Exchange of contracts is the moment a house purchase stops being an arrangement held together by goodwill and becomes a legally binding contract. Before exchange, either side can walk away. After exchange, neither can — not without financial consequences.
What happens at exchange
Both solicitors have been working toward the same goal: a contract that both parties have approved, with all the legal details resolved. Once everything is agreed, exchange happens.
In practice: Your solicitor calls the seller's solicitor. Both confirm they hold identical, signed contracts. They agree the completion date. Both solicitors then date their copies of the contract simultaneously — this is the legally binding moment. The signed contracts are then posted to each other.
Your solicitor transfers your deposit to the seller's solicitor. In most transactions, this is 10% of the purchase price.
The deposit
The deposit at exchange is different from the deposit you've saved for your mortgage. Your mortgage deposit is what you put in to reduce your LTV — it could be 5%, 10%, or more. The exchange deposit is a contractual payment, usually 10% of the purchase price, paid at the time of exchange as part of the legal process.
If your mortgage deposit is only 5%, your solicitor may need to negotiate a reduced exchange deposit with the seller's solicitor — paying 5% at exchange with the balance on completion. This is common and usually agreed without difficulty.
What you can and cannot pull out from
Before exchange: Either party can withdraw at any time, for any reason, without penalty. You lose only what you've spent (survey, legal fees, mortgage application fees). This is frustrating but legal.
After exchange: The contract is binding. If you pull out:
- You forfeit your full deposit
- The seller can pursue you for damages if their losses exceed the deposit
- Your mortgage offer lapses and may not be reinstated
If the seller pulls out after exchange, they must return your deposit in full, plus interest. You can also sue them for your losses, including legal costs, survey fees, and any price increase you suffered by having to buy a different property.
Setting the completion date
The completion date is agreed at exchange, written into the contract, and binding. Most buyers choose:
1–2 weeks: Tight but achievable. Removals can be booked at short notice, though popular dates go fast. Mail redirection needs minimum 5 working days' notice.
2–4 weeks: Most common. Enough time to arrange logistics without a prolonged wait in between. If you're in a chain, the whole chain needs to complete on the same day, so everyone has to agree.
Same-day (simultaneous exchange and completion): Only realistic for simple, chain-free purchases where everything is ready. No margin for error.
Buildings insurance starts at exchange
Your buildings insurance must be active from exchange of contracts — not completion. If something catastrophic happens to the property between exchange and completion (a fire, storm damage, flood), you are liable for the cost, not the seller. Their obligation to insure it ended at exchange.
Make sure your buildings insurance is in place and confirmed before exchange. Your solicitor should remind you; don't rely on them to do so.
This guide is information only. Dom does not provide financial, mortgage or legal advice. Always consult a qualified adviser for decisions specific to your circumstances.