We often get asked ‘what happens when a contract exchanges?’ and ‘what does that mean?’ – below are the answers to those questions!
This happens where the buyer signs the contract with the Agent. They pay a minimum deposit of 0.25% of the purchase price. The Vendor also signs the contract. The Agent then exchanges the contract. At this point the Owner cannot pull out or sell to another party (ie no possibility of ‘gazumping’). The Buyer however has a 5 day cooling off period in which to do their due diligence (ie pest and building reports, solicitor checking the contract, finance valuation if required). If the Buyer withdraws from the sale during the cooling off period, they will forfeit 0.25% of the purchase price. Please note: in this instance, the Buyer’s solicitor can still review the terms of the contract prior to exchange.
When this occurs, the Agent will forward the Buyers details to the Vendors solicitor to prepare the contracts. Once received, the Buyers solicitor will usually review the contract, organise any required inspections and finance arrangements. Once due diligence is complete, the Buyer will sign the contract with their solicitor and forward back the Vendor’s solicitor ready for exchange. In this situation, no deposit is paid until exchange of contract. In the instance that another offer is made, the Agent must present all offers to the Vendor, even if they have already accepted an offer. The Owner is entitled to ‘Gazump’ the first Buyer as contracts have not been exchanged.
We hope this helped you!
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