When it comes to real estate transactions, the terms „completion“ and „exchange of contracts“ are often used interchangeably. However, they actually refer to two distinct stages in the process of buying or selling a property.
Completion refers to the point at which the sale of the property is finalized and the ownership is transferred from the seller to the buyer. This is typically when the balance of the purchase price is paid by the buyer and the keys to the property are handed over.
On the other hand, exchange of contracts refers to the point at which both the buyer and the seller have signed and exchanged legally binding contracts that set out the terms of the sale. Once contracts have been exchanged, both parties are legally obligated to follow through with the sale according to the terms outlined in the contract.
So, while completion marks the end of the process and the actual transfer of ownership, exchange of contracts is the point at which both parties commit to the sale and the terms of the transaction become legally binding.
It’s important to note that in many cases, exchange of contracts will occur prior to completion, sometimes by several weeks or even months. This allows time for all necessary legal and financial arrangements to be made before the final transfer of ownership takes place.
In addition, it’s common for a deposit to be paid by the buyer at the point of exchange of contracts. This deposit is typically 10% of the purchase price and serves as a form of financial security for the seller in case the buyer fails to complete the sale.
In conclusion, while completion and exchange of contracts are sometimes used interchangeably, it’s important to understand that they refer to two distinct stages in the process of buying or selling a property. Completion marks the final transfer of ownership, while exchange of contracts is the point at which both parties commit to the sale and the terms become legally binding.