What is the difference between exchange of contracts and completion?
Exchange makes the sale legally binding and fixes the date; completion is when the money moves and you get the keys. What each one actually does, what changes at exchange, and what happens if either goes wrong.
- Difficulty
- beginner
- Time
- 10 min
- Read
- 5 min
Short answer
In England, Wales and Northern Ireland, exchange of contracts is the moment either party can no longer walk away without serious financial consequences, and it fixes the completion date. Completion is the later day when the balance of the purchase price is transferred, the keys are released and ownership passes. Scotland does not work this way — there, conclusion of missives is the binding moment.
Almost every anxiety in a house purchase comes from not knowing which of these two events has happened. Before exchange, nothing is committed and either side can withdraw for any reason at no cost beyond what they have already spent. After exchange, the deal is a contract and withdrawing is expensive. The gap between the two is often only a week or two, and occasionally they happen on the same day.
Step by step
- Know what has to be in place before exchange.A mortgage offer, satisfactory searches and enquiries, a signed contract and transfer, the deposit funds with your conveyancer, and — in a chain — every other party ready to exchange at the same time. Any one of these missing stops the whole chain.
- Understand what exchange physically is.The two conveyancers speak by telephone, read the agreed contract terms and the completion date to one another, and record the time. The signed contracts are then formally exchanged. It is a recorded phone call, not a meeting, and you are not there.
- Pay the deposit before exchange, not at it.The contract deposit — conventionally a percentage of the price, and negotiable — must be cleared in your conveyancer's client account before they can exchange. Bank transfers can take longer than you expect, so send it days ahead.
- Take out buildings insurance from exchange.In a standard contract the risk in the property passes to the buyer at exchange, not at completion. If the house burns down in the gap, that is the buyer's problem, and you are still obliged to complete. Arrange cover to start on the exchange date.
- Treat the completion date as fixed once exchanged.It is a contractual date. Removals, key handover, mortgage drawdown, utility transfers and the onward purchase all now hang off it. This is the point at which it is safe to book removers, and not before.
- Understand what happens on completion day.Your conveyancer draws the mortgage funds and sends the balance to the seller's conveyancer. When the seller's conveyancer confirms receipt, they authorise the agent to release the keys. Money moves through the banking system in sequence up the chain, which is why completions cluster in the early afternoon.
- Expect the post-completion work to continue for weeks.Your conveyancer files the land transaction return and pays the tax, redeems the seller's mortgage, and applies to register you as the owner. Registration can take a long time. Check afterwards that it completed and that you have the title information document.
- Know the consequence of failing to complete.If a buyer does not complete on the contractual date the seller can serve a notice to complete, and if it expires the seller can rescind and keep the deposit, and claim further losses. The equivalent applies against a seller. This is why exchange is treated so seriously.
Tips
- Ask your conveyancer to confirm the exchange by email with the completion date in it. That email is what everything else gets booked from.
- Verify your conveyancer's bank details by phone on an independently obtained number before sending the deposit or the completion balance. Payment diversion fraud in conveyancing is common and the money is rarely recovered.
- Agree what fixtures and contents are included in writing at offer stage. Disputes about a shed or a cooker on completion day are entirely avoidable.
Common mistakes
- Booking removals before exchange — Nothing is binding until exchange, and non-refundable removal and storage bookings made earlier are one of the most common real losses when a chain collapses.
- Leaving buildings insurance until completion — Risk passes at exchange under the standard conditions, so a gap of even a week is an uninsured week in which you are contractually committed to buy the property whatever happens to it.
If it doesn't work
Completion money has not arrived and it is late afternoon
Cause: A delay somewhere up or down the chain, or a banking cut-off — Fix: Stay in contact with your conveyancer, do not move furniture into a property you do not yet own, and ask what the contract says about late completion interest. Most same-day delays resolve; a failure rolls to the next working day.
The seller wants to delay the completion date after exchange
Cause: Their own onward purchase has slipped — Fix: The date is contractual, so a change needs both sides to agree a variation in writing through the conveyancers. You are not obliged to agree, and you can ask to be compensated for costs the change causes you.
The property was damaged between exchange and completion
Cause: Risk normally passes to the buyer at exchange — Fix: Claim on your buildings insurance, which should have been in place from exchange, and tell your conveyancer at once. You are generally still obliged to complete.
Questions people ask
Can I pull out after exchange?
Only by breaching the contract. A buyer who withdraws after exchange normally forfeits the contract deposit and can be pursued for the seller's further losses, including any loss on a resale. Take advice from your conveyancer immediately rather than simply not completing.
Can exchange and completion happen on the same day?
Yes, and it is common for a chain-free purchase or an auction-style deal. It removes the gap but also removes the certainty a gap gives you for booking removals, so it needs everything ready at once.
What is a notice to complete?
A formal notice served by the party ready to complete on the party who is not, making time of the essence and giving a short period — commonly ten working days under the standard conditions — after which the contract can be brought to an end with the deposit forfeited.
How is Scotland different?
Scotland has no exchange of contracts. Solicitors exchange letters called missives, and the contract is formed when missives are concluded — potentially within days of an offer being accepted. The transfer of ownership happens at the date of entry.