What is a Chain and How Can it Affect Buying a House?
05 July 2018
A property chain is a string of three or more linked property sales and purchases where everyone is relying on everyone else in order to complete their transaction. If you are in a chain it can delay the sale and/or purchase of your property and put you at greater risk of the deal falling through.
A property chain is best described with an example.
Take Andrew, a first-time buyer. He makes an offer on a flat and the owner, Bob, accepts. But now Bob has to find somewhere to live, before Andrew can move in. Bob has an offer accepted on a two-bedroom house owned by Charlie. But Charlie has just had his third child and wants to find a four-bedroom house in the countryside. Andrew, Bob and Charlie are all stuck in their current situations until Charlie eventually has an offer accepted by Deryck, who is moving into a care home and so is not buying another property.
As this example shows, the person at the start of the chain will always only be buying, and the person at the end of the chain will always only be selling.
The people in the middle – known as the 'links' (in the chain) – are both buying and selling. There are four parties involved in this chain, and each is depending on the other to find a property, have an offer accepted and/or accept an offer, and complete the transaction. Until each person has fulfilled all of these things, no one will be able to move forward.
There is no limit to the number of people who can be involved in a chain, and the longer it is, the more precarious the situation will be.
Potential Problems with Property Chains
Property sales and purchases regularly break down, and so the more people in your chain, the more likely it is that something can go wrong. For instance, one party may withdraw their offer or decide to take their property off the market because:
- Of an adverse building or valuation survey
- Their personal circumstances have changed, such as redundancy or illness
- They discover there are higher charges with a leasehold property that they were not expecting
- The mortgage company will not lend them the necessary funds
- They change their mindsIt is taking too long and they find another property
- They get a better offer; see Gazumping and Gazundering Explained.
The thing about a property chain is that when one transaction breaks down, it has a knock-on effect on everyone else's transactions. Using the above example, imagine if Charlie decides that he doesn't need to buy a new house after all, and takes his property off the market. Bob will then have to begin his house hunt all over again, delaying both his and Andrew's move. Deryck will also need to find a new buyer.
This can be incredibly frustrating for everyone involved. Even if a deal doesn't fall through, each party will be depending on everyone else to complete all the necessary steps in the conveyancing process. The chain can only move at the pace of the slowest link, as all the transactions have to be coordinated. If you have one party with title issues to resolve, or who is buying a flat and having difficulty in obtaining information from a managing agent, or even someone who isn't in a rush, it can delay the process for everyone.
Avoiding a Property Chain
That is why lots of buyers and sellers try to avoid getting into a long property chain, if at all possible. You will often see property listings that advertise the fact there is 'no chain', as this is seen as a huge plus point. Certain parties will usually be at the top or bottom of a chain, including first-time buyers, probate properties, repossessions which are sales by lenders, new builds and companies that offer a part-exchange.
If you are buying or selling a property, you might want to consider finding a buyer/seller who is not part of a chain although that is not easy. Or if you yourself are a link in the chain, you could break the chainand move into rented accommodation or temporarily with family, making you a chain-free buyer.
Managing a House Chain
If you cannot avoid a chain, then to reduce stress it is best to know what stage everyone is at. There are certain things you can do to try and speed the process up, such as instructing your solicitor or conveyancer when you go on the market, getting all your paperwork completed quickly and applying for your mortgage. That way you will be ready to act when needed. You can also stay in contact with your buyer and seller and your estate agent as well as the other estate agents in the chain to help keep the process moving.
However, the reality is that a chain is subject to so many variables and you can never fully control the situation. If this is something that does not suit your personal circumstances – perhaps because you need a quick sale and purchase – you should look at finding a buyer/seller who is chain-free.
At Co-op Legal Services we can help you find some of the lowest Conveyancing fees available, and all quotes include a No Sale No Fee guarantee.