Your Guide to the Property Chain15th November 2019
Moving home is an exciting time, especially if you have your heart set on that dream house. But it also has its downsides.
Buying and selling property can be a stressful, frustrating and tiring process, even before you’ve packed up your belongings. If you’re new to the property market, it can also be rather complicated and confusing.
If, like most people who are moving home, you need to sell your current house before buying a new one, you’ll probably find yourself in a property chain. But what is a property chain exactly? Why do people dislike it so much? And can you avoid it?
Find out the answers to those questions, plus more, in our in-depth guide to the property chain.
What is a property chain?
A property chain is a series of house sales and purchases that are linked together by their buyers and sellers.
A property chain is primarily made up of people (or “links”) who are all moving home and need to sell their current house before buying a new one. A new link is added to the chain with every person who is buying and/or selling property.
The one thing you should know about property chains is that every link in the chain is reliant upon each other to be successful. In other words, if one house sale or purchase falls through, every other house sale or purchase in that chain is also affected.
Here’s what a property chain might look like:
+ James and Laura, who are first-time buyers, buy a flat from Rachel.
+ Rachel, who is looking to upsize, buys a larger flat from Dave and Karen.
+ Dave and Karen, who are looking to move into their first house, buy a semi-detached house with a garden from Albert.
+ Albert, who is now retired, moves into a villa (which he already owns) in Spain.
Because most people who are looking to move home need to sell their current house before buying a new one, property chains are difficult to avoid.
How does a property chain start?
A property chain begins with someone who is buying, but not selling.
Typically, these are first-time buyers who have just secured a mortgage and are looking to purchase their first home. A property chain can also be kickstarted by someone who is buying a second home or a cash buyer who can afford to purchase a house outright without needing to sell (or secure a mortgage) beforehand.
If you’re selling a house, buyers like these are very attractive because they aren’t tied to a chain of house sales behind them. In most cases, this makes the sale process much quicker and easier, saving you a lot of time, worry and stress.
How does a property chain end?
A property chain ends with someone who is selling, but not buying.
This could be a retired couple who are moving abroad into a property they already own, a seller who is moving into rented accommodation (either permanently or as a stop-gap until they buy a new house), a family who are selling a house they have inherited from a deceased relative or a repossessed property that’s being sold at auction.
Because the seller in this situation isn’t buying a new house, the property chain doesn’t get extended and is therefore “complete.”
Properties like these are a desirable proposition to buyers because their purchase is safe from any house deals further down the property chain that could affect it. Many estate agents (including ourselves) will mark these properties as having no “onward” or “upward” chain.
Who else is in a property chain?
A property chain isn’t just made up of buyers and sellers. It also includes the various people and professionals who are involved in each house sale and purchase, including estate agents, solicitors, surveyors, conveyancers and mortgage lenders.
All of these parties can influence how smoothly — or not-so-smoothly — your property chain flows, making it an even more complicated and delicate process.
What is a property chain collapse?
A property chain collapse is when one house sale or purchase falls through, affecting every other sale or purchase in the chain. Think of it like a domino effect: if one domino topples, so do the rest.
For example, imagine a chain that looks like this:
Person A sells to Person B, who sells to Person C, who sells to Person D, who sells to Person E… and so on.
If Person C’s house sale to Person D falls through…
- Person D may not be able to sell their house to Person E until Person D finds a new house to buy.
- Person B may not be able to sell their house to Person C until Person C finds a new seller.
- Person A may not be able to sell their house to Person B because Person B’s house sale to Person C is delayed.
As you can imagine, property chains are one of the most frustrating and stressful aspects of buying or selling a house. With so many parties intertwined and precarious factors that are out of your control, they present a looming threat to your property plans.
Unfortunately, property chain collapses can be quite common. Of the roughly 300,000 house sales that fall through every year, one in five are due to a collapsed sale further up the property chain.
What happens if your property chain collapses?
The outcome of a property chain collapse isn’t always the same. In some cases, your house sale or purchase simply gets delayed and everyone in the chain has to wait a little longer to get their deals over the line. In other cases, your sale or purchase falls through completely and you’ll have to find a new buyer or seller. Of course, a delay could still force a buyer or seller to pull out of a house deal.
In any case, a property chain collapse is never ideal and can lead to stress, disappointment and heartbreak, especially if your dream move gets derailed.
Not only can a property chain collapse be emotionally-taxing, but it can also be expensive. Depending on what stage of the house moving process you’re in, you can lose the money you’ve spent on solicitors’ fees, surveys and a mortgage arrangement fee, which could cost you thousands. If you’ve inherited a property that’s standing empty and is struggling to sell, those council tax bills can add up.
It’s worth taking out Home Buyers Protection Insurance, which covers you for the loss of upfront expenses you’ve made in good faith to buy a property in the event of the purchase falling through.
What causes a property chain to collapse?
A property chain can collapse for many different reasons, including:
- A buyer has trouble securing a mortgage. Perhaps due to poor credit history or having too much debt.
- A buyer pulls out. Perhaps because they’ve lost their job, split up from their partner or simply have cold feet.
- A seller pulls out. Perhaps because they, too, have had an unexpected change in circumstances or have simply had a change of heart.
- A property survey highlights issues with the house. These can either be minor things that need fixing (like a faulty drain pipe) or major concerns that could turn off buyers (like structural movement).
- A buyer has been out-bid at the last-minute, also known as “gazumping.”
- A buyer lowers their offer at the last-minute, also known as “gazundering.”
- The legal process is taking too long. Perhaps due to poor communication, administrative errors, missing information or paperwork, or someone going on holiday.
- Unforeseen events. Like illness or an accident.
If you’re worried that any of these scenarios could affect you, it’s worth addressing them (as best as you can) before planning a house move.
Can you fix a broken property chain?
Yes, it’s possible. Just as there are many causes for a broken property chain, there are different measures you can take to try and fix it, including:
- Find a new buyer. If you’re lucky, you might have multiple offers on your house. So if one deal falls through, you can simply enter into negotiations with another potential buyer — preferably a first-time buyer or cash buyer.
- Move into rented or temporary accommodation. Obviously, this is less than ideal for many people, especially families. But if it’s practical, finding a short-term rental or staying with family and friends while you’re waiting for your house purchase to be finalised can be a very helpful way of keeping the property chain alive. If you’re renting and still looking for a house to buy, being chain-free will make you an attractive proposition to sellers.
- Accept a lower offer. While we understand that this is also an undesirable option, sometimes compromise is the only solution. If multiple house sales are threatening to fall through because of money, it might be worth trying to persuade all the homeowners in your chain to accept a lower offer in order to push through everyone’s deals. Even though you’ll be getting slightly less for your current house, you’ll still benefit from paying slightly less for your new one. Negotiating a house price is an art in itself, and there are many tactics you can use to help you be successful, including being calm, open and communicative and picking the right time to make your case.
- Bridging loan. This is a short-term loan aimed at property buyers, allowing them to “bridge the gap” between incoming funds from a sale and outgoing funds for a purchase. However, with high-interest rates and fees, a bridging loan is more expensive than a traditional mortgage and should be seen as a last resort.
While it’s impossible to prevent a property chain from collapsing, there are steps you can take to reduce the chances of it happening, including:
- Being organised. Having all the necessary information available, being proactive with progress checks and, not least, making sure you have a mortgage in place can help you avoid running into needless issues down the road.
- Good communication. When buying or selling a house, you’ll be in contact with numerous people. Responding promptly, accurately and thoroughly to requests can help speed things up. Plus, establishing rapport and building relationships will only strengthen your property chain.
- Be honest. As a buyer, be upfront about your finances to avoid any embarrassing mortgage issues. As a seller, be honest about any defects with your property that will only be flagged by a surveyor. This could not only cost you time and money, but interest from potential buyers.
- Find good estate agents and solicitors. These two parties handle a lot of the legwork when it comes to a house purchase or sale, so it’s crucial that you find an estate agents and solicitors who are experienced, efficient and reliable.
Can you avoid a property chain?
If you’re moving home, chances are you’ll find yourself in a property chain. However, it’s possible to avoid getting mired in a lengthy and complicated chain.
Here are a few ways you can avoid a property chain:
- Sell to a chain-free buyer. A chain-free buyer could be a first-time buyer, a cash buyer or a homeowner looking to purchase a second house. These buyers are only looking to buy, not sell, so they aren’t tied to a chain of house sales behind them.
- Buy a chain-free house. For example, a new-build house, a repossessed property or a house whose previous owner has passed away. Because the owners of these properties aren’t looking to buy another house, there is no “onward” or “upward” chain to contend with. When it comes to a new-build house, the property developer might even be willing to offer you a part-exchange deal on your current house. However, chain-free properties make up just 10% of the UK market, so they’re quite rare.
- Become a chain-free buyer. You can do this by moving into rented or temporary accommodation (like staying with family or friends) and relieving yourself of being in a chain. As a result, you’ll make yourself a more attractive proposition to sellers while giving yourself more time to find your dream home.
- Agree deadlines with vendors. If you’re in a hurry to move house, try and persuade the person whose house you’re buying to agree to a date by which they will move out. Vendors will sometimes agree to move into rented or temporary accommodation to ensure that the deal doesn’t fall through.
You can avoid the property chain altogether by becoming a chain-free buyer and buying a chain-free property. That way, your purchase isn’t reliant upon anyone else’s house being sold or bought, and you can eliminate the general worry and stress of being in a property chain. All you have to focus on is buying and moving into your new house.
How long is a typical property chain?
Asking how long a property chain is is like asking how long a piece of string is; every chain is unique. There are no official figures to show the average length of a property chain in the UK.
Theoretically, a property chain could be as small as three people or as large as 13. Here’s what a three-person property chain might look like:
- Jane, a first-time buyer, buys a house from Michael.
- Michael uses that money to buy a house from Penny.
- Penny moves into an overseas property she already owns.
Obviously, shorter property chains are more attractive. There are fewer parties involved, less paperwork to process and less chance that things could go wrong. On average, a house sale takes six months to complete, from the property being listed on the market to the sale being completed. So keep this in mind before moving home.
Can you find out how long your property chain is?
Thanks to technology, it’s possible to find out how long your property chain is. View My Chain is a service that allows homeowners and estate agents to view every property in their chain and track the progress of each sale or purchase.
As you can see, being in a property chain is one of the most frustrating — and, unfortunately, unavoidable — aspects of buying or selling property. Not only is it likely to cause you delays and disruptions, but it can potentially derail your house move altogether.
However, having a good estate agents can help reduce the chance of you running into property chain issues while saving you time, worry, stress, heartache and money.
JonSimon are an estate agents you can trust. With over 10 years of experience in the property industry, our award-winning estate agents are here to support you in your house move and make the process as smooth, speedy and stress-free as possible.
With four friendly and dedicated teams who work exclusively in their respective areas, we have expert knowledge of the Burnley, Greenmount, Radcliffe and Ramsbottom areas and understand what it takes to secure a house sale in these markets.
Get in touch today to find out how we can help you sell your home.
Radcliffe Office: 0161 723 1155
Burnley Office: 01282 427 445
Ramsbottom Office: 01706 48 9966