What to expect when changing contracts and deposits
Buying or selling a property is an exciting but often complex process. We explain what happens when you exchange contracts and what to expect at this stage.
26 June 2019
Once terms of the contract are agreed, a date to exchange contracts will be set and a 10% deposit is due to the seller when contracts are exchanged.
What does exchange of contracts mean?
When a buyer has agreed on a price and all of the survey and searches have been done, they will need to exchange contracts with the seller. The date, the price and the terms on which the property is taken are now formally agreed and are legally binding from the date on which contracts are exchanged. On this date a deposit is usually paid to the solicitor by the buyer. A solicitor will ensure that the contract is drafted properly to protect your position.
If there are any legal problems regarding the property, the lawyer will ensure that these are resolved before allowing the exchange to take place. They will also arrange a date that both buyer and seller agree on to complete the purchase.
If you are selling your property, your lawyer will double check that they hold the correct bank details.
During this time, both buyer and seller should arrange removal vans, ensure they’ll be packed and prepared ready for the move and should take final meter readings.
What about the deposit?
A 10% deposit is due to the seller when contracts are exchanged. The seller needs to continue making mortgage payments until the completion day, and the existing mortgage or loan can’t be transferred to a new property.
What if the buyer fails to complete the purchase?
If the buyer fails to complete the purchase then the seller will probably be entitled to retain the deposit and the property. If the seller fails to complete, the buyer will recover their deposit and the seller may face a substantial claim for compensation.
All the above information was correct at the time of publication.