Exchange of Contracts Explained

What Is Exchange of Contracts?

Exchange of contracts is the pivotal moment when a property sale becomes legally binding. Until this point, either you or the seller can withdraw. After it happens, you're locked in. Both parties must complete the transaction on the agreed date.

The actual exchange is remarkably simple: two conveyancers speak on a recorded phone call. Your conveyancer gets your formal agreement, the seller's conveyancer gets theirs, they exchange the signed contracts, and boom—it's done. No ceremony. No solicitor's office. Just a phone call that changes everything.

Before You Can Exchange

Your conveyancer won't let you exchange until several critical things are in place. Think of it as a checklist your legal team must tick off.

Your mortgage must be formally offered. Not a mortgage-in-principle (the quick desktop assessment). A proper written mortgage offer from your lender, stating exactly how much they'll lend and on what terms. This is your conveyancer's proof that you have the funds.

Deposit funds must be ready. Typically 5–10% of the purchase price, sitting in your conveyancer's client account as cleared funds. Your conveyancer holds this, not the seller's. It stays untouched until completion. You need this money physically available, not promised or pending.

All searches must come back clear. Your conveyancer has ordered four standard searches per Law Society Conveyancing Protocol: Land Registry, Local Authority, Water and Drainage, and Environmental. These reveal planning history, building regulation approvals, contaminated land issues, and flood risks. Any red flags here and exchange can't happen until they're resolved.

Your survey must be done and reviewed. If you've had a structural survey, your surveyor must report their findings. Serious defects here could stop exchange while you negotiate with the seller. Minor issues get noted but don't typically block the process.

Buildings insurance must be arranged. This is crucial and often overlooked. You legally cannot exchange without buildings insurance in place because the risk of the property transfers to you the moment you exchange. If there's a fire before completion, you're still obliged to complete the purchase—the insurance is your protection. Your lender won't allow exchange without proof of this insurance either.

Your mortgage must be formally offered. Not a mortgage-in-principle (the quick desktop assessment). A proper written mortgage offer from your lender, stating exactly how much they'll lend and on what terms. This is your conveyancer's proof that you have the funds.

The completion date must be agreed. This is written into the contract. It's typically 7–28 days after exchange, most commonly one or two weeks. Both parties must agree on this date. Your conveyancer will have negotiated this with the seller's conveyancer before exchange.

The completion date must be agreed. This is written into the contract. It's typically 7–28 days after exchange, most commonly one or two weeks. Both parties must agree on this date. Your conveyancer will have negotiated this with the seller's conveyancer before exchange.

The Exchange Process Itself

On exchange day, you'll need to be contactable. Your conveyancer will phone or email to get your express authority to proceed. They'll say something like: "Are you happy for me to exchange contracts?" You say yes. That's it. You're authorising them to do the exchange on your behalf.

Your conveyancer then calls the seller's conveyancer. Both confirm they have express authority from their clients. The seller's conveyancer confirms they have the signed contract from the seller. Your conveyancer confirms they have the signed contract from you. The contracts are exchanged (these days, usually via email, though historically this involved physical posting).

Both conveyancers note down the completion date, repeat key details for accuracy, and confirm the deposit arrangements. The call is recorded. Once that call ends, the sale is legally binding.

Your conveyancer will then email you a completion statement showing the purchase price, the deposit (now held by the seller's conveyancer), the balance due at completion, and various costs. This is your roadmap to completion day.

What Happens to Your Deposit

The moment contracts are exchanged, your deposit transfers from your conveyancer's account to the seller's conveyancer's account. This is called a stakeholder arrangement—the seller's conveyancer holds the money until completion, when they release it to the seller.

This is why the deposit must be cleared funds, not pending transfers or pledges. If you go to exchange and your funds aren't actually in your conveyancer's account, exchange can't happen.

At completion, this deposit is not a separate payment. It's part of the total purchase price. So if you're buying for £250,000 and your deposit is £12,500, you'll pay the remaining £237,500 at completion. The deposit sits in the middle, released to the seller once all funds are confirmed.

Why This Matters: The Legal Binding Effect

This is the critical bit. Once contracts are exchanged, the sale is legally binding on both you and the seller. Full stop.

You cannot withdraw without serious consequences. If you pull out, you lose your deposit. The seller can also pursue you for costs, including their legal fees, estate agent fees, and potentially damages for any financial loss they incur. This is rare but it does happen.

The seller cannot withdraw either. They're equally bound. If they decide they don't want to sell, they're in breach of contract and you can pursue them for specific performance (a court order forcing them to complete) or claim damages.

This is why everything leading up to exchange must be solid. Your survey, your mortgage offer, your searches—these are all done before this binding point. You're not exchanging and then hoping your mortgage comes through. It's the other way around.

Between Exchange and Completion

You're now the legal owner for insurance purposes, but the seller still owns the property. This creates an odd situation.

Any damage to the property between exchange and completion is your responsibility. Fire, flooding, vandalism, storm damage—if it happens, you're still obliged to complete for the full price. Your buildings insurance covers you here. Without it, you're exposed to significant financial risk.

The seller must vacate by the completion date and leave the property in the agreed condition. They must not remove agreed fixtures and fittings (fitted kitchens, wardrobes, etc.). You'll do a final walkthrough, usually 24–48 hours before completion, to confirm everything matches the contract.

During this period, you can arrange removals, notify utilities, and update your address. The time between exchange and completion (typically 1–2 weeks) is deliberately built in to let both parties prepare. For a comprehensive breakdown of every stage from here through completion day, see our complete completion guide.

Completing the Exchange

Exchange of contracts is straightforward once everything is in place. It's a phone call between conveyancers. But it's the phone call that transforms a negotiated offer into a legal obligation.

You're now committed. The seller is now committed. Completion will happen on the agreed date, and you'll own the property.

What happens if I want to withdraw before exchange?

You can withdraw anytime before exchange. You lose your deposit if you've paid it to the agent (pre-exchange deposit). You also lose any survey and search costs you've paid. Your conveyancer's fees are due. But you're not in breach of contract.

What happens if I withdraw after exchange?

You're in breach of contract. You lose your deposit (5–10% of purchase price). The seller can pursue you for additional costs: their legal fees, estate agent fees, and potentially damages if they resell at a lower price. This is why everything must be confirmed before exchange.

Can the seller withdraw after exchange?

No. They're equally bound. If they try to withdraw, you can pursue specific performance (a court order forcing them to complete) or claim damages. Sellers rarely attempt withdrawal because they know the consequences.

What if I find a serious problem with the property after exchange?

This is unfortunate but you're still obliged to complete. This is why survey and searches must be done before exchange. You cannot withdraw due to survey findings post-exchange. Your only recourse is to proceed and potentially claim against the seller for misrepresentation.