What is Exchange of Contracts?
The exchange of contracts is a key legal step in buying property. It’s when both you and the seller sign the contract of sale and swap signed copies.
Until this happens, the sale is not legally binding. Either party can still walk away. The contract exchange is what locks in the sale.
How Does Contract Exchange Work?
There are two identical copies of the contract of sale — one for you, and one for the seller. Each of you signs a copy, then they are exchanged. This can happen in one of two ways:
1. Traditional (Paper Based) Exchange
- Each party signs their own copy of the contract.
- The contracts are physically swapped — in person or by courier.
- You pay a deposit, usually 10% of the purchase price.
- The contracts are dated, and the agreement becomes legally binding.
2. Digital Exchange Using DocuSign:
Many buyers and sellers now use DocuSign for faster, remote exchanges.
Here’s how it works:
- Your solicitor or conveyancer emails you a digital contract.
- You review and sign the document online via DocuSign (a secure digital signing platform).
- The seller signs their copy in the same way.
- Once both parties sign, the system notifies everyone, and the contract is automatically dated.
- You transfer the deposit electronically.
DocuSign makes exchanges fast, secure, and convenient — no printing, scanning, delivering or couriering needed.
⚠️ Before You Exchange Contracts
Before signing anything, make sure to:
- Have the contract reviewed by your solicitor or conveyancer
- Complete building, pest or strata reports (unless you’re using the cooling-off period)
- Make sure your finance has been pre-approved (especially if waiving the cooling-off)
Paying the Deposit
When you exchange contracts, you’ll need to pay a deposit — usually 10% of the purchase price. This secures your interest in the property and is typically held in the real estate agent’s trust account until settlement.
Common ways to pay the deposit include:
- Bank Transfer: A direct transfer to the agent’s trust account.
- Deposit Bond: A guarantee issued by a third party (usually an insurer or financial institution) that substitutes the need to pay cash upfront. Commonly used if you’re waiting on funds from another sale.
- DEFT Payment: A secure electronic payment platform used by many agents. You’ll be provided with a DEFT reference and payment instructions.
✅ Tip: Always confirm deposit instructions directly with the agent or your solicitor before making any payment, to avoid scams.
Once the deposit is paid and contracts exchanged, it’s smart to arrange building insurance, as you now have a financial interest in the property.
More information on exchange of contracts can be found by visiting the NSW Fair Trading website.
Cooling-Off Period (NSW Private Treaty Sales Only)
If you’re buying a property by private treaty in NSW, you get a 5-business day cooling-off period after the contract is exchanged.
During this time, you can:
- Walk away from the sale (by giving written notice)
- Carry out final inspections (e.g., building, pest, strata)
- Finalise your home loan
What you need to know:
- Cooling-off starts as soon as contracts are exchanged.
- It ends at 5pm on the fifth business day.
- If you back out, you’ll lose 0.25% of the purchase price (e.g., $250 per $100,000).
No Cooling-Off Applies If:
- You buy at auction
- You exchange contracts on the same day as a passed-in auction
More information on cooling off periods can be found by visiting the NSW Fair Trading website.
What’s a 66W Certificate?
You can waive your cooling-off period with a Section 66W certificate. This must be:
- Signed by your solicitor or conveyancer
- Given to the seller before exchange
This can help strengthen your offer, especially in a hot market.
What Happens at Settlement?
Settlement is when the property officially becomes yours.
Here’s what to expect:
- Usually takes place 6 weeks after exchange (unless agreed otherwise)
- You pay the balance of the purchase price
- Adjustments like council rates and water are settled
- Your solicitor and the seller’s solicitor finalise the paperwork
- You receive the keys and take ownership!
