If you’re buying and selling a property, you will have heard the term property chain. But what is a property chain and how does it affect your move?
What Is A Property Chain?
If multiple people are buying and selling property from each other at the same time, these transactions are linked together, forming a chain. Everyone in the chain is interdependent as they need to sell their property to be able to buy a new one.
If one person pulls out, the chain is likely to break, putting everyone’s move in doubt. It’s therefore critical that you manage your chain, ensuring it keeps moving.
How does a property chain work?
At the top of the property chain is a buyer who isn’t selling. The next few links are made up of homeowners who are simultaneously buying and selling. The chain ends with a seller who is not buying. There’s no minimum or maximum chain length.
Ideally, all homeowner or links are working toward a similar completion date. It’s the job of the various solicitors who are involved to ensure the process continues to move towards.
Sadly, this isn’t always the case and unforeseen issues can arise, grinding the process to a halt. If one link has a problem, it can affect all in the chain. A single homeowner backing out can have a ripple effect and could stop you from buying and selling.
Another element that complicates the process further is that every link is working with their own team (estate agent, solicitor, mortgage lender, surveyor). While all of these professions are critical to the process, each works at their own pace, adding further complication.
Why can the chain collapse?
With multiple parties and variables involved, a property chain can easily collapse. Here are some of the common reasons why.
Change of heart
While the cost of a buyer or seller changing their mind partway through the process is high, it does happen.
Change of circumstances
Someone in the chain could fall ill, lost their job or a loved one, or even experience a relationship breakdown. The seller could receive a higher offer, which they decide to accept instead.
A buyer in the chain can’t raise all of the funds to buy the intended property. They could have their mortgage application declined or be offered a smaller loan than they require.
There are many reasons why a buyer would seek to renegotiate including issues uncovered by the survey and the bank valuing the property at a lower figure.
Survey uncovers an issue
One of the properties in the chain has an issue highlighted by their survey. This could be a major issue requiring building work and so the buyer decides to walk away.
The legal process drags on
Involving reams of paperwork, the legal process can move at a glacial pace and so a seller might decide to accept another offer or pull out altogether.
It’s therefore critical to stay on top of your conveyancer or solicitor. Ensure you return their emails and call the same day and drop in any paperwork (don’t mail anything if you can help it as it slows the process down).
How to keep your property chain short
Generally speaking, a short property chain is easier to deal with and as long as the process keeps progressing, is less likely to breakdown.
Luckily, there are several ways to ensure your chain is as short as possible.
Buy a new build
You’re likely to be at the end of the chain if you buy a new-build as you’ll be purchasing directly from the developer.
Selling to a first-time buyer is a good idea as they don’t have a property to sell and so can easily move.
Is the seller chain-free?
After finding the ideal property, it’s worth asking the seller if they are chain-free.
Buy an empty property
As there’s typically no upward chain on an empty property, they can easier to buy.
Is a seller/buyer willing to move out now?
If you can convince one party in the chain to move in with friends or into short-term accommodation, you can shorten the chain.
You’ll be far more attractive as a seller if you’re willing to move before finding your next home.
Can I break the chain?
It is possible to break the chain but this should be a last resort as it will add stress and costs to your move. Breaking the chain allows you to complete your sale now, and move into short-term accommodation while either the rest of the chain completes or you find a suitable new home.
What does “no upward chain” mean?
This means the person you’re buying from is not involved in a chain and so you don’t need to wait for them to complete on another home transaction before being able to finalise the sale.
Typically a property chain with no upward chain is likely to occur if you’re buying a new-build home from the developer. You might be buying from someone who’s moving into a rented property or in with a partner. The seller could be selling their 2nd or a family home which isn’t their primary residence.
You still might be part of a chain as your buyer could also be selling, meaning you’re waiting on multiple transactions to take place before you can purchase your next property.
What does chain-free mean?
This means only you are waiting on two transactions to take place. Your buyer isn’t waiting for another party and neither is the person you’re buying from.
For example, as a first-time buyer buying directly from a developer, your purchase is chain-free. As long as you can take out a sufficient mortgage, you can typically move within a few months.
Someone selling their second home is also chain-free as they’re not relying on anyone to make the transaction possible.
If you’re buying a chain-free property, chances are the process will move fairly quickly as there less moving pieces.
How to keep your property chain together
While primarily the responsibility of the professions such as the estate and conveyancers, there are several things you can do to keep your chain moving.
Firstly, choose your team carefully. For example, using a busy solicitor who’s involved in multiple legal cases and does the occasional property transaction is likely to slow the process down.
Likewise, using a conveyancer who just about to go on holiday for two weeks with no cover is likely to impact your move.
It’s worth asking family and friends for recommendations both good and bad. With your shortlist, ask them how they will keep the process moving and if they have any holiday coming up.
Ask both your estate agent and the one representing the property you’re hoping to buy, how can incentive the other parties to keep the process moving. It’s worth also asking the agents, often offering to double their fee if the transaction completes by a certain date can encourage them to help the process along.
Stay in contact
Part of keeping a chain together is active management. You should be in weekly contact with the estate agents and your conveyancer. Be polite yet firm and ask for an update.
By being in regular communication, you can deal with any issues quickly and keep the pressure on.
Chains can seemingly collapse overnight due to parties being slow to act. For example, many might mail paperwork to their solicitor or estate agent. However, this takes 2 or 3 days to reach them and slows the process down. Instead of posting, pop in the documents to their offices that day.
Have funds in place on day one
While you might have a budget in mind, will the bank lend you that sum? Many people agree to purchase a property only to discover, much to their horror that they can’t raise the funds to complete the purchase.
Therefore, it’s worth talking to your bank or a mortgage advisor and applying for a mortgage in principle. Not only does this document set your budget, but it demonstrates you have a bank who are potentially willing to lend to you.
Can I protect myself from a chain collapsing?
Unfortunately, chains do collapse, regardless of how proactive you are. There might be very little you could do to get it back on track.
It’s worth investing in Home Buyer Protection Insurance as this will repay most of your costs including legal costs, mortgage arrangement fees and survey costs.
If your chain does break down, ask your estate agent for advice. Maybe they have another suitable buyer on their books or can recommend a different approach. Don’t panic and trust the professionals.
What happens if the chain can’t agree on a completion date?
While you should try to agree on a target date for completion with your chain from t the outset, you must be flexible as completion dates often move.