Are you in a property chain that you fear will collapse, and you’re not sure what to do? Here’s our guide to help keep your house purchase on track.
As a homebuyer, you might face the risk of being in a property chain where you are dependent on everyone else’s transaction going smoothly.
This could even be the case if you are a first-time buyer, because although there will be no-one below you in the chain, there could be several parties above you in what is known as an ‘onward chain.’
If you are selling at the same time as buying, you will likely find yourself in the middle of a chain with people both above you and below you.
Being in a chain can slow things considerably, as the chain will only progress at the pace of the slowest link, and if one transaction falls through, the chain will break, and the effects will be felt by everyone.
The longer the process takes – and the longer the chain – the greater the chance of it breaking down, potentially costing you a fortune in the process.
Why might a chain collapse?
There are many reasons a sale may fall through elsewhere in the property chain.
It might happen if a buyer somewhere down the line can’t get a mortgage, or if someone changes their mind and takes their property off the market after agreeing a sale.
Other reasons could include one of the parties being made redundant, or a buyer pulling out after a survey throws up costly repairs which need to be carried out.
Gazumping and gazundering also play their part. Gazumping is where a seller accepts an offer from one buyer but then takes a higher offer from someone else at the last minute, thereby scuppering the sale.
Gazundering is where a buyer reduces their offer at their last minute, often just before exchange, which may result in the seller being unable to accept and the chain breaking.
What can you do?
As a first-time buyer, the ideal is to find a seller who is chain-free. This means finding someone who is not looking to buy a property at the same time as selling theirs to you. But this is not always possible.
If you are selling at the same time as buying, the ideal is to have not only a seller who is chain-free, but also a buyer who is chain-free – such as a first-time buyer or someone who has already sold and moved out of their property. Again, this scenario may be difficult to find.
Ways to fix a broken or breaking property chain
If you do find yourself in a chain, all is not lost, as there are steps you can take to try and keep things on track:
1. Keep communicating
Communication is key. You need to keep in touch with other people in the chain and respond promptly with all information you’re required to provide. By building relationships, you can increase your chance of keeping a chain together, as it becomes harder to let somebody down once you’ve built up a rapport.
2. Take control
The faster you can move towards exchanging contracts, the better. Keep in touch with your solicitor, estate agent and mortgage broker and make regular progress checks. If you’re organised, the process should be quicker and there is less chance of things going wrong.
3. Get everyone in the chain to agree a reduced sale price
If you discover that someone in the chain has pulled out because of money issues, you could try getting everyone in the chain to agree to a lower sale price. Persuading all parties it is of mutual benefit will be no mean feat, but there are occasions where this has worked.
4. Buy a property below you in the chain
You will need enough capital for this, but if there is a particular property lower down the chain which won’t sell, you could consider buying this to get things moving.
This might work if, say, there’s an inexpensive flat at the bottom which simply won’t shift. But don’t rush into this decision, as it’s far from straightforward, and there will be implications, such as 3% stamp duty, if that property is then viewed as a ‘second home.’
And, assuming you don’t want to keep this property, you then face the hassle of trying to sell it yourself. Or, if you decide to keep it, potentially trying to let it.
5. Sell to a ‘quick sale’ company
If you are looking to sell as well as buy, and your seller pulls out, you could look into selling to a ‘quick sale’ firm. These companies offer to buy houses very quickly at a discounted price.
But tread carefully as there are concerns that with some firms, homeowners could be misled and lose out financially. Research thoroughly before going down this route as the offer made could be well below your property’s market value.
6. Make use of technology
Check out tools aimed at helping to end the pain of being in a chain, such as View My Chain. This tool is designed to reduce fall-throughs and achieve faster completions by tracking the entire conveyancing process.
The tool allows agents, buyers and sellers to view automated key buying and selling milestones, such as searches being ordered or mortgages applied for.
Another tool, Gazeal, locks buyers and sellers into a deal and prevents them pulling out.
7. Consider a bridging loan
If you feel you’re running out of options, you may want to think about a bridging loan. With one of these loans, you borrow money against your current property. The issue is, this can be a costly way to borrow, and you should generally only consider this as a last resort.
8. Rent while you sell
If you are looking to sell and buy at the same time, you might want to consider moving in with friends and family – or rented accommodation – while you sell. That will mean there is no chain above you, and hopefully only a very small chain below you or no chain at all.
This will make you much more appealing to the vendor when you start to look for a new home. There are downsides, though, such as the added inconvenience and expense of having to move twice, and being tied into a tenancy agreement for a certain period.
If your purchase does fall through, this could prove costly, as you may have shelled out thousands of pounds in upfront expenses, such as solicitor and surveyor fees.
To avoid ending up out of pocket, consider protecting yourself with Homebuyer’s protection insurance.
This product covers you for the loss of costs you’ve made in good faith to buy a property in the event of the purchase falling through.
Zoopla has partnered with The Home Insurer, a broker, which will scour the market to help you find the best deal.