The Difference Between Exchange and Completion

It is at this very point that the transaction becomes legally binding.  Not before and not at the point of signing. Only once the exchange has happened does the transaction become legally binding on all parties. 

You will be asked to sign a contract in readiness, the other party will do the same. When everyone is ready and agreed a date for completion, we will get authority from you, either verbally or by email. Then we exchange on your behalf. This is done formally by a telephone conversation with the other solicitors using a formula set by The Law Society and each side will record it and send each other the signed contract.

On exchange, the completion date is then fixed so this would have been agreed prior to this happening. This is why we would always advise against any booking of removals or making permanent arrangements, because until we have exchanged, nothing is legally binding and you run the risk of everything changing and then paying penalties for making a change to those bookings.

The exchange is also where a buyer pays a 10% deposit which is the sum required under the contract and which was set by The Law Society. In reality, not every buyer has 10% available and so sellers accept a lower deposit but 10% will always remain due. 

The exchange is an important landmark in conveyancing because before this happens, either party can walk away from the transaction without penalty. This is why it is so important to understand that absolutely nothing is legally binding until you have exchanged.

An exchange may happen quickly or it may take some time, it largely depends on how many parties are in a chain. It starts with the buyer’s solicitor at the bottom and goes all the way to the top of the chain then back down again to the buyer solicitors at the bottom of the chain. 

If, after an exchange, someone does fail to complete then this is a default which comes with a serious financial consequence. 

It is at this point a buyer would need to put on risk their buildings insurance as under the contract this becomes the buyers responsibility. 

On exchange, the date for completion is set.  This is the day that officially changes ownership. The buyers’ solicitors will drawdown the buyers mortgage funds (if applicable) and send over the balance to the seller’s solicitors.  Once money has been received by them, they will authorise key release, usually via the estate agents (where applicable) and a buyer can move in and a seller must move out. In reality, if you are part of a chain, there may be some grace with timings on the day but the process repeats until money has reached the sellers solicitors at the top of a chain. 

There is an easy way to remember these important stages:

Exchange = commitment

Completion = moving day