03. Offers, exchange of contracts 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 if a survey shows up a defect or there is some other problem, you can pull out of the deal. The estate agent may ask you for a small deposit at this stage, but neither you nor the seller is legally committed to the sale and you will get this deposit back if the sale falls through.

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 conveyancer (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.

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, your solicitor may serve a 'notice to complete' and take legal steps to make sure the sale goes through without further delay.

Dealing with 'gazumping'
Gazumping is when a seller, after agreeing to sell to one buyer, accepts a better offer from another person. This can cause a lot of inconvenience and misery, but it is not illegal unless contracts have been exchanged. In the same way, if a buyer reduces their offer before the contracts are exchanged, the seller can do nothing to get a higher price if they still want to go ahead with the sale to that buyer.

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 period of 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 both sides pay a deposit that either will lose if they pull out without a good reason. You should use a solicitor to draw up agreements like these.

The 'home information pack'
The Government is planning new laws which will mean that the seller (or their agent) has to prepare a 'home information pack' before putting their property on the market. This will have to contain information about the property which at the moment the seller has to give only after they accept the offer. This would include a 'home condition report', which is broadly similar to a survey. The scheme is meant to speed up the selling process, but the new law will not make the seller any more responsible for providing accurate information than at present.