Make no mistake – every buyer and seller wants to avoid what can hold up exchange of contracts. However, despite everyone’s best effort sometimes delays are inevitable.
When you reach the point of exchange of contracts, you can start to feel confident that your property deal might actually come through. This is because following the exchange both buyer and seller have legal recourse if the other pulls out, meaning that they can sue each other for damages.
While it is not as final as the succeeding step, completion, when the new owner takes possession of the property, generally if the exchange of contracts goes ahead, the deal is likely to succeed.
However, reaching the exchange can be difficult, and a lot of different things can cause delays during any of the conveyancing stages. All of this can really add up if you are not careful.
This post details what can happen as you draw close to exchanging contracts and what you can do to help ensure things run smoothly.
What needs to be done before the exchange of contracts?
Before you can exchange contracts there are quite a few things that must be completed.
Some of these things fall on the buyer, while others fall on the seller. Both will need the assistance of either a licensed conveyancer or a solicitor.
Other things fall on both parties, and the exchange cannot proceed until these are agreed.
What do buyers need to do before the exchange?
- Order and conduct searches and surveys on the property and read the legal report your conveyancer will have composed using them. This document holds all the property’s details. Make sure you are happy with the results of the searches and the survey before you commit to exchanging contracts. These will show you if there are areas of the property that require additional paperwork, or indemnity insurance. IT can also warn you about other problems which could impact a property.
- Ensure you have your deposit ready. It would be very embarrassing to reach the point of exchange and be unable to pay. Beyond embarrassment, this could even lead to the transaction falling through. The seller may feel they can no longer trust you to pay your deposit the next time they try to exchange or the remaining monies when it comes to completion.
- Get your mortgage offer in writing. When buying with a mortgage you will need a final offer in writing at exchange. An agreement in principle will not do at this point!
- Check any leasehold agreements carefully. Leasehold property often comes with obligations, fees, and costs which affect whoever is leasing it. When buying any leasehold property you should ensure that you understand these before agreeing to exchange contracts.
- Arrange building insurance for your new property. Typically, sellers end their policies at exchange, as from this point insuring the house becomes your responsibility. You should buy insurance to ensure the worst doesn’t happen. Your lender may insist on seeing your insurance policy before exchange of contracts.
What do sellers need to do before exchange?
- Ensure all available paperwork for your property is collected and provided to the buyer’s conveyancer along with the TA6 property information form. This can range from planning permissions and guarantees for building work to instructions for household appliances. By supplying these documents, you can ensure that you do not have to buy indemnity insurance.
- Fill out the TA10 fittings and contents form. This form indicates what is to be sold with the property, and what is to be left behind. Sellers can also include optional extras in the form, giving the buyers the choice to buy certain items with the house.
- Inform your property’s insurance provider that you are moving and need to cancel your policy. Buyers will typically organise insurance starting from the day of exchange.
- If your property is a Buy to Let investment ensure that your tenants have a definite plan for moving out. This is best done by getting written confirmation from them. You should ensure they have left before the agreed completion date just in case they meet delays.
Understanding what can hold up exchange of contracts
What do both parties need to agree on before exchange?
Often, the results of the property searches can lead to re-negotiations over the property’s asking price. This could involve one party having to pay for indemnity insurance policies and any necessary repair work that must take place.
The need for providing an indemnity insurance policy is often due to missing or problematic paperwork and permissions. This could include covenants, deed issues and building regulations. The buyer will typically want indemnity insurance to be bought to protect them from costs associated with potential enforcement action associated with this type of issue. Who pays for this can vary, depending on who is in the stronger negotiating position. Usually sellers will cover any issues that they are to blame for by paying for the indemnity policy.
Negotiations can also result from structural and/or maintenance issues uncovered by the survey. This can lead to a buyer reducing their offer in order to cover the costs of work, or sellers agreeing to complete or pay for needed work prior to the exchange. Like issues brought up by searches, who pays to resolve problems found in the survey often depends on the strength of the parties negotiating position, though normally sellers will be expected to cover things they are at fault for. By far it is structural issues that what can hold up exchange of contracts the most.
The parties involved in the transaction must also agree on what fittings and fixtures will be included with the property. The seller will specify what is included as default, and what is available in the TA10 fittings and fixtures form. The buyer must indicate which of the optional items they wish to buy and the price they are prepared to pay.
Both parties will need to sign a TR1 transfer document. This document, which will contain the details of the transaction, authorises the property transfer and enables the conveyancers to conduct the exchange.
Finally, before exchange and completion can take place both parties must agree on a completion date. This is when the buyer will transfer the remaining balance of the payment and take possession of the property. Both parties should ensure that this date suits them, particularly if they are moving into or out of the property at that point.
What can hold up exchange of contracts?
Straightforward house sales usually take between 8 and 12 weeks to go from the initial offer to exchange of contracts.
Normally, much of this time is spent waiting for the results of searches and surveys. Sometimes, this can be delayed due to a slow surveyor taking a long time to complete their report. Other times this can be slow due to conveyancers being too busy, and therefore taking a long time organising and compiling searches.
On top of this, some local authorities are notoriously slow when tasked with providing their local authority search. They may choose to prioritize their own searches over private regulated searches.
Negotiations resulting from searches and surveys can also make up this time. If the buyer and seller are unable to agree on a revised sale price, who carries out repairs, or who pays for indemnity insurance, the sale can be delayed dramatically.
At other times, hold ups can be caused by questions going unanswered, especially regarding planning permission, covenants, and paperwork. If a conveyancer is not satisfied with the answer they have been given, they will not allow the process to proceed.
Complicated transactions, particularly those with unusual elements can also add to delays. Slow mortgage lenders also do not help as the exchange of contracts is often dependent on a final mortgage offer being made.
Long chains also cause delays. This is because every party in a linked property chain needs to exchange in the correct order to each in turn be able to pay for their property transaction. This means every party and their conveyancers must be ready at the same time. Given the inherent number of people involved in a longer chain this can be difficult to achieve. On top of this, the chain may still be incomplete at the time you join it. This could mean you are waiting on someone else finding a buyer or seller for their property.
Finally, delays can be caused by the buyer or seller not providing signatures, orders, or documents when required. Sometimes parties are not even aware of this, so you should keep in close contact with your conveyancer in order to ensure you are not unwittingly slowing the transaction down.
How can you speed up the exchange of contracts?
In order to speed up the exchange of contracts you will need to collaborate with all parties. This is so that all buyers and sellers can attend to their separate steps in turn for the exchange to go ahead.
You should try to ensure everyone selling a property in the chain has all their documents or indemnity insurance policies ready, including guarantees, warranties, planning permissions and safety certificates. Buyers should have their finances in order and be ready to proceed.
Solicitors and conveyancers should be chosen on the basis that they provide a fast service, in addition to a good one. This is because so much of the conveyancing process is dependent on how effective they are. A slow solicitor, especially working on the behalf of a buyer can dramatically slow down a property sale.
All parties involved should think carefully before deciding to go on holiday during the transaction. The timing of developments can be fairly unpredictable. Something coming up while you are on holiday can be an enormous nuisance for everyone involved if it is not dealt with swiftly.
Finally, when selling, the single biggest thing you can do to speed up the exchange of contracts is by weeding through potential buyers. A cash buyer will normally be the fastest, while a buyer who is dependent on their house selling will be much slower. Consider the length of any chains you are becoming involved with and if possible, avoid any longer examples.
Leading property site Rightmove offers guidance on how to speed up selling a property.
Summary
The exchange of contracts is the point where a property transaction becomes legally binding and represents the final steps towards completing your transaction.
However, exchanging contracts can be held up by numerous things.
Firstly, the buyer’s searches and surveys need to come back. This can be delayed by missing documents, slow conveyancers, or local authorities. Following these searches returning, the buyer and seller need to agree to the final terms of the contract. If neither party is keen to give ground, these negotiations can take a long time.
While there are lots of things you can do to attempt to speed up the exchange of contracts, you will inevitably be dependent on other people. You will never have total control over when it happens. All you can really do is ensure you hire a competent and fast conveyancer and provide them with whatever documents they need as quickly as possible once requested.
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