Exchange, deposit and completion

Once all the details have been agreed, the contracts between you and the buyer must be signed. The contracts are exchanged and the buyer pays a deposit. The sale is usually completed within a month of contracts being exchanged.

Before you exchange

Exchange of contracts is the stage when a property sale becomes legally binding on both sides. From this point on there can be no changes to the conditions of the sale and neither you nor the buyer can pull out.

You can be sued for breaking the contract if you pull out of the sale for any reason. If the buyer pulls out after exchange, they also lose their deposit.

It is therefore essential that:

  • all the legal documents have been thoroughly checked
  • any survey or homebuyer's report has been carried out
  • any repairs or other work you agreed to do, have been completed before the completion date
  • the buyer's mortgage has been formally arranged
  • the buyer has the money for the deposit

If you are buying a new property at the same time, you usually exchange contracts on your new home at the same time as you exchange contracts on your old one.

Signing the contract

Once the contracts are agreed, your solicitor (or licensed conveyancer) asks you to sign a copy. Ask your solicitor to explain anything you don't understand.

The buyer signs a separate copy and your solicitors exchange the two copies. You probably won't need to have direct contact with the buyer on the day.

Once you sign, the contract is legally binding. You have to sell, the buyer has to buy and the price cannot be changed. There is no more room for negotiation and neither side can pull out of the deal.

The buyer may also become responsible for the costs of buildings insurance from the date you exchange contracts.

The deposit

Most buyers pay a deposit of around 10% of the agreed price when contracts are exchanged. It is sometimes a smaller amount but only if this has been negotiated in advance.

When contracts have been signed and exchanged, the buyer's solicitor gives the deposit to your solicitor. They keep the deposit until the completion date when the deposit is paid to you (or your mortgage lender) along with the rest of the purchase price.

If you are buying at the same time, it may be possible to put the 10% deposit you get from your buyer towards the deposit on your new home. If not, and you don't have enough savings to cover it, you may be able to arrange a separate short-term loan (a bridging loan).

Alternatively, your solicitor may be able to arrange a deposit guarantee with an insurance company. In either case you normally have to pay a fee and might pay a high rate of interest.

Buildings insurance

If the property is freehold, the buyer usually becomes legally responsible for buildings insurance from the date contracts are exchanged. If the property is leasehold, the freeholder is normally responsible for arranging insurance but the buyer can be asked to pay their share of the costs involved.

Ask your solicitor to check this and make sure the property is insured properly while you are responsible. If this is the case and the property is damaged between exchange of contracts and the completion date, the buyer's insurers have to pay for any repairs that are needed.

However, the buyer is not responsible for your personal belongings. Make sure your contents insurance is valid until you move out.

After the exchange

When you exchange, you should be given an idea of the completion date. This is usually between seven and 28 days after you exchange contracts but can be as little as 24 hours.

Before the completion date the buyer's solicitor carries out any final checks and organises the rest of the money for the purchase. While this is happening, you may need to:

  • make arrangements to move out and arrange insurance for your new home
  • inform your bank and other important contacts of your new address and/or arrange for Royal Mail mail redirection.
  • inform the local council tax office, gas, electricity, water and telephone companies that you are moving. Ask for final readings to be taken and make sure that essential services are connected in your new home provides a free service to inform utility companies and other important contacts of your new address.

The buyer may want to visit the property before the completion date, for example, to measure for carpets or get estimates for work s/he intends to have done. You can refuse to allow this and don't have to allow any work to begin until after the completion date.

Delays before exchange of contracts

There are many reasons why there may be delays before exchange of contacts, for example if the:

  • council hasn't returned the local searches
  • buyer's solicitor hasn't provided information needed to complete the sale
  • buyer is having problems getting a formal mortgage offer

Contact your solicitor as soon as possible if there are any delays.

Completing the sale 

Completion is the date when the buyer becomes the legal owner of a property. It's usually no more than a month after contracts have been exchanged and could be as little as 24 hours.

When the sale is completed, you receive the remainder of the sale price and pay for any outstanding costs involved in the sale.

The seller can't enter the property after the completion date without the new owner's permission.

Full payment for the sale of your home

You should be paid in full for your home on the completion date. This includes the deposit and any interest it has earned since contracts were exchanged.

You may have to ask your solicitor or conveyancer if you don't automatically get the interest payments.

Contact the Legal Ombudsman, or the Council for Licensed Conveyancers if your solicitor refuses to give this to you.

Handing over the keys to the property

In most cases, you give all the keys to the property to your solicitor. They give the keys to the buyer's solicitor when the agreed price has been paid.

However, you can arrange to give the keys to the buyer or the estate agent if that's easier.

Paying off any debts secured on your home

If you used a mortgage to buy your home, all or part of the money from the sale will go to your lender to pay off the amount you still owe.

Many lenders charge penalty fees for paying off a mortgage early, but if you are taking out a new mortgage with the same lender, you don't normally have to pay the penalty. Check your mortgage agreement to see what it says.

You also have to repay any other loans that were taken out using your home as collateral. Any money left over is yours.

If your home is sold for less than you owe (leaving you in negative equity), you still have to pay back everything you originally borrowed.

Leaving the property

You must remove all of your furniture and belongings before the completion date. You should only leave behind fittings and fixtures that were part of the sale.

The buyer can ask you to remove any unwanted items you leave behind. They may be able to take legal action against you if you refuse, but this is unusual.

If you haven't done so already, you should inform your bank and other important contacts of your new address and/or arrange for your post to be redirected. 

If the property is damaged while you are moving out, you may have to pay to put things right if this was agreed as part of the sale contract.

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