Residential property specialist Victoria Cranwell explains what can delay exchange of contracts when buying a house.
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Exchanging contracts is the most crucial milestone in any property sale or purchase. That’s because, for the first time, it provides the parties with certainty that the transaction will happen, i.e. it becomes legally binding.
As it’s the point of no return, it’s crucial that you fully understand what you are buying – physically and legally – before exchange of contracts. But achieving that involves gathering and reviewing lots of information from different sources, including (but certainly not limited to):
- the Property Information Form;
- the contract bundle (from the seller’s solicitor);
- the management pack (for leasehold properties);
- Land Registry documents;
- local authority and other relevant searches; and
- any additional enquiries necessary as a result of the information received.
Local authority searches, in particular, are notorious for causing delay, often taking several weeks to arrive. However, delayed receipt of any enquiry can put everything on hold.
Further information is often required from the seller if any of these investigations reveal something unexpected, but ultimately, armed with all this knowledge, you must decide whether to:
- proceed to exchange contracts; or
- attempt to renegotiate with the seller over the purchase price or other terms; or
- withdraw from the transaction.
Your mortgage lender
If you are buying with a mortgage, remember that your conveyancing solicitor acts for both you and your mortgage lender. So, even if you would otherwise be happy to proceed in the face of some unwelcome or unexpected news, it’s unlikely that your lender will be happy to accept the same risk.
Also, contracts cannot be exchanged until we receive a formal mortgage offer from your lender. An ‘offer in principle’ is not sufficient.
See also: Improving your home’s legal kerb appeal
The conveyancing chain
Sometimes, you see a property advertised for sale with ‘no chain’. That means the seller is simply selling, i.e. they have no related purchase. So, if you are the buyer and have no related sale (perhaps because you are a first time buyer), subject to the usual enquiries listed above, you and the seller control the transaction. However, more often, you find yourself part of a series of related sales and purchases, commonly called a conveyancing chain. Getting everybody in the chain to agree on a completion date is often difficult and delays exchange of contracts.
Understandably, if you are selling and buying, in most cases, you need the certainty that your sale has exchanged before committing yourself to exchange on your purchase. Therefore, once everybody in the chain confirms they are ready and happy to proceed, including an agreed completion date, exchanging contracts begins at the ‘bottom’ of the chain – typically a buyer with no related sale – and works upwards. The person at the ‘top’ of the chain is usually a seller with no related purchase.
Unfortunately, a delay in any transaction in the chain affects everyone else. And, of course, the more transactions in the chain, the greater the chance of one or more of them causing delay.
But don’t despair
This can all sound very depressing. However, the good news is that conveyancing solicitors have considerable experience in problem-solving to help push transactions forward. And never lose sight of the fact that everybody in the chain is (or should be!) focused on achieving a common goal.