Although property chains are very common in the house-buying process, they can often be frustratingly slow. However, the worst-case scenario is when the property chain collapses or breaks down completely. This results in the seller (and potentially the buyer) having to return to “square one” in terms of the entire transaction. This can cause problems; particularly for those who are looking to sell their home or flat quickly. Let’s look at some of the main causes of a property chain collapse as well as some potential remedies.
A Breakdown of a Property Chain Collapse: A Lack of Financing?
According to data released in July 2016, nearly one-third of all property chains within the United Kingdom failed due to the fact that borrowers had difficulty raising the necessary financing through their mortgage lender. So, a simple lack of finances can be one main reason why a property chain collapse can occur. This same reason can also affect a property seller seller. Let’s imagine that the seller is not able to secure the financing in order to “bridge the gap” and purchase a new property in advance of the sale. In this case, the buyer pulled out of the house sale for similar monetary reasons.
Gazumping, Gazundering and More
Gazumping and Gazundering are two more reasons why property chains collapse. Either your seller pulls out of an agreed sale due to a better offer from another buyer (Gazumping).You might have a buyer who reduces the offer by a large amount at the last minute (Gazundering). Both of these situations can trigger a property chain collapse.
It may not be your property that causes the collapse, your seller may have problems. If their new property purchase falls through, their house could very well be taken off of the market. Another common problem with chains is is when arguments over necessary repairs lead to negotiations as a whole breaking down.
Possible Solutions to a Property Chain Collapse
Of course, one of the best ways to avoid this type of collapse is to not become involved within a property chain in the first place. But you may already be committed to such a situation. Thankfully, there are things you can do which can help avoid a collapse.
One option is to obtain a bridging loan. This action will show your seller that you are serious in terms of your intention and more importantly, it will break you free from the chain. This is just as important if you are selling, for this loan can be used to secure your new property.
Assuming that you are selling your home and the home you are moving to is ready to move into, consider using a quick sale company to buy your property instead of waiting for a chain. This will give you immediate funds as a down payment on your new home; once again avoiding the pitfalls of a chain. If a buyer suddenly drops out from the sale process, be sure to keep solicitors and other stakeholders informed. In this instance, it may also be wise to consider lowering the sale price.
Understanding the common causes of a property chain collapse is the first step to avoiding them and finding the solutions that may be available.