Last reviewed: June 2026
TL;DR- Exchange of contracts makes the transaction legally binding - neither party can withdraw without significant financial penalty.
- At exchange, the buyer pays a deposit (typically 10% of the purchase price) which is at risk if they fail to complete.
- A mortgage offer should be in place before exchange - exchanging without a confirmed mortgage offer creates significant financial risk.
- Buildings insurance must be in place from exchange in most cases - the buyer bears the risk of the property from this point.
What Exchange of Contracts Means
Exchange of contracts is the point at which both buyer and seller sign identical contracts and these are exchanged between their respective solicitors, usually by telephone with the contracts sent by post or electronic means. From this moment, the transaction is legally binding. Both parties are committed to completing the purchase on the agreed date at the agreed price. Neither party can withdraw from the transaction without becoming liable to the other for damages and the loss of the deposit (buyer) or the requirement to return the deposit and potentially pay additional compensation (seller).
The Exchange Deposit
At exchange, the buyer pays a deposit to the seller's solicitor - typically 10% of the purchase price. This deposit is held by the seller's solicitor until completion. If the buyer fails to complete after exchange without a valid legal reason, the deposit is forfeit to the seller. If the seller fails to complete, they must return the deposit in full and may be liable for the buyer's losses. The exchange deposit is separate from the mortgage deposit - the buyer must have the 10% exchange deposit available in cleared funds before exchange.
Before Exchange: What Must Be in Place
The buyer should not exchange contracts until all the following are confirmed: the mortgage offer is in place and accepted; the solicitor has completed all searches, reviewed the title and raised all enquiries; the buyer is satisfied with the property survey results; buildings insurance has been arranged (most lenders require this from exchange); and the completion date has been agreed with all parties in a chain. Exchanging without these elements confirmed creates significant financial and legal risk.
Between Exchange and Completion
The period between exchange and completion is typically 1-4 weeks (sometimes longer for new builds). During this period: the solicitor prepares the completion statement showing the final sums due; the buyer confirms buildings insurance is active from exchange; the buyer arranges removal services and final preparations; the solicitor requests mortgage funds from the lender; and the final searches and land registry checks are completed. The buyer cannot access the property between exchange and completion - they become the legal owner only at completion.
Frequently Asked Questions
Can I withdraw after exchange without losing my deposit?
After exchange, withdrawal without a valid legal reason (such as the seller being in breach of contract) results in forfeiture of the 10% exchange deposit and potential liability for additional damages to the seller. There is no cooling-off period after exchange of contracts in England and Wales. Before exchange, withdrawal is possible without financial penalty on the property itself (though search fees, survey fees and legal fees already incurred are not recoverable).
What if my mortgage offer expires between exchange and completion?
If the mortgage offer expires before completion (due to a delay between exchange and completion), the buyer must arrange a mortgage extension or, if the offer cannot be extended, a new application. A new application is subject to current rates and criteria, which may have changed since the original offer. This scenario underlines the importance of confirming offer validity before exchange and exchanging only when there is sufficient time remaining on the offer to complete.
Does the buyer or seller bear the risk of the property between exchange and completion?
The buyer bears the risk of the property from exchange in most transactions under standard English Law Society contract conditions, which is why buildings insurance must be in place from exchange. The property is now the buyer's responsibility even though they do not yet own it legally. If the property suffers damage between exchange and completion, the buyer cannot walk away without financial penalty - they must complete and manage the insurance claim.
What is a simultaneous exchange and completion?
Simultaneous exchange and completion (exchange and complete on the same day) removes the gap between the two events, eliminating the risk period between exchange and completion. This is more common in simple transactions (no chain, cash buyers) where the conveyancing is fully complete and all parties are ready to proceed on the same day. It is less common in chains where sequential completion of multiple transactions must be coordinated.
