Property Chains: Everything you Need to Know
Updated: July 2023
According to Which? 3 in 10 property chains collapse.
This is an alarmingly high figure, but what is a property chain? How long can property chains get, what does chain free mean, and what is the average property chain length in the UK?
We’ll answer this and more in our must-read comprehensive guide on housing chains.
What is a Property Chain?
A property chain is a term that’s often thrown around in the property market world, but what does it really mean? In simple terms, a property chain refers to a sequence of linked house buying or selling processes, each dependent on the one before it for the entire chain to progress and complete.
To understand how a property chain works, imagine a line of dominoes. Each domino represents a buyer or a seller, and they all need to fall in the right order for the process to be successful. If one domino (or deal) falls through, it can have a domino effect on the rest of the chain, potentially causing other transactions and deals to collapse.
The average length of a property chain can vary greatly. It can involve as few as two parties – a buyer and a seller. However, in more complex scenarios, a property sales chain can include multiple buyers and sellers, with the chain extending to ten or even more links. The length of the chain can significantly impact the complexity and duration of the property transaction process.
One question people often ask is how many homes are in a chain? A house chain will have a minimum of two people unless you buy a new build home. However, there is no maximum number of people in a property chain, so yes – it can go up to and even over ten!
One of the risks of purchasing or selling a property in a housing chain is that not only do they rely on buyers and sellers being competent enough to sign documents on time, be organised and gather funds. Chains also rely on solicitors, estate agents and mortgage brokers to do their job correctly to avoid complications later.
With so many parties involved, the likelihood of the chain being delayed or broken is increased!
Generally, the people at the chain’s start and end have the least responsibility. However, the people in the middle have to worry about several parties getting everything done on time so the chain can progress.
Below is an example of a house chain and the processes involved.
The Process of a Property Transaction
For those who are unfamiliar with the steps involved in a property transaction, they include the following:
- Getting a mortgage agreed in principle.
- Making a legitimate offer and SSTC (Property Sold Subject to Contract)
- Getting a solicitor or conveyancer in place to do the legal work.
- Arranging surveys (All the types needed to ensure the house is structurally sound and not in poor condition)
- Finalising & confirming the mortgage.
- Exchanging contracts.
- Completion.
As you can tell from the above, the process is quite long, so when people ask how long does it take to buy a house with a chain, we can only estimate as so many variables are involved. In addition, the longer the property chain, the longer it is likely to take. It could take 8 weeks, 8 months or even 18 months!
The Role of Different Parties in a Property Chain
In a property chain, each party plays a crucial role in ensuring the smooth progression of the chain. Let’s break down these roles:
- Buyers: The buyer is the individual or entity looking to purchase a property. Their role in the chain is to secure financing, usually through a mortgage, make an offer on a property, and complete the purchase once all conditions are met. Buyers are often at the start of the chain.
- Sellers: The seller is the party selling the property. They must provide all necessary documentation about the property, accept an offer from a buyer, and transfer ownership once the purchase is complete. Sellers are often at the end of the chain.
- Solicitors/Conveyancers: These legal professionals handle all the legal aspects of the property transaction. This includes conducting property searches, drafting contracts, handling the exchange of contracts, and managing the completion process. They play a vital role in ensuring all legal requirements are met to avoid any issues down the line.
- Estate Agents: An Estate agent will act as intermediary between buyers and sellers. They market the property, facilitate viewings, negotiate offers, and help push the transaction along. Their role is crucial in keeping the property chain moving.
- Mortgage Brokers: Mortgage brokers assist buyers in securing financing for their property purchase. They liaise with various lenders to find the best mortgage deal for the buyer, help with the application process, and ensure the funds are ready for the completion of the sale.
Each of these parties must work together effectively to ensure the property chain progresses smoothly. Any delays or issues from any party can potentially disrupt the chain, leading to delays or even a collapse of the chain. Therefore, understanding the role of each party can help you navigate the property chain more effectively.
Why Could a Property Chain Collapse
A property chain can fall apart for several reasons, many of which will be out of your control. It’s not uncommon for a chain to collapse after an exchange, so if you are involved in a property chain, you must also remain vigilant during and after the exchange! Below, you can read some of the reasons why there could be a break in a property chain.
- One of the buyers or sellers in the chain may change their mind.
- A house survey reveals structural or other issues with the property, and the buyer decides not to proceed.
- The buyer is unable to get a mortgage approved.
- The buyer or seller faces personal issues or financial difficulties such as divorce, illness, family bereavement, job loss or redundancy.
- The seller cannot find another property to move into in time.
- The legal firm takes too long to process the legal paperwork.
- The state of the market and other economic issues causes a party to back out.
- A party is GAZUMPED meaning someone else made a higher offer for the house.
- A party is GAZUNDERED, meaning the buyer makes a reduced offer at the last minute.
How to Prevent a House Chain from Breaking
If your property chain collapses, it can be one of the worst feelings imaginable. Most of the issues in selling a property in chain are usually out of your control, so all you can do is wait and hope the other parties can get their acts together so the chain can progress.
Theoretically, it is the job of the professionals that you have employed to keep a chain moving if there has been a break. That said, here are some things you can do to reduce the chance of a property chain collapsing.
- Choose Chain-Free Properties: If possible, opt for properties that are chain-free, along with a chain free buyer. These could be new build homes or properties being sold by owners who have already moved out. This reduces the number of links in the chain and thus the chances of a break. If you’re selling, pick a buyer who isn’t in a chain, such as a first-time buyer so you benefit from a chain free transaction.
- Select Your Buyers Carefully: If you’re selling, consider choosing a buyer who isn’t in a chain, such as first time buyers. This goes for buyers as well – ensure the owner is a chain free seller. This can help avoid potential delays or complications from an upward chain.
- Be Organised: Ensure all your paperwork, finances, and legal requirements are in order as early as possible. This can help prevent delays that might cause other parties in the chain to pull out.
- Hire Experienced Professionals: Working with experienced solicitors, estate agents, and mortgage brokers can help ensure that all aspects of the transaction are handled professionally and promptly.
- Communicate Regularly: Regular communication with all parties can help identify and address any potential issues early. This includes staying in touch with your estate agent, solicitor, and the other parties in the chain.
- Be Flexible with Your Moving Date: Being flexible can help accommodate the needs of other parties in the chain, making it more likely for the chain to stay intact.
- Consider a Bridging Loan: If you have the financial capacity, a bridging loan can allow you to proceed with your purchase even if your sale hasn’t been completed yet. This can effectively break the chain, but it’s important to consider the costs and risks involved.
- Clauses: Consider putting clauses in your buying and selling contracts, including the dates of exchange, surveys and completion.
How to Break a Property Chain
If you’re stuck in a property chain, it can be frustrating and stressful. You may be waiting for the sale of your current home to go through before you can buy your new one, but if something goes wrong, the whole chain could collapse.
There are a few ways to break a property chain. Here are some of the most common methods, along with their pros and cons:
1) Selling your house before buying one
This is the most straightforward way to break a property chain. You simply need to sell your current home first, then use the proceeds to buy your new one. This method is relatively straightforward, but it can be difficult to sell your home quickly, especially in a slow market.
2) Getting a bridging loan
A bridging loan is a short-term loan that you can use to buy a new home before you sell your current one. This can be a good option if you’re in a hurry to move, but it’s important to remember that bridging loans are often expensive. You’ll need to make sure that you can afford the repayments, and you’ll also need to repay the loan within a certain period of time.
3) Extending your current mortgage
If you have enough equity in your current home, you may be able to extend your mortgage to use as a deposit on your new home. This can be a good option if you don’t want to take out a bridging loan, but it’s important to remember that extending your mortgage will increase your monthly payments.
4) Which method is right for you?
The best way to break a property chain will depend on your individual circumstances. If you have the time and flexibility, selling your house before buying one may be the best option. However, if you’re in a hurry to move, or if you don’t have enough equity in your current home, a bridging loan or an extended mortgage may be a better option.
Here are some additional tips for breaking a property chain:
- Be prepared to compromise. If you’re willing to be flexible on your price or timescale, you’re more likely to find a buyer for your current home quickly.
- Get professional advice. A mortgage advisor or property lawyer can help you to understand your options and choose the best method for breaking your property chain.
- Be patient. Breaking a property chain can be a long and frustrating process, but it’s important to stay patient and positive. With a bit of luck, you’ll be able to move to your new home sooner rather than later.
A Final Word
Understanding how property chains work can be a complex task, but it’s an essential part of the property buying and selling process. In this article, we’ve broken down the concept of a property chain, the roles of various parties involved in longer chain, and strategies to prevent or break a chain.
We’ve learned that a property chain is a sequence of linked house buying or selling processes. The length of a property chain can greatly impact the transaction process. We’ve also discussed the crucial roles and key steps that buyers, sellers, solicitors, estate agents, and mortgage brokers play in a property chain.
Moreover, we’ve explored strategies to prevent a property chain from breaking and methods to break free if you’re stuck in a chain. Each of these methods has its own pros and cons, and the best choice depends on your individual circumstances.
Remember, dealing with property chains can be complex, and it’s always a good idea to seek professional advice if you’re unsure about anything. We hope this guide has given you the knowledge and confidence to navigate the property chain successfully. Happy house hunting!
How Can Selling to Housebuyers4u Help if you’re Stuck in a Property Chain?
If you’ve ever had your property chain collapse, you know just how stressful and expensive the whole process can be. So if you’ve experienced this or are currently stuck in a chain, why not get in touch with us here at Housebuyers4u and see if selling your house to chain-free buyers is the right option for you.
We are genuine cash house buyers who guarantee to buy any house in any condition within 7-14 days and have the cash funds available to purchase a property at any time. Below is a chart outlining our services compared to estate agents and other firms:
If that’s not enough, we are also proud members of the National Association of Property Buyers, meaning we have to follow even stricter regulations when purchasing properties. That should help put your mind at ease if you’re unsure about selling your home to a property buying company.
Even if we aren’t the right fit, we can fill you in and advise you on how to find a cash buyer for your home.
