A property transaction involves a very formal process of exchanging contracts and completing the sale. This process has developed over a number years to ensure a safe and smooth transaction between the buyer and seller.

It is possible to buy and sell property without any formal process. Many transactions are done between people every day without involving solicitors and other professionals, i.e. selling a car or selling a second hand video recorder. With the large sums involved in a property transactions it is not advisable to avoid the processes of contracts and completion. Indeed if the buyer is borrowing to purchase a property, the formalities of checking a property out are an absolute necessity.

Exchanging Contracts

About ninety percent of property transactions have a standard form according either to the national conditions of sale or the Law Society's conditions.

Two identical contracts are prepared, each for the buyer and the seller to sign. The exchange of contracts happens when the buyer is happy with all the details of the property, has the money to finance the purchase and can agree a completion date and the seller is sure the buyer can complete the sale and the seller himself is able to move out on or before the completion date. On the date of exchange of contracts, the buyer usually gives the seller a 10% deposit usually via his solicitor. Completion usually happens 28 days after exchange of contracts. It is also possible for completion and exchange of contracts to occur on the same day.

Completion of Transaction

Completion takes place when the seller hands over the money to the seller, and the seller hand over the title to the property and the keys to the buyer. The date and time of completion will be agreed between the sellers and the buyer solicitor.

Any finance for the property the buyer is personally supplying will be available to his solicitor, if paying by cheque his solicitor will have asked for payment about a week before hand to allow the cheque to clear. If the buyer is borrowing money then his mortgage company will have given the funds to his solicitor. When the buyer has a mortgage on his existing property and is selling on the same day, this mortgage should discharged by his solicitor from the proceeds of the sale of his existing property with the balance put towards paying for his new property. If the buyer has a mortgage then the title deeds will be sent to the mortgage lender otherwise they are sent directly to the buyer.

The seller should be moving out on the day of completion for the buyer to collect the keys. Keys may be collected directly from the seller, or by agreement from the sellers estate agents.

Failure to Complete

Failure to complete the property transaction leaves the injured party entitled to claim damages for breach of contract. More often this occurs when the buyer failed to complete due to a failure to obtain the required finance. It must be stressed that you should never into a property transaction unless you are absolutely sure you are able to complete.

If the seller fails to complete the sale, the buyer is entitled to have his deposit returned and sue the seller for any damages suffered. When the buyer fails to complete the sale, the seller is entitled to retain the buyers deposit and sue for damages suffered.

If the completion date is delayed for a few days after the contracted date, only a few days interest will be lost on the balance of the money due. When the completion date extends beyond a few days, the seller should give notice to the buyer to complete within two weeks. Failure to complete beyond this period entitles the buyer to retain the sellers deposit and then claim damages for breach of contract.