Property chains are common vernacular in the homebuying and selling arena – but what exactly is a property chain? We explain in this guide.
What does property chain mean?
A property chain is when homebuyers and sellers are linked together because their purchase or sale is dependent on another transaction.
This is most relevant to homemovers – who will be buying a new home and selling their current one simultaneously.
For example, it’s likely you’ll need the sale of your current home to complete before you can finance the purchase of your next one.
Similarly, the seller you are buying from might also need to finalise the purchase of their new home before they can hand over the keys to you.
This, in short, is a property chain, and getting it moving at a similar speed ensures that all parties (or ‘links’) can complete the transactions for you to move when you need to as well.
One link in the chain can hold up the whole moving process. For example, if you're ready to sell your home, but the seller you are buying from is struggling to complete on the purchase of their next one, the whole deal can fall apart.
Ultimately, if any link in the chain doesn't have a home ready to move into, they're going to be reluctant to go through with the sale of their current home.
Keeping property chains short and simple
In some instances of homebuying and moving, property chains can be much shorter and easier to deal with.
- A seller has several offers on the table. In this case they could opt for the buyer who isn't in a chain – ie, someone who is not selling a home. This might be a first-time buyer or someone buying an ‘additional’ property, such as a buy-to-let or a holiday home.
- Buying a new-build. New-build properties are unlikely to have any upward chain, as the purchase is often made direct from the developer.
- One party is a first-time buyer. A first-timer doesn’t have to sell a home before buying, so only forms ‘half’ of a link in the chain. And if a first-time buyer is purchasing a new-build property, the deal is probably entirely chain-free.
- One property is empty. If someone is selling a home that’s empty – they are living abroad, recently deceased or it’s a second home for example – that can mean there is no upward chain.
- One or more parties is prepared to move out anyway. If one link in the chain agrees to selling and moving into short-term accommodation or staying with friends, this can also free up the chain. This flexibility could make you a more attractive prospect to seller – but there is no guarantee you won't be waiting a long time to move into a home of your own.
Although it would make the homebuying process smoother and likely, quicker, it's more important to find the right property for you and your budget, rather than to simply look for ways to avoid or shorten a property chain.
In most cases, you will have to contend with a property chain, but if you understand how it works and how to manage it properly, then you might be able to complete the purchase of your new home quicker and without undue hassle.
How does a property chain work?
A property chain begins with a buyer who is not selling, and ends with a seller who is not buying. The links in the property chain comprises of everyone else in between – ie, those who are moving home and both buying and selling.
A property chain works when every link (all buyers and sellers involved) is working towards the same completion date. The whole property chain should be moving together in the same timeframe and it’s the representing solicitors’ jobs to ensure this happens.
Unfortunately, the actions and circumstances of others involved in the chain is not something you can control, so one faulty link in the chain could stop you from buying or selling your home.
On top of this, all links in the chain will be working with their own estate agent, solicitor, surveyor and mortgage lender. This means there are multiple variables involved in the home buying process, and so there are many reasons why a property chain could fall apart.
Here are some examples.
1. A buyer or seller in the property chain changes their mind. There are often penalty fees and plenty of costly financial implications for anyone backing out of a mortgage deal or a home buying contract, but it can still happen.
2. A change of circumstances for the buyer or seller. For example, they fall ill, lose their job or break up with the partner they were buying with.
3. A mortgage block. One of the buyers in the chain is unable to get approval for a mortgage to match the asking price of a seller.
4. A problem is uncovered. With one of the properties in the chain after the survey is carried out, forcing the deal to fall through.
5. The legal aspect of the process is taking too long. For example, a conveyancer may have forgotten to complete the necessary paper work and the seller has decided to sell to someone else instead.
It's important before the home buying process begins that you take these potential scenarios into consideration. The same applies if you are selling or moving home.
For instance, when hiring a conveyancer to carry out the legal work or instructing an estate agent to help you with the process, make sure they are aware of the whole property chain and the timeline.
If one person in the chain misses an important phone call or forgets to sign some important documents, then all deals within the property chain could be delayed.
What does no upward chain mean?
“No upward chain” in homebuying means the person you are buying from is not involved in the chain and you are not required to wait for them to complete any other home transaction before finalising the deal.
A property chain with no upward chain is most likely to occur when you are buying a new-build direct from the developer.
You might also find a seller who is not moving or has no plans to buy another home, so you would not be dependent on them – and therefore there would be no upward chain.
There might still be a chain below you, if you are moving home and waiting on the sale of your current property before completing the purchase of your new property.
What does chain-free mean?
Chain-free in homebuying is when no one on either side of the deal is waiting on anyone else before completing the transaction, i.e. neither party is moving home.
A chain-free property purchase is most likely to occur with a first-time buyer or someone who is purchasing a second home direct from a developer or from someone who is selling their second home.
The most common chain-free homebuying process is between a first-time buyer and a new build property developer.
Essentially, “chain-free” means that both the buyer and seller can carry out the transaction without depending on the outcome of any other deal.
How can you help keep a property chain together?
Keeping a property chain together should in theory be the responsibility of those being paid to do so, such as the estate agents and conveyancers.
Through their regular communication ordered paperwork processing, a property chain should stay together for everyone's deals to go through.
In reality of course, this isn't always what happens. So it’s important to do your research on who you hire to help with the homemoving process and take useful measures to speed things along.
For example, when speaking to estate agents bring up your concerns about a property chain slowing down the deal and ask what they would do to help prevent it. Some companies will have their own dedicated staff to ensure that the homemoving process reaches a swift conclusion.
Of course, along the way there might be instances where it would be best for you to step in. It's generally good practice either way to ask your estate agent or conveyancer what stage the homebuying and selling process is at and if you can help by chasing up people on their behalf.
Try to remain friendly and courteous as you need these people on your side. But at the same time, make sure they know you expect regular updates.
Here's a breakdown of all the things you can do to help keep a property chain together and make any plans to move home a little smoother:
- Get your cash ready: your solicitor will need at least a 5% deposit of the house value to exchange, so make sure this sum is lodged with them as cleared funds.
- Have the right mortgage in place: make sure everything is agreed for your home loan, including the lender's mortgage valuation. Compare the best, current mortgage deals at money.co.uk.
- Do some research on the professionals you hire: preferably use an estate agent and solicitor that have been recommended. Find out how available they are likely to be and if they will provide regular updates throughout the process.
- Keep in touch: Speak to your estate agent and conveyancer regularly and maintain a good relationship. Find out if there's anything you can do to help move things along.
- Get organised: Keep all your important paperwork in a file and keep it handy in case you need it at a moment's notice. Put your estate agent and conveyancer's contact details into your phone.
- Agree on timelines: Ask the solicitor to include clauses in the contracts with the dates of exchange, surveys and completion, to ensure that the seller or buyer follows the same timeline.
- Sign and return all necessary paperwork as soon as possible: ideally deliver them by hand or by special delivery.
- Get ready: Don't delay in researching and comparing broadband, energy and insurance deals – make sure you have everything you need for your new home ready so you can move in swiftly.What to do when a property chain breaks
Unfortunately, there is not a lot you can do if the property chain breaks. But financially speaking, a break in the chain and a deal falling through would be disastrous.
If you are the one pulling out of the deal after exchange, then you will lose your deposit.
Even if you aren’t, you may have paid several fees involved, such as mortgage arrangement, legal fees and surveying costs, so you will lose money either way.
Home Buyers Protection insurance (click below) can be a good way to mitigate this risk.
It's important to find out why the chain has broken. For example, if your mortgage lender is unwilling to match the asking price or you can't sell your home in time, then you could consider getting a bridging loan, where you borrow against your current home to help cover the costs.
These loans can be expensive and may not be good value for you. so be sure to compare the best deals first – use money.co.uk to find a suitable low rate deal.
Some estate agents may offer guarantees on a sale going through if you're moving home, even in the event of a property chain breaking. But beware, as these deals usually stipulate that they can sell your home for far below market value.
There are no guarantees when moving home that your property chain won't break, so the best guard against that is to simply be prepared and do your research.
You may also be interested in…
- What does a conveyancer do? - You'll need to hire a professional to carry out the legal work behind buying a home. But what can you expect from the service? Find out here.
- Homebuying fees laid bare - No matter how much you set aside, the legal costs associated with buying a home are all-too-often underestimated. Get to grips with what to expect.
- Top 5 causes of delay in the conveyancing process - An accepted offer on a home is cause for celebration. But, in many cases, the journey to completion can be longer than you bargained for. Watch out for these 5 most common delays.