A property chain is a series of interlinked house purchases, all of which are dependent on the successful sale of the other. The actions of any individual within the chain can have an effect on everyone else in the chain, whether this be positive or negative. If a link were to break, it is likely that the other sales will be effected and the chain can collapse.
The best way to deal with a collapsing property chain is to avoid it in the first place. If, however, this isn’t possible, there are steps you can take to salvage a sale.
Why property chains collapse
Nobody can predict what will happen with a property chain and this can cause, both buyers and sellers, to worry due to the uncertainty of the sale. There are a multitude of reasons why a property chain could collapse but a few of the more common ones are:
- The circumstances of the buyer or seller change during the progression of the chain.
- The buyer or the seller changes their mind (More often than not, it’s the buyer that changes their mind but sometimes a seller may decide that they no longer want to sell).
- A buyer from outside of the chain has a higher offer on one of the properties within the chain.
- Missed paperwork deadlines.
- A buyer within the chain reduces their offer.
Property chains are so fragile because of their dependence on so many different elements; from rises in interest rates to another buyer coming in and providing a better offer. The laws in the UK make it so that, until the exchange is made, a buyer is not legally bound to the sale in any way and with an average of 129 days from offer to sale, there is plenty of time for a buyer to change their mind. So, what should you do if you find your self in a collapsing property chain?
How buyers can prevent chain break
If you’re a first-time or cash-buyer then your safest approach is just to steer clear of chains. Alternatively, if you’re in no rush, you could try leveraging them. If a seller needs to sell before they buy, they will know that you are a safe option (assuming that you’re pre-approved for a mortgage). This could give you scope to negotiate on price.
How sellers can prevent chain break
If you’re selling then your safest move is to sell before you buy. Your next-safest move is to get preapproved for a suitable mortgage and a bridging loan. This would allow you to complete a purchase without depending on a sale. You’d therefore be on much the same footing as first-time/cash buyers.
If neither of these options is practical for you, then consider pricing your home as competitively as possible. Then prioritize buyers according to reliability instead of price. If this seems financially painful then think about the cost, inconvenience and general pressure of having a chain collapse.
If you must get involved in a chain
If you must get involved in a chain then do whatever you can to keep it running smoothly. Technically, you’re only likely to have contact with your buyer and your seller. You can, however, leverage this to encourage them to keep in contact with their buyer/seller and so on. If everyone does their bit (or at least most people do their bit), even long chains can work.
Communication is key. That’s not just communication with your buyer and seller. It’s communication with everyone involved in the transaction. For example, you’ll want to keep in regular contact with your real-estate agent, your conveyancer and your surveyor. You may also want to keep in touch with your mortgage lender or broker.
Organization is also a must. Get all paperwork done by the deadline at the latest. Ideally, get it done as soon as you possibly can. This will give you time to resolve problems before any deadlines strike.
At the risk of stating the obvious, organization also includes getting yourself ready to move. You don’t want to be the one causing a chain to break because you weren’t able to move out when you were supposed to do so.
Broken property chains: What to do?
If you’re going to get involved in a chain, then you need to be realistic about the possibility that it will collapse. It’s therefore highly advisable to have contingency plans in place. One obvious precaution would be to take out home buyers’ protection insurance.
However, the first thing that you should do is to speak with your conveyancing solicitor and the estate agent that is handling the sale of your home. Through any discussions that you have with these parties you may be able to determine what the problem within the chain is and identify ways that it can potentially be repaired.
It’s also advisable to think about what steps you could take to relink the chain. For example, if your buyer pulls out, could you get a bridging loan so you can still buy yourself? If your seller pulls out, could you rent or stay with family/friends?
Alternatively, could you salvage the original chain? Remember that home sales fall through for a variety of reasons. A lot of them, however, can ultimately be linked to money. For example, even if a buyer is preapproved for a mortgage, the lender may not be willing to lend the bid amount on your home.
If this is the issue, then one potential answer is to lower the sales price to one the buyer can afford (and/or feels comfortable paying). What’s more, you might not have to shoulder the full burden of this yourself. If the next person in the chain is dependent on you, then they may be willing to lower their sales price and so on along the chain.
This article was brought to you by Nannette Kendrick, Head of New Business and Marketing at Lovedays Solicitors – a firm that specialises in a vast range of legal services throughout England and Wales.
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