Exchanging Contracts – Everything You NEED To Know

Podcast Hosts:

Gemma (Host)
Ifthikhar (Ifthi) – Accountant, Mortgage Advisor, and Founding Director at WIS

Introduction

Gemma:
Today we’re talking about exchange of contracts in the property buying process, what it means, and the difference between exchange and completion.
We’ll also cover 10 things to consider before exchanging contracts.

Q&A Discussion

Q1: What does “exchange of contracts” mean?
Ifthi:
One of the biggest milestones in buying a property – often called the “point of no return.”
You provide your deposit to the solicitor (commonly 10% of the purchase price).
Solicitors agree on a completion date, the day the property legally changes hands.
For existing properties, you know exactly when you’ll get the keys. For new builds, it may take months.

Q2: Are you the legal owner at exchange?
Ifthi:
No, you are not the legal owner at exchange.
Your name is not yet on the Land Registry.
You do have responsibilities from the point of exchange.

Q3: What are the differences between exchange and completion?
Ifthi:
At Exchange:
Seller signs a TR1 transfer form and submits it to their solicitor.
Buyer pays their deposit.
Completion date is agreed upon.
Solicitors confirm all mortgage and documentation are in order.
At Completion:
Buyer’s solicitor transfers funds to the seller.
Seller’s solicitor confirms receipt.
Estate agent hands over the keys to the buyer.
Exchange = agreement in principle; Completion = day you get the keys.

Q4: 10 Things to Consider Before Exchange

1. Review the solicitor’s pack
Contains search results (local searches, drainage, flood risk) and findings.
Includes easements (e.g., allowing someone to walk through your garden) and restrictive covenants (e.g., limitations on building structures, parking restrictions).
Carefully review and consult your solicitor if unsure.

2. Verify the list of items from the seller
Ensure items like curtain poles, blinds, taps, wallpaper match what you agreed on.
Solicitors send a detailed room-by-room list – check everything is correct.

3. Arrange home insurance
Insurance must be valid from the point of exchange, not completion.
Mandatory for most mortgage offers, especially for houses.

4. Arrange life insurance
Protects against losing the main income earner before completion.
Ensures obligations can be met and prevents loss of deposit or additional claims.

5. Confirm you have funds to complete
Include stamp duty and solicitor fees.
Ensure you can meet all obligations; otherwise, you risk paying damages.

6. Agree on a minimum gap between exchange and completion
Shorter gap reduces risk if circumstances change (e.g., job loss, death).
Ideally, exchange and completion on the same day, but practical constraints may prevent this.

7. Inspect the property before exchange
Check all agreed items are present and in good condition.
Identify issues (e.g., damaged walls) before committing.
Avoid unexpected costs or disputes later.

8. Arrange movers in advance
Coordinate with the chain of buyers and sellers.
Ensure availability and avoid last-minute high charges.
Allow ample time for packing and moving.

9. Understand how controls work in the house
Learn operation of boilers, gas cookers, heating systems.
Ask the seller to leave manuals for appliances and systems.

10. Inform all bill providers of your move
Notify banks, insurance, mobile providers, HMRC, pension providers, etc.
Arrange mail redirection for missed letters (usually 3–6 months).

Closing Remarks

Gemma:
Exchange of contracts and completion are major milestones.
Proper planning, inspection, insurance, and communication are crucial.
Reminder: These points may not apply to everyone. Always consult a qualified advisor.
A mortgage is secured against your home or property and may be repossessed if repayments are missed.