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Your June Property Jargon BusterPROPERTY CHAIN

What is a property chain and what should you do if yours collapses? ⛓ Carry on reading to find out.

Your June Property Jargon Buster... 'PROPERTY CHAIN'

What is a Property Chain?
A property chain is a series of linked property purchases happening at the same time where all the sales depend on each other in a chain like fashion. In short, each party is buying a property from someone else in the chain and selling to someone else in the chain. You will probably have heard the terms 'chain free', 'no onward chain' and 'no upward chain' before which all refer to different aspects of the chain..

What does 'Chain free' mean?
These two words can be music to many prospective buyers ears! 'Chain free' means that the vendor doesn't need to buy another property to be able to sell their current one. If you are a chain free buyer you are in a strong position as your purchase doesn't depend on you selling your property first and sellers may prefer your offer to other offers.

There a a number of reasons that a property purchase can be chain free, including:
  • The buyers are first time buyers
  • The vendor is relocating abroad or into a rental property
  • The vendor is selling a second or inherited property
  • The buyer is a cash buyer
  • The vendor already has a new property to move to
  • The home is being sold by a company, (this can occur during a repossession)

Are there risks associated with property chains?
In short yes! As there are so many people involved in chains including estate agents, mortgage lenders, surveyors and solicitors there's ample opportunity for things to go wrong. The main issue that people find with property chains is that they are slow moving as the chain can only progress at the same rate as the slowest link. Another issue with property chains is that they often collapse. This happens when a buyer or seller pulls out of their transaction, breaking the chain.

Chains can collapse for all sorts of reasons, including;
  • Someone simply changing their mind about purchasing a property or a sale
  • A buyer failing to acquire the mortgage amount needed
  • A change in circumstance for a buyer or vendor (illness, divorce or job loss)
  • Surveys uncover unexpected issues with a property
  • Legal firms taking too long with the paperwork
  • The possibilty of ‘gazundering’ (when a buyer reduces their offer late in the day) or ‘gazumping’ (when a seller accepts a late offer that is higher).

Luckily there are things to be done to manage, or even avoid these pitfalls.

Are there ways to avoid being in a property chain?
For many, being in a property chain is unavoidable but there are many ways you can decrease the chances of being in a property chain. That being said, it is always best to listen to the advice of your agent as they have years of experience in dealing with property chains and of course each situation is different.

Here are some tips to keep things moving forward smoothly:
  • The best way to avoid unnecessary headaches is to communicate regularly throughout the whole process. This is where a good estate agent and solicitor can make all the difference, as it’s their job to keep things on track.
  • If you have multiple offers on your property consider the chain-free buyer, choosing the highest offer is not always the best decision if you have a cash buyer ready to move straight away!
  • Look to buy a property with no upward chain (this means that the vendor is not looking to buy another property) or a new build.
  • Consider using short-term living accommodation to bridge the gap between selling your old home and buying your new one, meaning the transactions aren't dependant on each other. Many people choose to rent a property or move in with friends or family (one thing to bear in mind though is that it could take a while to find your new home so it depends on how much you like these people!)
  • An agreement could be made whereby the vendor agrees to a date by which they have to move out, whether they’ve finalised their purchase or not. This can be risky for the vendors, especially if they do not have back-up accommodation, so they’re more likely to agree to it if the property has been on the market for a while and they don’t want to risk the deal falling through.

What can I do if my property chain collapses?
When a chain collapses it can be hugely frustrating and stressful, but it is important not to panic or lose sight of the bigger picture. There are steps that can be taken to resolve most issues.

If the collapse of the chain is at your level, for example your buyers drop out because they have changed their minds or couldn't get the mortgage they needed, you can ask your agents to get in touch with anyone else who made an offer on your property.

If the issue is at another level in the chain it is important to find out what the problem is before making any decisions.

How quickly can you buy a house with no chain?
In theory a chain free sale should proceed quicker than one with a chain. If your mortgage is approved or you don't need a mortgage, you may be able to buy a chain free property within weeks from having your offer accepted to completion. Compare this to transactions when you’re in a chain, which may take a number of months until you get the keys.

However, despite the fact that chain free buyers are usually in a better position, it doesn’t necessarily mean the sale will go smoothly. Anything can hold up a sale: surveys revealing unexpected structural issues, buyers changing their mind and problems with deeds are just a few complications that can arise.

In reality, you could have a chain free sale that drags on forever or a chain containing multiple parties where everything goes smoothly. So while chain free buying is best according to the law of averages, it’s not always so simple.

If you would like advice on selling your home please contact us on 01803 214214 (Torbay) or 01626 818212 (Teignbridge)