor. Even if the vendor decides not to go ahead with works that need done they often organise quotes so you are fully aware and objective when it comes to making an offer, and that offer is far more likely to make it through to exchange. In a handful of cases the..."

"... Price - The fee that you, the vendor, pay will affect three things: The price achieved for your property The quality of the staff you deal with (and so the likelihood of exchange) The quality of marketing - The Fee and the Price - The fee paid to a high street agent is a percentage..."
"... The fee on a £250,000 flat at 1% would be £2,500 of which a negotiator on 10% commission would get £250. If you pay 2% the negotiator gets £500. Which property do you think the negotiators will work harder on, not only to sell, but to ensure the agreed sale progresses to exchange? If..."
"... There is a long way to go between agreeing a sale price and an exchange. The solicitors must be chased and managed, the buyer must be educated, the surveyor must be kept happy, the lender must be pursued and the process must be bought to a speedy conclusion. None of these things will happen if: ..."
"... fail simply read through the true stories in each chapter. An agent that is prepared to negotiate to a low fee is likely to achieve a worse price for your property and that deal is more likely to fall through before reaching exchange - The Fee and the Advertising - Advertising and market..."

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Author of How to Really Buy a Property

I'm Tim Hill, Author of How to Really Buy a Property. I'm a property buyer, seller, landlord, tenant and I've been an agent in hundreds of transactions. I own a property portfolio across Europe but that doesn't mean I think you should to!

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