Exchanging Contracts…What does that actually mean when buying & selling a property?

Congratulations – We have just Exchanged Contracts!

Often, your solicitor in a typical property transaction will contact you for authority to exchange contracts and thereafter, give you the good news that contracts have exchanged. This is a great checkpoint to be at, but what does this actually mean?

Following exchange, a legally binding contract will exist between the parties to the contract and neither may withdraw without incurring liability for breach. The seller retains the legal title in the property until formal completion occurs, but the beneficial interest is held on behalf of the buyer. The seller is said to hold the property on trust for the buyer. At this stage, the buyer is legally committed to buy and the seller to sell.

Solicitors usually exchange contracts over the telephone with one another. Once contracts have been exchanged, solicitors will inform their clients of the good news and will comply with the necessary legal formalities following exchange. The price, formal completion date and terms bespoke to the transaction are all contained in the contract. Sometimes, contracts may be exchanged simultaneously with completion, so the transaction may be finalised on the same day.

It is important to note that contracts usually state that the buyer bears the risk of loss and damage to the property after contracts have been exchanged. It is therefore important that buyers have insurance in place from the point of exchange.

More information on moving home can be found here.