What’s the Difference between Exchange of Contracts and Completion?
The main difference between exchange and completion is that the 'exchange' is an exchange of contracts, which makes the matter legally binding between the buyer and seller, whereas 'completion' is the date the parties physically move and transfer legal ownership of the property.
If you are selling or buying a house, the transaction isn’t legally binding on any party until contracts have been exchanged. The legal representatives instructed by the seller and the buyer will be required to undertake certain work before the exchange of contracts can take place. Any party can withdraw from the transaction prior to exchange.
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Exchange of Contracts
Exchange can take place once the buyer’s Conveyancing Solicitor is satisfied with all the information provided by the seller’s Conveyancing Solicitor, and all Solicitors are holding a signed contract on file. A completion date will also need to be agreed by all parties in a chain.
A buyer’s Solicitor will also need to be in receipt of a mortgage offer (if the buyer is getting a mortgage to fund the purchase) and ensure that all mortgage conditions have been satisfied. They must also be happy with the results of the property searches. Deposit funds will be requested from the buyer and sent to the seller’s Solicitor on exchange of contracts.
Between exchange and completion, if there is a mortgage on the property that’s being sold, then the seller’s Solicitor will obtain a redemption statement and pay the mortgage off on the day of completion. They will also request any other invoices to be paid on completion such as the estate agent’s fee.
Both parties will receive a financial statement with a breakdown of the funds showing a balance due to the seller or funds required from a buyer in order to complete. If the buyer is obtaining a mortgage, it’s usual practice for the mortgage funds to be requested for the working day before completion to avoid delays on the actual day of completion. Final checks and searches will be undertaken by the buyer’s Solicitor.
The buyer’s Solicitor will transfer the balance of the purchase money to the seller’s Solicitor on the day of completion. Once the funds are received, the seller’s Solicitor will confirm completion and inform the estate agent that the keys can be released to the buyer.
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