When it comes to buying or selling a property, there are several important steps that take place before the deal is finalized. One of these crucial steps is known as the contract exchange. In this article, we’ll discuss what contract exchange means and why it’s important.
What is Contract Exchange?
Contract exchange is the moment when the buyer and the seller of a property sign identical contracts and exchange them. The contracts will include all the details of the sale, such as the property price, the completion date, and any other conditions that have been agreed upon. Once the contracts have been signed and exchanged, both parties are legally bound to complete the sale.
Why is Contract Exchange Important?
Contract exchange is a vital step in the property buying and selling process because it provides both parties with certainty. Before the contracts are exchanged, either party can back out of the deal without any legal repercussions. However, once the contracts have been signed and exchanged, the deal becomes legally binding.
In addition to providing certainty, contract exchange also marks the point where the buyer typically pays a deposit on the property. This is usually 10% of the purchase price, and it’s paid to the seller’s solicitor or conveyancer. The deposit serves as a guarantee that the buyer intends to go through with the purchase.
What Happens After Contract Exchange?
After the contracts have been exchanged, the completion date is set. This is the date when the property officially changes ownership and the buyer takes possession of the property. The completion date is usually agreed upon when the contracts are signed, and it can be anywhere from a few days to several months after contract exchange.
Between contract exchange and completion, the buyer and the seller will need to make any necessary preparations for the transfer of ownership. The buyer will need to arrange for the payment of the remainder of the purchase price and the seller will need to vacate the property.
Conclusion
In summary, contract exchange is a vital step in the property buying and selling process. It provides both parties with certainty and marks the point where the deal becomes legally binding. If you’re buying or selling a property, it’s important to have a good understanding of what contract exchange means and what to expect during the process. Working with a qualified solicitor or conveyancer can help ensure a smooth and successful transaction.
