Offer, Acceptance, Exchange and Completion
Posted by John on September 15, 2011 under Choosing a Solicitor | 
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- What’s the difference between offer, acceptance, exchange and completion?
- When do you have a legally binding contract?
- What happens if someone backs out?
- What if someone offers more than we’ve agreed?
The property conveyancing system in this country is a lot less simple buying and selling something in your local shop. It’s actually a four step process and there’s a lot of confusion about it. Your conveyancing solicitor should be able to explain it to you, however, the four steps are:
1. Offer
2. Acceptance
3. Exchange
4. Completion
So what does this mean?
1. Offer
As the name suggests, this is when the buyer puts in a offer for the property. Nothing is binding at this stage. The initial offer may be accepted, rejected or be just the start of negotiations.
If the initial offer or subsequent negotiations lead to agreement on price then we move to step 2:
2. Acceptance
Again, as the name suggests, this is when the seller accepts the buyer’s offer. Maybe it’s not quite so complicated after all once you break it down!
This is where we mention gazumping. Gazumping is when someone else comes in with a higher offer and the seller gives the the chance to match it or lose the property. While not considered to be good form it is nonetheless perfectly legal as no contract has been entered into at this stage.
Gazundering, by the way, is the opposite of gazumping. It’s when the buyer lowers the offer price at the last minute – usually just before exchange. This puts the seller in a bind as they’ve probably incurred legal costs, invested time, effort and emotion, and may well have taken their property off the market. Gazundering is just as bad form as gazumping, but again, there’s no contract and it’s perfectly legal.
Once an offer has been accepted we move to step 3:
3. Exchange
This is where things get a little more complicated, though not that much.
Exchange refers to the “exchange” of signed contracts. In other word buyer and seller each sign separate copies of the contract and these copies are exchanged so that each party ends up with a copy signed by the other. Often it is enough for them to be signed as “counterparts”, meaning that the parties don’t need to sign both copies for them to be binding – they just sign the one being sent to the other side.
There is quite a bit of work for the conveyancing solicitors to do, however, between exchange and completion. Contracts have to be agreed, questions answered, searches made and reviewed. This is why it typically takes around two months between an offer being accepted and exchange taking place.
Normally a deposit is paid at exchange – usually 5 or 10% of the purchase price. Because a binding contract is being entered into the deposit can be forfeit if the buyer decides not to go ahead at this stage.
4. Completion
Sometimes, though rarely, exchange and completion are simultaneous. More often, completion takes place around two to four weeks after exchange. This is mainly due to the practicalities of moving.
At completion the balance of the purchase monies are paid by the buyer. Once these are safely received the seller’s conveyancing solicitor will authorise the release of the keys to the buyer. At this stage the property is sold and all that remains is the post-completion admin, such as paying land registry fees and stamp duty.
So there you have it – not quite as complicated as all that, but never be afraid to ask your conveyancing solicitor if your not sure about something. That’s what you pay them for!