Moving home is a stressful time, it brings on anxiety. If you're about to exchange, you may be asking, what can go wrong between exchange and completion?
After all, you just want to know what to look out for to get over the line. Unfortunately, there is a small chance of something going wrong, but don't worry.
in this insight, i'll explain all that can go wrong between exchange and completion. Hopefully, you will be reassured by the end as I provide tips on how to mitigate those risks.
Before diving into the potential risks that can arise during the exchange and completion process, it is essential to understand what these terms mean. Exchange of contracts is the point at which both parties (buyer and seller) become legally bound to the transaction.
At this stage, a completion date is agreed upon, and a deposit is paid by the buyer. Completion is the day on which the balance of the purchase price is paid, and ownership of the property is transferred to the buyer.
Chain delays, property issues, mortgage withdrawals, and legal disputes can go wrong between exchange and completion. Examples include sudden deaths, flood damage, delay of funds, changes in credit score, or expired mortgage offers.
There are a few issues that can arise between exchange and completion, but rest assured, these are not common issues.
In fact, you would have to be really unlucky to suffer any of these. That's mainly because, by the point of exchange, the transaction should be legally tight and binding.
One of the most common issues that can arise between exchange and completion is a delay in the completion date. Delays can occur for various reasons, including issues with the property condition, problems with finances, legal disputes, and other unforeseen circumstances.
When a completion date is missed, it can cause significant stress and frustration for both parties, as well as financial implications.
For example, a sudden death of a person in the chain would cause an approved delay to completion.
Another potential problem that can arise between exchange and completion is issues with the property condition. In some cases, the seller may not have disclosed all relevant information about the property, or issues may arise during the survey or inspection process.
These issues can range from minor repairs to significant structural problems and can result in delays or even the cancellation of the transaction.
For example, a flood in the area could raise alarm bells around damp. It would take time to decide whose responsibility the clean up and repair is. It may lead to a renegotiation of price. Although, technically, this would be the responsibility of the purchaser.
This example is why home insurance must be setup on point of exchange.
Finances and mortgages are another area where problems can arise between exchange and completion. For example, the buyer may encounter unexpected issues with obtaining financing, or the mortgage lender may require additional documentation or information before releasing funds.
These issues can cause significant delays in the completion process.
For example, your buyer may face a sudden change in their credit score rating which may lead to a change in the mortgage decision.
This could happen if the buyer decided to take out finance elsewhere without first consulting their mortgage adviser.
It is also possible for your mortgage declined before completion. However, this is a rare scenario usually as a result of credit score changes.
Finally, legal issues and disputes can also arise between exchange and completion. For example, the buyer or seller may discover that there are outstanding legal disputes or issues with the property title, which can delay or even cancel the transaction.
It is essential to work with a qualified solicitor or conveyancer who can help identify and resolve these issues before completion.
Various factors can hold up the exchange of contracts, including legal disputes, financing challenges, property condition issues, chain delays, and documentation errors. Promptly addressing these issues with professional assistance is crucial to expedite the process and ensure a successful exchange.
While there are many potential risks that can arise between exchange and completion, there are also steps that buyers and sellers can take to mitigate those risks.
Here are some tips to help ensure a successful exchange and completion:
It is essential to work with a qualified solicitor, conveyancer, and real estate agent who can help identify and resolve potential issues before they become significant problems.
Both buyers and sellers should take an active role in the transaction and communicate regularly with their solicitor or conveyancer. This can help identify potential issues early on and find solutions before they become major problems.
Buyers and sellers should be prepared for the unexpected and have contingency plans in place.
For example, buyers may want to have a backup financing plan in case their primary lender falls through, while sellers may want to have a backup plan if the completion date is delayed.
Both buyers and sellers should review all documents carefully before signing and ensure that they understand all terms and conditions of the transaction.
Buyers should conduct thorough inspections of the property before exchange to identify any potential issues with the property condition.
Before you exchange speak to your solicitor to ensure all is well with the planned exchange of contracts.
Cover important checklist items such as searches, your mortgage offer, funds, completion date, contract review, contact with other parties in the chain, offer details, deposits, Energy Performance Certificates (EPC), fire-safety ratings, and buildings insurance.
The exchange and completion process is a significant milestone in any property transaction, but it is also a period of worry and doubt. in this insight, we've explained what can go wrong between exchange and completion. Hopefully, we have left you feeling more assured.
Remember you can take proactive steps to prevent anything going wrong. If you are considering buying or selling a property, be sure to work with qualified professionals and be prepared for the unexpected.
Home insurance is crucial before the exchange because liability for the property transfers at this stage. It safeguards against unexpected events like floods or accidents, providing financial protection for both the buyer and seller.
If a buyer's mortgage is declined during this period, it could lead to significant delays or even the cancellation of the transaction. It's crucial for buyers to maintain communication with their mortgage advisor and have contingency plans in place.
Sellers should be proactive and have contingency plans in place for unexpected delays. This may involve discussing alternative completion dates with the buyer, preparing for potential renegotiations of price, and ensuring all necessary documentation is in order to expedite the process.
If you can't complete after exchange, it's a serious situation with potential legal and financial ramifications. The seller may keep your deposit, and you could face additional penalties. The seller might also pursue legal action to force completion or seek compensation for any losses incurred due to the failed transaction.
It's essential to consult with your solicitor to understand your options and mitigate the consequences.
Stuart is an expert in Property, Money, Banking & Finance, having worked in retail and investment banking for 10+ years before founding Sunny Avenue. Stuart has spent his career studying finance. He holds qualifications in financial studies, mortgage advice & practice, banking operations, dealing & financial markets, derivatives, securities & investments.
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