Exchange of Contracts: When a Sale Becomes Binding

Exchange of contracts is the point at which a house sale in England and Wales becomes legally binding. Before it, either side can still walk away with no legal consequence. After it, the contract decides what happens, including what the deposit is for and when completion takes place.

What happens at exchange of contracts?

Exchange is the swap of two signed copies of the same contract between the buyer's conveyancer and the seller's conveyancer.

By the time they exchange, both conveyancers confirm they hold identical contracts signed by their clients, that the deposit is ready to move, that searches and mortgage conditions have been dealt with, and that both sides have agreed the completion date. They date the contracts, read the key terms back to each other so the documents match, and the buyer's deposit is sent at the same time. The sale is then binding on both sides. Everything before this, from the offer to the survey and the mortgage agreement in principle, was preparation rather than obligation.

When does the sale become legally binding?

The sale becomes legally binding at exchange of contracts, not when an offer is accepted and not when the keys are handed over.

An accepted offer, a survey report and even a mortgage offer leave both parties free to withdraw, and nothing is owed to the other side if they do. Exchange changes that: from that moment the contract sets out the price, what is included in the sale, the completion date, and what happens if either side fails to complete. This is also why the period between exchange and completion is not a time for renegotiation. If something turns up after exchange, the price and the date do not automatically change; the contract and your conveyancer's advice govern what can be done.

Where a purchase is part of a chain, the exchanges are normally co-ordinated so that every link becomes binding on the same day. That avoids one buyer being committed while the sale they depend on can still fall through.

What exchange fixes: the deposit and the completion date

Exchange locks in the money the buyer commits now and the date the sale finishes, and both are written into the contract.

The deposit is paid by the buyer's conveyancer at exchange, held by the seller's conveyancer until completion, and then counted towards the purchase price. The standard contract terms usually allow the seller to keep the deposit if the buyer then fails to complete, and normally let the buyer recover it if the seller is the one who fails. The amount is agreed between the parties rather than fixed by law, and it can be reduced by agreement when the buyer's own sale is still running, so read the contract instead of assuming.

The completion date is the day the balance of the money moves and the keys are handed over. The gap between exchange and completion varies: it can be a matter of days or much longer, arranged around a related sale, a mortgage, removals or the end of a tenancy. Once the date is in the contract, moving it needs both sides to agree.

Two practical points follow from exchange. The risk in the property usually passes to the buyer on that day, so a buyer should have buildings insurance in place from exchange and a seller should keep their own cover until completion. And Stamp Duty Land Tax is a buyer's cost handled after completion: GOV.UK states that the return must be sent to HMRC within 14 days of completion.

What to check before you exchange

Treat exchange as a deadline rather than a formality, because the checks below cannot be undone afterwards by renegotiating.

• A written mortgage offer, with any conditions already met
• Search results and the survey read, and the conveyancer's advice understood
• Fixtures, fittings and anything else staying with the property agreed in writing
• The completion date checked against your lender, your removals and any related sale or tenancy
• Buildings insurance ready to start on the day of exchange
• The deposit amount, and who holds it, confirmed in the contract

Checking sold prices before you exchange

The time before exchange is the last point where price evidence can still affect the deal, so it is worth looking at what nearby homes actually sold for.

HM Land Registry publishes the prices properties sold for, and those records are what this site uses. You can compare sold house prices for a street or postcode, look at house prices for a town, see the pattern across an area on the house price map and read how the figures are put together on the methodology page. If you are the seller and want a starting view of what your own home might be worth, the house value page explains what the site does. Sold price records describe completed sales, so they are evidence about the recent past rather than a promise about your own sale, and none of it replaces advice from your conveyancer on the contract itself. If you later want to speak to a local estate agent, how it works explains the process, and your details are only shared with your consent.

Frequently asked questions

Is exchange of contracts legally binding?

Yes. Once contracts have been exchanged, the buyer and the seller are bound by the terms they signed, and neither can withdraw simply because they have changed their mind.

Can either side pull out after exchange?

No, not without consequences. If the buyer fails to complete, the contract will usually allow the seller to keep the deposit; if the seller fails to complete, the buyer can normally recover the deposit and may have a further claim. The exact position is set by the contract you sign.

Does exchange happen on the same day as completion?

No. Completion is a separate, later event, on a date agreed before exchange and written into the contract.