Property Chains: All You Need to Know
Property Chains: All You Need to Know
Buying a new home is, in equal parts, exciting and nerve-wracking. In fact, according to one study, moving house is one of the most stressful events in life. There are boxes to pack, change of address forms to fill out and authorities to notify. But that all pales in comparison to the prospect of the dreaded property chain.
Moving is overwhelming enough, but consider the turmoil you would find yourself in if you found the home of your dreams, you committed to move — and then you heard that the sale had fallen through. You’re unable to move into that perfect house because the chain has collapsed. Scenarios such as this are a regular and unfortunate occurrence — but are they inevitable?
Let’s explore what a property chain is, why one might collapse and how you could avoid a property chain altogether.
What Is a Property Chain?
A property chain is a group of properties whose sales depend on each other. These buyers and sellers are connected (like a chain) because everyone is either buying or selling a property from each other. The chain starts with a party who is only buying a property — and at the other end is someone who is only selling. It is the people in the middle (the “links” in the chain) who are under pressure to coordinate the sale of their properties to purchase a new one.
To add to the confusion, links don’t just involve vendors and buyers. Every party involved will be working with an estate agent, a conveyancer, a surveyor and a mortgage lender. Everyone involved has a role to play and the longer the chain gets, the more fragile it becomes.
What Is the Average Length of a Property Chain?
How long is a piece of string, how long is a property chain? The answer is, we don’t have the official figures to answer this question. What we do know is, they can get very long. Some online forums have examples of property chains of ten properties or more.
Chain Free Houses
What is a chain-free house? A chain-free property is one where neither the vendor nor the buyer is relying on another purchase or sale to ensure a change of ownership takes place. If this sounds too good to be true, it’s because this occurrence is infrequent. We can demonstrate an example using a Part Exchange deal. In a scenario like this, there are only two parties involved — the vendor and the housing developer. The vendor sells their property to a developer, who in turn guarantees them a home in exchange. In such scenarios, the vendor can remain in their home until their new house is ready.
Below are other chain-free examples:
- An empty house (for example, following a death or a repossession)
- The vendor has another home to move into
- The buyers are first-time buyers — they have no chain to deal with
What Is a Broken Property Chain?
With so many people involved in a chain, there is a lot of opportunity for something to go wrong. Each link has vulnerabilities — and it doesn’t take a lot for a property chain to collapse. A broken property chain is when — for one reason or another (examples of which are covered below) — a sale or purchase of a property falls through. Given that everyone else is dependent on the next link in the chain, everyone is affected.
According to a 2016 survey by Which? as much as three in 10 property purchases collapse, which comes at an average cost of nearly £3,000 to each buyer.
How Does a Property Chain Break?
What are the common causes of property chains breaking? Chains can fall apart for several reasons, including:
- A survey can show serious problems with a property, meaning a sale can’t go through
- The buyer is unable to get the finance they need
- One of the legal companies involved might take too long with the necessary paperwork
- One of the parties might fall ill
- A change of circumstance — a party might lose their job or split from their partner
- A seller or buyer can change their minds about selling or buying
How to Avoid Broken Property Chains
As you might have heard, the chain will progress at the same rate as the slowest link. When one sale goes wrong, it has a domino effect that impacts the remaining links in the chain. But there are some ways you can manage, or avoid broken property chains.
- Try to have multiple offers for your property. If you can find a chain-free buyer, (for example, a first-time buyer), the process is likely to go much more smoothly.
- You can consider short-term accommodation until you buy your new home, so the transactions aren’t dependent on each other. This option could involve renting or staying with family. It might take some time before you find a home to buy, but being chain-free makes you more attractive to vendors.
- Look for properties with no upward chain — for example, a new build or an empty house.
- Consider a Part Exchange option — this rids you of a sales chain and speeds up the purchasing process.
- Get the seller of the property you’re buying to firmly agree on a moving out date.
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Part Exchange and Broken Property Chains
If you’re eager to move out and move on up, part exchange is a solution that might appeal to you — particularly if you’re eager to avoid the potential mess of a property chain. With part exchange, a property developer buys your house directly from you and you are guaranteed a new build house without the worry of a chain-breaking — and without the lengthy wait that inevitably accompanies the house buying process. This solution allows you to move on — without the worry of the house of cards crashing.
Property Chains: All You Need to Know is a feature post – you might also like my post on a handy guide to buying your first property in London