Growth in average UK house prices continues to fall. As such, there are likely to be more first-time buyers entering the market and facing the twists and turns of property chains.
A property chain occurs when multiple home buyers and sellers are connected. They’re linked by their shared goal of moving house, meaning each sale/purchase is dependent on another within the chain.
Read on to find out how property chains work, why they collapse and advice on navigating them.
How Property Chains Work
Below is a simple example of a property chain.
- First-time buyer. As this individual is only buying, they don’t continue the chain in front of them. They’re reliant on the other two parties completing their transaction.
- Homeowner. A buyer and a seller. The homeowner is reliant on securing their new home from the retiree. The homeowner will then sell their existing house to the first-time buyer.
- Retiree. Selling their home to the homeowner and moving to a place of residence that doesn’t require purchasing.
The homeowner in the example benefits from no onward chain. This occurs when a seller is not using sale generated funds to purchase another property. The result is that the sale will typically progress much faster than sales where an onward chain is present.
A property chain relies on all the links within it working towards buying or selling. This involves each buyer or seller completing several steps:
- Make an offer.
- Obtain a mortgage.
- Estate agent confirms property is sold subject to contract(SSTC).
- Solicitor/conveyancer is informed.
- Order a survey.
- Finalise mortgage.
- Exchange contracts.
- Complete the deal.
Be aware that each of these steps can take varying amount of time. This is because it involves dealing with a different party. For example, the property survey will be conducted by independent experts that the buyer selects. Where the expert might not be able to guarantee a timeframe, obtaining a mortgage is generally accepted to take 2–4 weeks. When helping you buy a property, Toomey Legal averages just 6 weeks from when we’re informed to the completion of the deal.
Why are Property Chains Collapsing?
A property chain can in theory contain any number of separate parties making purchases and sales. The more people involved in a chain, the more likely it is to experience delays and other issues. When a sale falls through further up in the chain it can affect everyone and, in some cases, cause a complete collapse. This can happen when:
- A property surveyors report shows potentially costly/dangerous issues.
- A mortgage application gets rejected.
- Unexpected loss of finances – ie redundancy.
- A change of heart causes a buyer to back out – one of the main reasons this can happen is due to Gazumping.
- An estate agent, solicitor or legal firm takes too long processing documents.
You might be wondering, ‘what do I do if my property chain breaks?’. Unfortunately, the goings-on in other parts of a property chain are out of your control. You can better protect against property chain breaks with expert conveyancing services though. You may also be able to find an insurer that offers Home Buyers Protection to cover legal fees.
There are scenarios when deliberately breaking the chain is advantageous. Why would someone intentionally collapse a property chain? Unchaining allows your sale and purchase to operate independently. This can be beneficial if a buyer’s offer is particularly attractive, and you want to move forward. If you’re planning to move to another area, severing the chain can also allow relocation plans to get underway. Finally, you now possess an edge as a ‘no chain’ buyer going forward. Parties may agree to break a property chain as a courtesy to the others waiting in the chain.
Of course, there are risks to breaking a property chain. For one, if you’re subsequent purchase is unsuccessful you may need to rent. The result being shouldering rent payments for an indeterminate amount of time. This one of many areas that Toomey Legal will be happy to provide legal advice as part of our residential property conveyancing services.
What is the Key to a Successful Property Chain?
The key to a successful property chain is effective communication. This applies both individually and across the various links. Moving through steps promptly helps to avoid holding up the chain. Best practice includes returning documents quickly, comprehensive record-keeping, setting strict deadlines and having important paperwork ready. Bridging loans are a useful option for buyers whose purchase hinges on the sale funds of their property.
These measures help make your link in the chain as strong as possible. If all chain links were to follow your lead, then the chain will be a success. If only it was that simple. For peace of mind, Toomey Legal’s online portal can be used to track progress when moving home. We also offer fixed fee residential conveyancing so regardless of your buying/selling situation, your legal costs won’t go up.