Article From Home Owners Alliance by Ruth Jackson-Kirby
Once you’ve exchanged contracts on a property a lot of the worry and stress goes away. But things can still go wrong. Here we look at what can go wrong between exchange and completion and what you can do to avoid and solve common problems.
What can go wrong between exchange and completion?
When you make an offer on a property, or accept one on your own home, you face a stressful wait to get to exchange worrying that the deal could fall through. The latest figures from Quick Move Now show that 35% of property sales fell through in 2023. So, the race to exchange is fraught with worry.
Once you’ve exchanged contracts and the buyer has paid a deposit it can feel like your house sale or purchase is a done deal. In most cases it is, but there are still a few things that can go wrong, delaying or even cancelling completion.
These include:
Most of these issues are quite rare, while others are quite common. But knowing what could go wrong can help you take steps to prevent it happening.
1. Your mortgage offer is withdrawn
By the time you’ve exchanged the chances of your mortgage offer being withdrawn are low. The mortgage valuation will have already taken place and your lender should have done all their checks. However, it isn’t impossible for a mortgage offer to be withdrawn. Obviously, if the buyer loses the funding for the purchase this can cause a huge delay or even the breakdown of the sale.
2. The buyer is made redundant
If the buyer is made redundant between exchange and completion they will have to inform their mortgage lender, this could lead to their mortgage offer being withdrawn.
3. The seller is declared bankrupt
A situation where the seller goes bankrupt can seriously disrupt the house purchase process. They may no longer be the legal owner of the property and not in a position to sell it.
4. A break in the property chain
It isn’t unusual for your house purchase or sale to be tied to a number of other property purchases. For example, your buyer may be in the process of selling their own home to fund the purchase of your home. You are therefore in a chain with your buyer and the person buying their home. These chains can sometimes even run into double figures. If something goes wrong with one house sale in the chain, it can have a knock-on effect along the chain as people lose the money they were going to use for their purchase.
One way to avoid this problem is to consciously break the housing chain yourself. You can do this by selling your home before you buy or by getting a bridging loan, so you aren’t reliant on the sale of one property to fund another.
5. Disagreements and communication breakdowns
You or your solicitor may spot something after exchange that causes a problem. It could just be that a question hasn’t been answered correctly on the Property Information Forms or new information comes to light. Whatever the cause arguments between the buyer and the seller can occur between exchange and completion and cause serious problems.
6. Payment delays
Payment delays can cause problems between exchange and completion. Funding not going through on completion day can cause delays with keys being released.
7. Removal company problems
On completion day you can have last-minute problems like delays with the transfer of funds particularly in a chain, a removal company letting you down or emptying a property taking longer than expected. Avoid problems with your move by finding the right removals company, researching how to pack for moving house.
Can a house sale fall through between exchange and completion?
After you have exchanged contracts your house sale is legally binding. However, problems between exchange and completion can happen, as you’ve seen above. In most cases these may lead to a delay before completion, but it is possible for a house sale to fall through if one party is no longer able to proceed to completion.
You can protect yourself from the financial pain of your sale falling through with home buyers protection insurance. This will cover your conveyancing fees, survey costs, mortgage arrangement fees and other costs if your house purchase collapses. It specifically covers your costs for various events including if the person you are buying with is made redundant or the seller is declared bankrupt and no longer legally entitled to sell the property.
What happens if my house sale falls through after exchange?
When you exchange contracts on a house sale or purchase you have legally committed to the deal. If you are the buyer, you will have also handed over a substantial deposit. If either party pulls out of the deal after exchange it is a breach of contract.
So, if a buyer pulls out they will lose their deposit which is usually 10% of the sale price. If a seller refuses to proceed after exchange of contracts, they are liable for the buyer’s costs including legal, mortgage and survey fees.
Either party could sue the other for breach of contract. This could also include seeking damages to cover financial losses that have occurred as a result of the transaction not going through.
When a house sale falls through after exchange it is a serious matter and one that both the buyer and the seller want to avoid. No-one wants to end up dealing with the legal and financial headache of a contract breach.
How to solve problems between exchange and completion
While a number of problems can occur between exchange and completion there is usually a solution that either heads off the problem before it can even occur or one that can swiftly resolve the issue.
How long should it take between exchange and completion?
The average time from exchange to completion is around two weeks. But it is entirely down to you and the other party involved in the sale to decide. Some buyers and sellers agree to exchange and complete on the same day, others have months between the two dates.
Having read all the things that can go wrong between exchange and completion it may be tempting to opt to do both on the same day. This has its advantages, you minimise the risk of things going wrong and complete faster. But there are disadvantages too, it can be stressful as you don’t know your exact moving date until the last-minute. This can cause problems arranging removals and ensuring all funds are in the right place ready to be transferred.
There are other ways you can speed up conveyancing such as getting your paperwork in order, responding to all enquiries quickly and accurately and asking your solicitor for regular updates.
Maximum time between exchange and completion
There is no legal maximum time between exchange and completion. It is up to you and the buyer or seller to decide how long you want from when you exchange contracts to when the transaction is completed and you handover the keys to the property.
Most people are excited about moving into their new home. So in general, most of the time all parties want a relatively short time between exchange and completion – two weeks is the norm – but there are situations where a longer time is needed. This could be because one party is renting and has to give a month or two months’ notice on their rental property.
A recommended maximum time between exchange and completion would be under six months. This is because most mortgage offers expire after six months which could leave you scrabbling for a new mortgage offer after you’ve committed to buy a property.
When you are deciding a completion date you may want to consider what day of the week if falls on. The majority of property sales complete on a Friday but that doesn’t mean it is the best day to choose.
What is the maximum time between exchange and completion on a new build
When you buy a new build property you must exchange contracts within 28 days after you have reserved your home. You will be given an estimated time when the property will be built but no definite completion date.
Instead, your contract should include an anticipated legal completion date – that’s when the developers think they will be finished building your home – and a long stop completion date. The latter is the date the builders must have built your home by, otherwise you will have the option to withdraw and get your deposit back.
You may find the build date is delayed which means your completion date will be delayed too. Once notice is served that your build is complete you will have around two weeks to complete.
Shortest time between exchange and completion
The shortest time between exchange and completion is to do both on the same day. However, this can be stressful as it means you may not know your moving day until the last minute and all funds have to move in a short time.
A more common short time between exchange and completion is one to three days. This is still a very quick move from exchange to completion, so you’ll need to be able to act fast to pack up and vacate your property and make sure your mortgage lender is able to transfer funds quickly. But it means you reduce the risk of problems arising between exchange and completion and get your hands on your new home, or the funds from selling your home quicker.
Can I exchange and complete on the same day?
Yes, it is possible to exchange and complete on the same day. However, such a speedy process can come with logistical issues.
The advantages of same day exchange and completion
Faster completion
Minimise risk of problems after exchange
Suits cash buyers, no chains and vacant property purchases
The disadvantages of exchanging and completing on same day
Mortgage lenders may not be able to transfer funds that quickly
Stressful
Difficult to organise removal firms at such short notice
Not suitable for renters who need to hand in notice to landlord
Who is responsible for repairs after exchange of contracts?
Once you have exchanged contracts it is usually the buyer who is responsible for repairs. This is why solicitors advise you to take out buildings insurance on your new home from the exchange date. The seller should then inform the buyer of any issues or repairs that need to be carried out – this should only be issues that have arisen since exchange. If you can prove that the issue existed before exchange, then it is the sellers responsibility to repair it.
However, it isn’t set in stone that the buyer is responsible for repairs. You need to check the terms of your contract to find out who is responsible for the property. For example, if it’s a leasehold flat, the freeholder may be responsible for the repair.