Prior to the exchange of contracts, as a first time buyer you are under no legal obligation to purchase the home and are not required to pay for any of the costs incurred by the seller.
By the time you exchange contracts on your first house purchase your property lawyer should have carried out all relevant tasks surrounding the move.
What does exchanging house contracts actually mean?
Put simply, the exchange of contracts between the buyer and the seller legally commits both parties to the sale of the property. This is in the penultimate stage of the legal process before you legally own your first home.
It’s important to note that in England and Wales, neither party is legally bound until contracts are exchanged. Either party can withdraw at any time up until the contracts are exchanged – then both the seller and the buyer must complete. Failure to do so by the agreed date can be costly
What should your property lawyer have completed for you pre-exchange?
Your property lawyer is required to carry out relevant searches for your new home. There are three main searches that your solicitor will undertake:
Local Authority Search
This is usually formed of 2 parts. One checks the local land charges register and will let you know if the property is a listed building, in conservation area, has tress with a preservation order or is in a smoke control zone.
The second element to a Local Authority Search reveals cautionary elements about the property such as
- Compulsory Purchase Orders.
- Proposed Tree Preservation Orders.
- Many informal notices under planning and highways laws not found on any register.
- Road proposals or schemes (including road widening).
- Proposed enforcement action or breach of conditions notices.
Water Drainage search
This search outlines details of whether the home is connected to a septic tank, a public sewer, or other private disposal facilities. It will also confirm if the property is connected to a public or private water supply and provide details of how the property is billed for its water supply and wastewater disposal (either rateable value or water meter). Finally the report will confirm if the property is close to or affected by water mains or public sewers.
An environmental search is carried out by a specialist company that references past land use records relating to the area. They check whether the land is likely to be contaminated land within the meaning of the Environmental Protection Act 1990.
Once you have exchanged, you should consider obtaining an independent survey on your property. Your mortgage lender will expect you to pay for a valuation survey, but this will not reveal any fundatmental problems with its structure (eg damp, woodworm), it simply lets the mortgage lender know whether it will get its money back should you default on the mortgage payments.
The independent survey you consider could include a HomeBuyer Report or a Buildings Survey. If you are still in the process of choosing a Chartered Surveyor you can take advantage of reallymoving.com’s instant survey quotes. Receive up to four quotes from regulated Chartered Surveyors in your area emailed within a matter of seconds.
Searches are very important as you are duty bound to know of any restrictions and planning issues relating to the property. In addition your sale document will detail the fixtures and fittings that will be included as part of the agreed price with the seller. Your property lawyer will then return to you with their findings. If you are content with the information provided they will draw up a contract and you will be able to arrange a date to exchange contracts with the seller and confirm a completion date.
Should there be any issues raised by your surveyor, can discuss options with the seller. Some people would be happy to fix or repair the problem whilst others are prepared to drop the price to allow you to sort it out after the deal has transacted.
If the seller is to fix the problem, we recommend that you get any repairs to be completed in writing as part of the contract before you sign.
For more detailed information on house surveys visit our article, why should I have a home survey or find out how to get a house survey.
Liaising with your mortgage lender
Once your lender is happy with their valuation, your lender will provide you with a formal mortgage offer which will include the full details of the loan. Your solicitor can help you read through the terms of the agreement and explain any areas you do not understand.
At the point of exchange you will be required to pay your deposit – usually 20-25% per cent of the purchase price in the current market. Following the exchange of contracts and payment of your deposit you commit yourselves to the purchase and the agreed terms of the seller.
During exchange your property lawyer will also help arrange buildings insurance for your new property as you are now legally responsible for your first home from this point onwards.
Find out about what can delay the exchange of contracts in this Which? video.
Updated February 2017