Exchange of contracts is when the buyer and seller each sign identical copies of the contract and it becomes legally binding, usually with the buyer paying the deposit. Settlement is when the buyer pays the balance, ownership transfers and the keys are handed over, usually about 6 weeks later.
Many buyers think exchange and settlement are the same thing, or that nothing is final until settlement. In NSW, the commitment happens at exchange.
What happens at exchange
- Both parties sign the contract
- The buyer pays the deposit, or 0.25% if exchanging with cooling off
- The contracts are swapped, now usually electronically
- Cooling off starts, if it applies
- The buyer arranges insurance, depending on when the contract passes risk
What happens between exchange and settlement
- Finance is finalised and loan documents signed
- Searches and inquiries are completed
- Transfer duty is paid
- The seller arranges the mortgage discharge
- Settlement figures are agreed
- The buyer does a pre-settlement inspection
What happens at settlement
The balance is paid, the seller's mortgage is discharged, the transfer is lodged through PEXA and the keys are released. See our full settlement guide.
Side by side
| Exchange | Settlement | |
|---|---|---|
| Legally bound? | Yes, once cooling off ends | Already bound |
| Money | Deposit | Balance |
| Ownership | Still the seller's | Transfers to the buyer |
| Keys | No | Yes |
Common questions
FAQs
Can I pull out after exchange?
Only during the cooling off period, if there is one, by paying 0.25%. After that, you are bound.
Is exchange the same day as signing?
Usually, or very close to it. The contract is binding once both signed copies are exchanged.
Can exchange and settlement happen on the same day?
It is possible but unusual for residential property.
City Peak Conveyancing acts on NSW property only. This page is general information, not advice about your circumstances.