A property chain involves a connected group of home buyers and sellers where there is more than one buyer involved. A property chain occurs when you want to buy a house but have to wait until the seller buys and moves into their next home.
Property chains are more common in residential property transactions where it is more likely for a purchase or sale to depend on another vendor elsewhere in the chain.
Example of a property chain:
- Start of the chain: First-time buyer who is not selling, just buying their first property.
- Middle of the chain: Homeowner who is selling to a first-time buyer and is buying from a retiree.
- End of the chain: Retiree who is selling to a homeowner and moving in with family.
This is a two-person chain as there are two purchases in the transaction. A property chain always begins with someone who is only buying and ends with someone who is only selling. When you’re in a property chain, your completion date is affected by when your seller can move into their new house.
Examples of a chain-free transaction:
- A first-time buyer purchasing a new build
- Moving in with your family or friends once you have sold your home
- Buying a vacant or repossessed property
- Part-exchanging your current property to a developer
This is also known as having no onward chain and occurs when the buyer or seller doesn’t need to rely on other transactions in order to complete their own. This is because the vendor doesn’t need to buy at the same time they are selling and vice versa.
Examples of a property chain collapse:
- Someone in the chain changes their mind about buying or selling
- The solicitor, estate agent or legal firm takes too long to process the paperwork
- One of the vendor’s mortgage applications is rejected
- The property survey shows costly or dangerous problems
A sale falling through can affect everyone in the chain. For example, you may have to put your property back on the market and miss out on your dream house, or you could lose money that you have already invested into your house purchase.
There are risks involved in a property chain as a chain can have many links and each link is a vendor who each has their own estate agent, legal firm, surveyor and mortgage lender, providing ample opportunity for things to go wrong and potentially causing a collapsed chain.
How to break a property chain:
If you are selling your house and have three parties interested in buying your property, all for roughly the same price, who are you going to choose? The first-time buyer who has the required deposit, the homeowner who has sold his house but his buyer is yet to have a survey done or the homeowner who is selling his house to a cash buyer?
The first-time buyer with no property to sell seems like the best choice to avoid a property chain but your solicitor will advise you on the best options. For example, they will establish whether someone is a serious buyer or not, has a mortgage in principle and will check to see proof of them having the required deposit. However, no matter who you choose, there is always the chance that something unfortunate could happen.
Another method to avoid a property chain is to find a short-term accommodation option, such as temporarily moving in with family or friends, to bridge the gap between selling your old property and buying your new one. This would mean that your transactions aren’t dependent on each other and that sellers will favour you over someone with a property chain.
Finally, you could look for new build properties as these will have no upwards chain. This simply means that the vendor is not looking to buy another property, even if you yourself are part of a chain.
How to keep a property chain moving:
- Avoid moving house in busy periods: While this cannot be helped in some circumstances, moving during busy periods can cause further delays. Read our guide on ‘Should I Sell My House now?’ to find out when the best time to move is.
- Get organised: Have your finances in place well in advance, especially your deposit. Your paperwork should also be well kept in a file with important details such as copies of important documents, contact details and notes from important phone calls.
- Communicate: Keep in regular contact with your solicitor or estate agent so that you can give and receive any updates as well as stay on track with everything you need to be doing.
Having said this, a property chain is unavoidable most of the time but as long as you’re doing all that you can to keep the chain moving and not holding the process up, you’ll be sure to complete your move without too many, if any, delays.