A property chain is a common occurrence during house purchases. It happens when there are several buyers and sellers in a row – which means there is always a risk that your house purchase could fall through if someone else breaks the chain.
Here’s what you might face when your property chain breaks – and what to do next.
What makes a property chain collapse?
A property purchase isn’t certain until you’ve exchanged contracts. Between the offer and exchange, which can be several weeks, many things can happen.
Someone at the start of the chain may decide that they don’t want to sell their house anymore. This affects their buyer, who may not be able to leave their existing home until they’ve found a replacement property. That, in turn, has a knock-on effect with other buyers and sellers in the chain.
Another reason chains collapse is financial: someone may not get the mortgage that they had expected, for example, if the property isn’t approved by the mortgage provider. This, again, causes delays and collapses in the chain.
Gazumping and gazundering are both responsible for property chain collapses, too. If a seller accepts one offer, and then takes another (better) offer from another buyer at the last minute, that’s gazumping.
The opposite happens, too: a buyer will wait until just before exchange of contracts to reduce their offer. This often occurs after the property surveys are completed. Some price reductions are warranted, such as major renovation work required that’s been revealed by the survey.
However, gazundering is when a buyer deliberately waits until the last minute to reduce their purchase offer. They do this to pressure the seller into lowering the price: if the seller refuses, the buyer could pull out of the sale.
Can a chain be avoided altogether?
You can avoid being in a chain in a few ways – but doing this could limit your choice of property.
Being a first-time buyer, or living in rented accommodation while seeking a home, puts you in a strong position to be at the start of a chain (or in no chain at all). If you’re in this position, you can avoid a chain altogether by looking for a vacant property to purchase.
Empty houses come up for a few reasons: landlords wanting to sell, bereavement properties, or when a couple decide one should move in with the other partner are the most common reasons. Sometimes, a property comes up for sale because the owner has had to move away for their career.
You may also find a property that is soon to become vacant, such as an older person preparing to go into residential care.
Of course, unless you’re a first-time buyer or have the capital to buy a home without selling your existing one first, a vacant property simply puts you at the end of the chain.
How to prevent a chain collapse
Unless you’re in the golden position of being a first-time buyer or tenant buying an empty property, a chain is very likely. Don’t panic!
You can’t be responsible for the other vendors and buyers in the chain – but you can try to protect yourself from the situation or from being the weak link yourself.
Find out if a property is in a chain before offering
Before you put an offer on a property, find out if the property is in a chain. If it is, ask how many transactions are involved. The longer the chain, the higher the likelihood is that a collapse – or significant delay – can occur.
Consider a short-term rental property
Break the risk of being in a chain deliberately! Many home buyers choose to sell their house and move into a rental property for a short time. This creates a time buffer between buying and selling and takes the pressure off being in a chain.
It also means you can find the right property rather than feel pressured to work around other buyer and seller timelines in a chain. As a renter, you can be at the start of a property chain, or avoid one altogether.
Keep communication and don't panic
If it looks like something might go wrong with your property chain, don’t panic!
The first thing you need to do is talk to your conveyancing solicitor and the estate agent. Find out where in the chain the problem lies and if there is anything that may be done to remedy the situation.
If the weak link is your own buyer, find out whether there are things you can do to make sure the sale goes through. If the buyer has found a problem through their survey, for example, find out if it’ll be less costly for you to remedy the work before the sale. This will prevent your house price from being reduced and ensures the buyer stays happy.
Chain collapsed? Speak to an expert about bridging loan
There is one final way to prevent a broken chain from stopping your house move. It’s called a bridging loan.
You get a bridging loan to pay for your new house and then pay it off when your old house sells. It can be useful if, for example, there are too many delays in the chain or if you have to move for work by a certain date.
Bridging loans can be complicated and expensive, however. Find out if they’re the right option for you by calling your local mortgage expert in Nottingham on 0115 9017146 to discuss your situation.
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