Contract exchange is a very crucial phase during the property purchase process. Before the exchange happens, you still have some wiggle room to back out of the transaction without incurring any serious legal consequences. However, once the exchange happens, you are bound to the contract and can rarely back out without incurring a great legal cost. Here is a simple guide on some key questions to ask yourself before proceeding with the contract exchange for the purchase of a property.
Are the searches complete?
Before the property purchase, searches known in the industry as conveyancing searches have to be done and completed to unearth important information about the property that you want to buy. There are various kinds of searches that can be done all of which will have a serious bearing on the legality and cost of the purchase. These commonly include the following:
- Searches on planning permissions
- Quality of the ground on which the property is built
- Building regulations compliance etc
All these searches must be done and approved before you proceed with the exchange of contracts and make a legal commitment to buy the property. They are critical because they are likely to bring out the planning or structural deficiencies in the property.
Do you have the mortgage offer in writing?
The importance of having this in writing before proceeding with the transaction cannot be understated. Don’t make a casual assumption that your lender is simply going to grant it because you feel your finances are in order. Work through the procedures and get the offer in writing before confidently proceeding with the purchase process.
Do you have your mortgage deposit?
By the time you are making the move, you will have accumulated some substantial savings to cover the deposit. This isn’t going to be the only cost. There are plenty of legal and administrative fees involved along the way and you will have to pay most of these in cash.
Are all the terms and conditions clear enough?
Before proceeding with the exchange of contracts, go through the terms and conditions and ensure everything is clearly spelled out. If there are any terms and conditions that you don’t understand, talk to your lawyer to explain these clearly. It is always advisable to work closely with your lawyer during this critical phase so that there are no hold-ups in the paperwork. This will also ensure that the property purchase process goes on as smoothly as possible.
What is the impact of the covenants?
Covenants can be positive or restrictive. Positive covenants spell out what you can do with the property while restrictive covenants state what you cannot do. Before the exchange of the contracts, make sure you fully understand the covenants that govern the property you are purchasing. The content of the covenant must be fully resolved during the conveyancing process.
When does the property insurance start?
This must be fully established before an exchange of contracts. Generally, you will inherit the risk at the point of exchange of the contracts which means the insurance should cover your property if there is damage during the contract exchange process. Make sure you work this out with your solicitor to ensure clarity.