When searching for a home to buy, you may come across properties that are advertised as chain-free. So, what is a property chain?
Put simply, a chain is a collection of property transactions linked together because they rely on the sale of every home in the chain.
The people at the beginning of the chain are likely to be buyers with nothing to sell, while those at the end have nothing to buy. The people in the middle consist of those who are selling to one person and buying from the next.
Here we explore the potential pitfalls that come with being part of a property chain and how you can play your part in helping the buying process proceed as smoothly as possible.
Please note that the buying process is different in Scotland. If you'd like to find out more about buying in Scotland, please read more here.
An example of a chain
Ben is a first time buyer with nothing to sell. He is buying a studio flat from…
Susan, who is buying a bigger flat from…
Kirsten and Ian, who are moving to a house with a garden being sold by…
Pauline and Alan, who are buying a bungalow from…
Frank, who is retiring to the holiday home he already owns in Spain.
Keeping the chain together
Problems arise when circumstances change for someone in the chain. If somebody has to pull out of buying or selling – or agreed dates are missed – it can cause a knock-on effect for everybody else. There are many reasons why a chain can ‘wobble’ or be thrown into jeopardy.
- People change their minds. It’s human nature to have second thoughts but it can have an impact on numerous people when a change of mind involves property. Occasionally buyers get cold feet or another property new onto the market catches their eye.
- An offer is accepted, but the prospective buyers have trouble securing a mortgage. Even when prospective buyers have a Decision in Principle a full mortgage offer isn’t guaranteed. In addition, if the lender deems the property’s value to be less than the asking price they can withdraw an offer.
- Agreed dates are delayed. Balancing the financial commitments of the chain is a delicate operation and many people have a part to play. Let’s take our chain above. For example, let’s say Kirsten and Ian have agreed a completion date with Susan. Their purchase of Pauline and Alan’s house relies on the funds coming from Susan’s solicitor on the agreed date. If the funds are late, Kirsten and Ian cannot fulfill their commitment to buy Pauline and Alan’s house by their agreed completion date. This can lead to the process stalling.
- Issues arise from surveys. The process can also falter if a property survey uncovers a major or even a minor issue. The prospective buyer may wish to renegotiate the price, or even pull out altogether. This can result in a mad scramble to put the house back on the market and secure another buyer.
- A buyer reduces their offer. Occasionally a buyer reduces their offer right at the last minute, for example, just before contracts are exchanged. This is known as gazundering.
- A new buyer comes in with a higher offer. This is known as gazumping. The seller accepts an offer from one buyer, but later accepts a new, higher offer from somebody else. Unfortunately, some sellers will change their mind with the lure of a more generous offer on the table.
- Personal circumstances change. As in all walks of life, people in a property chain can experience illness, sudden unemployment or a relationship breakdown. Any of these can have an impact on the chain if it results in someone having to withdraw from a purchase or sale.
Tips and hints
You can play your part in helping to keep the property chain together. Here are a few tips and hints to keep in mind.
- Changing your mind down the line can be expensive and can jeopardize the whole chain. It’s important to be 100% convinced that the property is right for you before you put in an offer.
- When selling, your estate agent will offer their opinion on the suitability of your prospective buyer. You want to be assured that they have their financial arrangements in place and a conveyancer in mind.
- Keep in regular touch with your conveyancer and estate agent to ensure everything is on track and being done on time.
- Paperwork deadlines are crucial. It’s important that everyone in the chain has a reliable conveyancer, a helpful estate agent and a trusted lender who can work together to ensure the process runs smoothly. Ask friends and family for recommendations when choosing yours. Equally, you need to ensure that any paperwork you are expected to do is completed correctly and delivered on time.
- If you intend to have a professional inspection or survey before buying, arrange one as soon as possible. If you are selling, encourage your buyer to arrange their inspection or survey quickly.
- Don’t make an offer on a property before you have a mortgage agreed in principle yourself. In addition, do your research – does the asking price reflect other prices and sales of similar nearby properties?
- If gazundering happens in the case of your sale, you will need to decide whether to accept the lower offer or remarket your property.
- If you are gazumped when buying, remember, you can’t influence circumstances outside your control. Losing a property can be stressful and disappointing and can leave you out of pocket if you have paid for an inspection or survey or other fees. You just need to pick yourself up and tell yourself that you will end up with the perfect home for you.
Estate agents – an insider’s knowledge
Estate agents play a crucial role in keeping a property chain together. It’s in their interests to ensure nothing goes wrong with the sale they are dealing with. After all, their commission relies on a successful and timely sale. Here’s what one former estate agent we spoke to had to say about property chains…
When it comes to the buying or selling process, it’s in everyone’s interests to keep things moving along. I always advised buyers and vendors to get all forms and documents filled in and returned to their conveyancer as soon as possible after receiving them. Don't give your conveyancer an excuse to go slowly. Conveyancers prefer to have the ball in the other conveyancer’s court, but that can also mean they won't chase them for responses. Make sure your conveyancer is working with their counterpart. Always remember that you're the client and they are working for you.
If you're selling, your agent should be checking the chain and should have contacts for all the agents in the chain. Your agent should know if the chain is complete, and should be able to find out if any sales in the chain have problems. All agents want to keep a chain together so will generally speak to each other to help the common cause. Ask your agent for updates on the chain below if you're selling – it may mean finding another buyer quickly if there are problems down the chain.
The material contained in this article is intended for information purposes only and not as advice.
You should obtain professional legal or other advice if you are unsure about the effect on you of any matter in this article.
Published 26 January 2018