Exchanging contracts is a major milestone in any property transaction, but for many buyers and sellers in New South Wales, it also raises new questions.
👉 What happens next?
👉 Is the property legally mine?
👉 What can go wrong between exchange and settlement?
If you’ve recently exchanged contracts or are about to, this guide will walk you through exactly what happens after contract exchange in NSW, step by step and explain why having an experienced conveyancing lawyer involved at this stage is critical.
What Does “Exchange of Contracts” Mean in NSW?
In NSW, exchanging contracts occurs when both the buyer and seller sign identical contracts and swap them, with the agreed deposit paid (usually 10%, unless negotiated otherwise).
Once contracts are exchanged:
- The agreement becomes legally binding
- Both parties are locked into the sale (subject to cooling-off rights, if applicable)
- Settlement preparation begins immediately
This is where the conveyancing process in NSW truly accelerates.
Step 1: Cooling-Off Period Begins (If Applicable)
How the Cooling-Off Period Works in NSW
For most residential property purchases in NSW (excluding auctions), buyers receive a 5-business-day cooling-off period after the exchange of contracts.
During this time, the buyer may withdraw from the contract, but at a cost.
If the buyer rescinds:
- The seller keeps 0.25% of the purchase price
- The rest of the deposit is refunded
Sellers do not have a cooling-off right.
When Cooling-Off Does NOT Apply
The cooling-off period does not apply if:
- The property was bought at auction
- The buyer waived the cooling-off period with a Section 66W certificate
- The property is commercial or rural (in many cases)
- The property is residential, but the land is more than 2.5 hectares
This is why legal advice before the exchange is essential. Once the cooling-off period is waived, there is no exit without serious consequences.
Step 2: Deposit Is Held in Trust
After the exchange of contracts, the deposit is typically held:
- In the selling agent’s trust account, or
- In the vendor’s solicitor’s trust account
The funds remain there until settlement, unless:
- The contract allows early release to the seller, or
- The contract is rescinded during the cooling-off
Your conveyancing lawyer ensures:
✔ The deposit amount is correct
✔ Trust arrangements are compliant
✔ Your financial risk is minimised
Step 3: Conveyancing Work Intensifies
This is the most legally active phase of the conveyancing process in NSW.
For Buyers: What Happens Next?
Your conveyancing lawyer will:
- Review final contract conditions
- Confirm cooling-off expiry
- Liaise with your lender
- Order final title and council checks
- Prepare settlement documentation
- Ensure special conditions are met
- Complete stamp duty forms( including concessions or exemptions)
This is where hidden legal risks often appear, such as:
- Incomplete compliance certificates
- Outstanding council notices
- Outstanding water notices
- Outstanding strata ( including special levies) notices
Without legal oversight, these issues can delay settlement or, worse, expose you to financial loss.
For Sellers: What Happens Next?
Your solicitor or conveyancer will:
- Prepare discharge of mortgage documents
- Coordinate with your bank
- Finalise adjustments (rates, water, strata)
- Confirm settlement figures
- Ensure compliance with contract conditions
Even after exchange, sellers still have strict legal obligations and breaches can result in claims or settlement delays.
Step 4: Finance Approval Is Finalised
If you are buying with finance, this stage is critical.
What Buyers Must Do After Exchange
- Ensure unconditional loan approval
- Provide the lender with:
- Contract of sale
- Title documents
- Insurance confirmation
- Satisfy any remaining loan conditions
Risk alert:
If your finance falls through after the exchange and you cannot settle, you may:
- Lose your deposit
- Be sued for damages
- Be forced to pay penalty interest
This is why buyers should never exchange contracts without proper legal advice and financial certainty.
Step 5: Property Insurance Becomes Essential
In NSW, risk generally passes to the buyer at exchange, not at settlement.
This means:
- If the property is damaged after the exchange but before the settlement
- The buyer may still be required to complete the purchase
What Buyers Should Do Immediately
✔ Arrange building insurance from the exchange
✔ Ensure coverage reflects the purchase price
✔ Confirm lender requirements
Your conveyancing lawyer can advise you on when risk transfers under your specific contract.
Step 6: Pre-Settlement Inspection
As settlement approaches, buyers are entitled to a final inspection of the property.
This inspection ensures:
- The property is in the same condition as at the exchange
- Inclusions remain
- No new damage has occurred
If issues are discovered:
- Your lawyer may negotiate compensation
- Adjustments may be made at settlement
- In rare cases, settlement may be delayed
Step 7: Settlement Preparation & Adjustments
Settlement typically occurs 42 days after exchange, depending on the specific contract terms.
What Are Settlement Adjustments?
Adjustments ensure fair allocation of costs, such as:
- Council rates
- Water rates
- Strata levies
- Land tax (if applicable)
Your conveyancing lawyer prepares a settlement statement detailing:
- Amounts owed
- Credits and debits
- Final balance required
This step requires precision; even small errors can delay settlement.
Step 8: Settlement Day
On settlement day:
- Funds are exchanged electronically (via PEXA)
- The title is transferred
- The buyer becomes the legal owner
- Keys are released through the agent
Congratulations — settlement is complete.
Your lawyer will then:
✔ Confirm registration
✔ Provide final documentation
✔ Advise on post-settlement matters
What Can Go Wrong After Exchange?
Even though contracts are legally binding, problems can still arise, including:
- Finance delays
- Title issues
- Seller failing to vacate
- Property damage
- Breach of contract terms
Having an experienced conveyancing lawyer in NSW ensures:
- Problems are addressed early
- Your legal position is protected
- Stress and financial risk are minimised
Why Legal Advice Matters After Contract Exchange
Many people assume the “hard part” is over once contracts are exchanged, but legally, this is when risk is at its highest.
At Eastside Legal, we help clients:
✔ Navigate the NSW conveyancing process with confidence
✔ Avoid costly settlement delays
✔ Protect their legal and financial interests
Speak to an Experienced Conveyancing Lawyer in NSW
If you’ve exchanged contracts or are about to, now is the time to ensure everything proceeds smoothly.
Eastside Legal provides clear, practical conveyancing advice tailored to NSW property transactions.
📞 Book a consultation today or visit our conveyancing website, here
📍 Servicing Sydney and NSW
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