Differences between exchange and completion

In short, an “exchange” is an exchange of contract whereby the buyer and seller are legally obligated to proceed with the sale of the property.

Whereas “completion” takes place after the exchange of contracts. At this point, the buyer receives the keys to their new home and the seller transfers the remaining funds to them.

In this blog, we describe the difference between these two processes in more detail to help guide and prepare you for what can be a daunting but equally exciting time of life.

1. Contract details

When preparing the contract, it is essential that all details are correct. Most importantly, these include your name and information, as well as that of the property and the agreed price. Part of the contract should include a list of equipment and contents, so make sure you are happy with its contents and inform your legal representative of any plans to purchase from them. However, the most important date to confirm for the entire process is the exchange of contracts. This is the day when the contract will become legally binding on both parties, and neither will be able to withdraw after this period without financial penalty. This is done in order to confirm a completion date, which will be the day the buyer legally owns the property.

2. Contract exchange

The exchange of contracts can be approached in several ways.

• A simultaneous exchange and completion where the exchange of contract and transfer of ownership can take place on the same day. This gives the buyer and seller complete flexibility with no commitment until the day of completion itself.
• Exchange of contracts before completion, leaving little or no flexibility.
• Exchanging contracts before completion with a coronavirus clause which allows flexibility in the event of a ‘coronavirus’ related issue for the seller or buyer. This can be beneficial because it allows you to delay completion. However, the seller could also block or withdraw completely if affected.

3. The deposit

On exchange of contracts the buyer will pay a 10% deposit and, in the event of default by the seller on completion, the buyer will be entitled to its return (and possibly to claim damages for any loss ). However, the seller may use all or part of your deposit towards their subsequent purchase with any remaining balance held by the solicitor. For new construction purchases, the developer’s attorney will immediately pay the deposit to the developer. If a deposit is not available to secure the exchange of contracts, contact your legal representative to discuss alternatives. To learn more about this part of the process, read our “guide” here.

4. Completion date

It’s the day you move out. Just before the exchange of contracts, the legal representatives will manually insert the date and the sellers, if they have not already done so, must vacate the property on this date. Representatives must send the completion money to their solicitors to reach their bank account by 1pm this afternoon. If cleared funds are not made available to legal representatives in a timely manner, you will be responsible for paying daily interest (at the % rate specified in the contract). You must ensure that the representatives have cleared funds from you (other than the mortgage, which is covered below) at least 24 hours before the completion date.

5. Condition of the property

The buyer accepts the good in the state and condition in which it is at the time of the exchange of contracts. It is advisable to carry out your own property survey and surveyor’s report before reaching this stage. If it is expected that any work will be carried out on the property before the completion date, then this must be agreed and confirmed before contracts are exchanged. Additionally, it is important to have building insurance in place from the date of exchange of contracts and not completion, as any risk of property damage between the two processes will be borne by the buyer.

6. Completion delays and failures

Although rare, unforeseen circumstances may delay the completion date, such as death, illness or extreme weather conditions, etc., and the contract takes this into account with a daily penalty which may be paid by the defaulting party. This would also make them responsible for any reasonable expenses incurred, such as hotels or moving etc. If either party fails to meet the completion date agreed in the contract, it will be postponed until the next day. The defaulting party will also be responsible for the costs caused by this situation. If one party withdraws and the purchase cannot be completed, it is best to contact your legal representative for help and advice.

At Thomas and Thomas Solicitors we know that buying and selling a property can present challenges at an important time in a person’s life. That’s why we offer our reliable residential and commercial conveyancing services to help you throughout the process.

We are committed to making the process of buying and selling a property as simple as possible, and we are proud to offer a free, no-obligation online quote for the cost of our service, tailored to your needs. This is accessible here, anytime and anywhere, to help streamline the entire process. If you need any advice or guidance regarding conveyancing, our team of experts are always ready to help.