When Selling a House Who Signs the Contract First?

A fairly common question that crops up during the house sale process is who signs the contract first…

In most cases, it will be the seller.

In this guide, the team at Property Solvers explain exactly why. We’ll also cover what it means for both the buyer and the seller, what else to expect from the process as well as how to best prepare. 

When Selling a Property, Who Signs the Contract First?

Considering the stakes are so high in a property transaction, it’s no surprise that many people worry about who signs the contract first.

In the UK, that responsibility usually lies with the seller. Due to how the legal process works, this arrangement offers the most protection to both parties.

However, in Scotland, buyers sign first since there’s an extra process called “missives” during which either party can back out of the sale. Therefore, the buyer signs first to show their commitment.

What to Expect from Signing a House Contract

After the buyer and seller agree on a purchase price for a house, they sign a contract.  This means that both parties are legally bound to go through with the transaction.

The seller’s solicitor initiates this process by drafting and sending a contract pack, and the buyer’s conveyancing team can query it and make amendments. Once the buyer and the seller are satisfied, they will sign (initiating the contract exchange).

You can think of exchanging contracts as the “point of no return” in buying a property. Although it’s still possible for either party to back out before the purchase reaches completion, doing so results in penalties and “abortive” legal fees.

A buyer that gets cold feet at this stage could lose their deposit, while the seller would have to cough up for all the costs the buyer racked up. 

After exchanging contracts, the buyer’s solicitor sends the money for the house to the seller’s solicitor, and the next stage in the process is completion. On average, the completion date comes around five working days after the buyer and seller exchange contracts, but this may vary and can even be done straight away (known as a “simultaneous” or “same day”).  For instance, chain free sales are quicker.

A contract includes:

• Purchase price
• Property address
• Title number (from the Land Registry)
• Title Guarantee
• Contract rate (a penalty clause)
• Encumbrances (covenants and stipulations affecting the property)

Once the sale has completed, the buyer receives the keys.

What Happens if the Buyer or Seller Backs Out of the House Sale?

The buyer pays a deposit at the same time as signing the contract, which means the seller has to pay it back in its entirety (plus the seller’s cost) if they back down from the sale.

After the seller signs, they also must sell the property even if the buyer loses their financing.  This gives the buyer more chance to sort out alternative financing arrangements without the seller moving elsewhere.

If you’re the seller in the exchange of contracts, you may be concerned about signing first in case placing “all your cards on the table” will put you in a weaker position. But you will also benefit. By indicating your commitment to buyers, you’ll help to move the sales process along.

Also, the contract is only legally binding after both parties have signed it and the contracts have been exchanged. 

Therefore – even if you sign and the other party tries to negotiate – you’ll have the option to back out with zero consequences.

How to Prepare for Signing a Contract

Given everything we’ve said, the last thing you should be doing is signing a contract without adequate preparation. 

Here’s what you should keep in mind…

Conveyancing solicitors are responsible for the legal work involved when buyers and sellers exchange contracts. But it’s still a good idea to ensure you thoroughly understand the contract yourself before you put pen to paper.

Ask the solicitor to clarify anything you don’t understand, and don’t forget to make final checks.

When selling a property, you should look out for clauses that allow the buyer to back out even after they’ve signed. For example, contracts occasionally allow a buyer to change their mind if they don’t like the property’s condition.

For buyers, another crucial step is checking finances. Do you have enough money to cover all the costs involved, including the mortgage deposit and stamp duty? Note that the mortgage advance will usually occur shortly before the exchange of contracts.

If you’re selling a property yourself, have you checked how much the amount of proceeds from the sale you will receive and that will cover your financial obligations?

You’ll also need to get your paperwork in order. Most crucially, sellers will need a Transfer Deed, which passes legal ownership of the property to the buyer after the completion date.

The transfer deed may be signed before or after exchanging the contracts. Buyers may need documents from their mortgage lender.

Finally, ensure all the non-legal pieces are in place for you in other areas of your move. People often feel rushed when it’s time to exchange contracts – but if you need a little longer to get packed or prepare to move out, provide enough notice for the buyer to prepare.

As a buyer remember to get things like your buildings insurance and removal arrangements in place. Sellers need to remember to leave the property in a good state, cancel contracts with utility companies, organise for keys to be picked up, amongst other tasks.

Don’t sign the contract until you’re absolutely ready, because things will move fast after that point.

Sealing the Deal

It’s usually the seller who signs the contract first in a house sale.

Fortunately, nothing is legally binding until the buyer also signs.  Signing promptly can even work to your advantage by nudging the sale along.

Chat to Property Solvers – The Sell House Fast Experts

Exchanging contracts can be stressful. If you want to sell your house the easy way, consider using a fast home buying company like Property Solvers.

We’ll handle the entire process for you with minimise hassle and no legal or estate agency fees to pay.