If you’re buying or selling a house, the chances are that you may find yourself in a property chain. Property chains are common, but they’re also incredibly frustrating, as you’re reliant on every other sale in the chain working out successfully in order for yours to be okay too. In this article we take a look at some of the main causes of property chain collapse as well as some ways in which you could avoid getting stuck in such a scenario.
What is a Property Chain?
A property chain is the term used to describe a number of property buyers and sellers who become linked together due to selling or buying a property from one of the others in the chain.
At the beginning of the chain, there’s someone who’s only buying a property, not selling, such as a first time buyer getting onto the property ladder. At the end of the chain, they’ll be someone who’s only selling a home, not buying, such as someone who’s moving into a rental accommodation, going to a retirement home and doesn’t need their own property any longer or has died. All the people in between the beginning and the end form the links of the chain.
The Problem With Property Chains
In theory it sounds like a logical progression, but in reality being stuck in a property chain can be a bit of a nightmare.
Aside from a property chain adding extra time to your property selling process, problems arise when you’re stuck in a long chain and issues further down the chain. This can have a domino effect, breaking down the chain all the way along.
Although some property chains work out fine in the end, in other situations the property chain collapses and the whole process breaks down completely. Finding yourself back at square one, especially if you need to sell your house or flat quickly, can be demoralizing and complicate your plans.
Lack of Financing
In some cases, a simple lack of adequate funding and finance can cause a property chain collapse. In fact, according to research, nearly one third of all property chains in the UK fail due to the fact that borrowers had difficulty raising the necessary financing through their mortgage lender. In theory, all finance issues should be resolved before you even put an offer in on a property, but sadly not everyone follows these guidelines.
One of the reasons why property chains collapse is due to gazumping. The term gazumping is used when a seller accepts an offer on their property from one buyer, then later takes a higher offer from someone else. This wrecks the original sale and causes the property chain to collapse.
Gazundering is in effect the opposite of gazumping. In such scenarios, the buyer suddenly reduces their original offer on a property at the last minute. This often occurs just before both parties are due to exchange, which can play havoc with the buying and selling process. If the property seller is unable to accept the lower offer and the buyer won’t change their mind, this can cause property chain collapse.
Another factor that can commonly cause a property chain collapse is issues that arise due to property surveys. If unforeseen issues are highlighted in a property survey, such as major structural, roof or other repairs that need to be carried out, but are going to be very expensive to do, it may cause buyers to pull out of the sale.
Sometimes quibbles can occur over who should carry out the repairs – the current owner or the new buyer – and being unable to resolve the debate can cause the property chain to collapse.
How to Avoid A Property Chain
There are some ways in which you can avoid being stuck in a property chain or reduce the chance of your chain being long and complicated. For example:
- Look for new build properties – there will be no upward chain to worry about. If you have a property to sell first, there’s also the possibility that the developer might be willing to do a part-exchange deal, whereby they buy your previous property and enable you to move quickly.
- When you’re looking for a property to purchase, enquire from the outset about the chain situation. Ideally look for homes where there’s a short upward chain or, in the best case scenario, no chain at all.
- If you’re a seller, find out the chain situation of potential buyers before making a final decision on an offer. Ideally look for first time buyers, holiday / second home buyers and anyone who has no chain associated with their purchase.
- Consider selling your property first and renting somewhere else before you buy another property. This can be a useful move if you’re not in a hurry to buy and don’t mind temporarily renting, as it will instantly put you into the position of being a coveted no-chain buyer.
Property Chain Collapse Solutions
Of course, there are some situations where you just cannot avoid being in a chain, but even then, there are some practical steps you can take to help try and avoid a property chain collapse.
One option is to obtain a bridging loan. This loan will help show your seller that you’re serious in terms of your intention to purchase and, more importantly, it will break you free from the chain. This is just as important if you’re selling a property, as this loan can be used to secure your new property.
If you’re selling your home and the property you’re buying is ready to move into, consider using a quick sale company to buy your property. As well as freeing you from the confines of the chain, this method will provide you with immediate funds that you can use as a down payment on your new home.
So, we hope this has given you a clearer insight into some of the common reasons why property chains collapse and some possible solutions as to how you can avoid a chain breakdown or even avoid a chain completely.