What does “Exchange of Contracts” mean?

Should I have a survey done?

If you discover there is anything wrong with the property after exchange of contracts the seller will not be liable and you, as the buyer, will have to pay for any necessary repairs. If you are buying with the help of a mortgage, a surveyor will inspect the property purely for the benefit of your mortgage lender, to ensure the property is a good security risk. You may wish to arrange for the same valuer to carry out a more detailed inspection, known as a “Home Buyer’s Report” or even a full building survey, if the property is very old or needs extensive repairs or alterations.

How long will it take?

Until contracts are exchanged the answer to this has to be “we don’t know”. It is impossible to tell how long a sale or purchase will take until all the loose ends are sorted out. On average, straightforward transactions can take up to 8 weeks or so to reach exchange of contracts. You should try to find out right at the beginning whether there is a chain and, if so, whether the chain is complete and whether all concerned have made satisfactory financial arrangements. We cannot stress enough that you should not make any financial commitments for moving until contracts have been exchanged and a definite completion date has been agreed.

What is a Local Authority search?

This is an investigation to find out any important information affecting the property, which may be on the Council’s records. It might, for example, reveal that an extension on the property has been in breach of Building Regulations or that the nearest road is not maintained by the Council. It might equally show whether there is a road-widening scheme which would affect the property. What it will not do is give any information about proposals affecting neighbouring property. If you are at all concerned we recommend you contact the Local Authority Planning Officer for advice.

Environment matters

Environmental factors increasingly influence the decisions of buyers, lenders and insurers. In addition, local authorities can now require property owners to clean up any contamination on their property and this could prove costly. Because of this we carry out an environmental search and will send you a copy of the results with our report to you.

Is a deposit really necessary?

On exchange of contracts, a deposit is paid to the seller’s conveyancer as a deposit on the property. If the buyer is unable to complete the purchase on the agreed completion date, or within a reasonable period after that (usually ten working days) the seller can keep the deposit in compensation. The seller’s conveyancer will often require at least 5% of the price. Please let us know if you have agreed a lesser deposit.

Why do I need a written mortgage offer?

Before we exchange contracts on your behalf, thus committing you to a purchase, we need written confirmation that your lender will provide the funds you require, and upon what terms. We need to be satisfied that there are no onerous conditions in the mortgage offer that you are unaware of. There might also be conditions you need to satisfy before funds are released. In addition, you need to be happy with the product you are being offered, and to be able to take advice on it.

What should I do about life cover?

Your lender will often recommend that you arrange sufficient life assurance to cover your mortgage liabilities, in order to protect your dependants. The type of cover will depend upon the mortgage you take out so you will need to liaise with your financial adviser and lender. Life cover must go on risk from exchange of contracts. Most lenders do not require to see the policy and leave such arrangements entirely up to you.

Can I transfer an existing secured loan to my new property?

In addition to any mortgage, all other secured loans outstanding on a property (for example, a business overdraft facility, Legal Aid charge or personal loan) must be paid off out of the sale proceeds unless you have an agreement with the lender to secure the loan on your new property. This could take a while for the lender to organise, and if you intend to do this you should talk to the lender without delay. Assuming the lender agrees, they will send written instructions to us.

What do I do about building insurance?

A property should be insured by the buyer from exchange of contracts (brand new properties are different in that they should be insured from completion as the Builder will insure it to that point). Houses should be insured for the estimated cost of rebuilding which is often quite different to the purchase price. It might be much greater than the actual market value. Your mortgage broker or lender will usually be happy to arrange insurance for you. Otherwise you will need to make your own arrangements and it would be prudent to investigate this early on.

When are the estate agents and conveyancers paid?

If you are selling, the Estate Agent will send their invoice to us after exchange of contracts. They will expect us to settle their account on completion from your proceeds of sale. Prior to completion we will prepare a full financial statement, taking into account our fees and any disbursements incurred on your behalf. We will require you to ensure we have sufficient monies on completion in order that our fees will be paid.

Why does a completion have to take place on a working day?

Purchase monies are transferred between conveyancers electronically, by bank transfer. Banks will only transfer money in this way on a working day and therefore completion cannot take place at the weekend.

How do I sort out the keys?

It is usually the case that the seller will drop off the keys to the Estate Agent and, following completion, you can then pick them up. It sometimes happens that this is not convenient, in which case the seller will hand them direct to the buyer. It is important that you find out and agree the arrangements for the keys.