Senior conveyancer Karen Pratt, in our Residential Property team, discusses the difference between exchange and completion when buying or selling a home.
For many buying or selling a home, exchange and completion can feel like a cause for celebration, but it is important to note that they are two separate stages of the process. Exchange is the point at which the transaction becomes legally binding, and completion is when the purchase money is transferred and the buyer becomes the owner.
What happens when contracts are exchanged?
Before exchange, the buyer’s and seller’s solicitors or conveyancers agree the contract and deal with the legal work required for the transaction. Each party signs their copy of the contract. The solicitors or conveyancers then exchange those contracts and agree the completion date.
Once contracts have been exchanged, the buyer and seller are legally committed to proceeding on the agreed terms. Withdrawing from a transaction after this point can have serious financial and legal consequences.
What needs to be ready before exchange?
The buyer will usually need to be satisfied with the legal title and the replies to enquiries. Any required searches and mortgage arrangements should also be in place, and the parties must agree the completion date before contracts are exchanged.
Your solicitor or conveyancer will tell you when the matter is ready and explain any outstanding point that could affect your decision.
If you are a first-time buyer or purchasing without a sale property your conveyancer will need your deposit. The deposit is normally 10% of the purchase price, and can be agreed for less if you are obtaining a higher percentage mortgage. This sometimes causes confusion for buyers as the amount differs from the deposit they have advised their mortgage company they have. It is important to note that this deposit is the legal deposit which is required, as opposed to the sum of money you will be contributing towards your purchase.
Building Insurance is important, it is down to the buyer to insure between exchange and completion. If you are getting a mortgage, it will be a requirement as well by your lender. It is good practice to get draft quotes ahead of exchange, this will help you understand how much the premiums are likely to be. Insurance quotes can also highlight high excess amounts for matters such as flooding and subsidence in the area.
What happens on completion?
On the completion date, the buyer’s solicitor or conveyancer transfers the purchase money to the seller’s solicitor or conveyancer. Once the money has been received, completion can take place. The seller must leave the property in accordance with the contract and the keys are released, usually through the estate agent.
For the buyer, completion is the point at which ownership transfers and they can collect the keys. For the seller, it is when the sale money is received, subject to any mortgage repayment and other sums due.
Can exchange and completion happen on the same day?
They can and are known as simultaneous exchange and completions. However, many transactions have a period between exchange and completion. That gap gives everyone time to make the final, practical arrangements for the move. The suitable timing will depend on the circumstances and any chain.
If exchange and completion take place on the same day, there is less certainty in advance that the move will proceed. Your solicitor or conveyancer can explain the practical implications before a date is agreed.
What happens after completion?
Although the keys have been handed over, there is still some legal work to be completed. The buyer’s solicitor or conveyancer will deal with any Stamp Duty Land Tax requirements and apply to HM Land Registry to register the buyer as the new owner, together with the lender’s mortgage where applicable. Registration can take some time, but the solicitor or conveyancer will confirm once it has been completed.
Why the distinction matters
Before exchange, either party can usually withdraw from the transaction with no financial ramifications, save for surveyor, broker and solicitor fees, because the contract is not yet binding. After exchange, both parties are contractually committed. Completion then carries out what the contract requires and brings the sale or purchase to its conclusion.
Next steps
Knowing where you are in the process can make a move feel more manageable. Your solicitor or conveyancer will explain what remains outstanding, when you will become legally committed and what you need to do before completion.
For further information or legal advice, please contact law@blandy.co.uk or call 0118 951 6800.
This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.
