Exchange of contracts is the legal milestone in a property transaction when both the buyer and seller sign identical contracts and the transaction becomes legally binding on both parties.
Either party can withdraw from the transaction without legal penalty (though they may lose survey and solicitor costs). This is the period when transactions 'fall through'.
Withdrawal by either party incurs significant financial penalties. The buyer forfeits their deposit (typically 10% of the purchase price). The seller may face a damages claim. The completion date is agreed at exchange — this is the date the money transfers and the keys are released.
Buildings insurance must be in place from exchange — not completion. If the property is damaged between exchange and completion, the buyer bears the risk. Transfer the deposit (typically 10%) to the solicitor. Confirm the mortgage offer is still valid.