Exchange of contracts is the formal process of creating a contractual relationship between the seller and buyer of a property.
By law, a residential property cannot be put on the market until a contract of sale has been drawn up, and a purchaser will have to sign a contract of sale to formalise the sales agreement.
The exchange process involves both parties signing a contract and those two contracts being reviewed to ensure they are identical before being dated.
The date of the contract is the date of exchange and this is when a legally binding relationship is created. The deposit is also payable by the purchaser upon exchange. Up to this point, the agreement is usually not binding and both the seller or buyer of the property have the right to change their minds, and can pull out without penalty.
After exchange of contracts neither party can pull out of the contract (except in exceptional circumstances), the vendor cannot sell to anyone else and the purchaser must now proceed with the purchase.
Please note the answers provided are for your general information only and we ask that you call our office on 02 6331 2911 to obtain detailed legal advice for your individual situation.
Zoe Bagnall | Property Lawyer