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5 Buying and Selling Property
3. Offers, exchange of contract and completion
If you are buying and you make an offer for a particular house or flat, you should make sure the offer is 'subject to contract'. This means that you can pull out of the deal if, for example, a survey shows up a defect though it can be for any reason. The estate agent may ask you for a small deposit at the offer stage. As there is little advantage to the seller in getting a deposit, you should refuse to pay anything except a small sum. You should get confimation in writing that you will be refunded the full deposit if the sale doesn't go through, for whatever reason.
Once the contracts for the sale have been signed and exchanged, the buyer and the seller are legally committed to the sale and cannot pull out. Contracts are exchanged by their solicitors or conveyancers (conveyancers deal with the transfer of ownership of a property). At this point, the buyer will usually pay 10 per cent of the price they have agreed with the seller. If the buyer fails to complete, they can lose this money.
The sale is complete when the buyer pays the rest (the balance). The seller must then move out. If either of these things does not happen, a solicitor may serve a 'notice to complete' and take legal steps to make sure the sale goes through without further delay.
Dealing with 'gazumping'
If your offer to buy has been accepted, you might be able to prevent gazumping if you can persuade the seller to sign a 'lockout agreement'. This means they will not sell to anyone else as long as the contracts are exchanged within a set time. This may be in exchange for a sum of money which is taken off the purchase price if the sale goes through. Another possibility is a 'pre-contract deposit agreement'. This means that each side pays a deposit that will be lost if they pull out without a good reason. You should use a solicitor to draw up agreements like these.
The Home Information Pack
This leaflet was written by the Legal Services Commission (LSC). It was written in association with Shelter.
Leaflet Version: April 2019
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