Why Property Chains are Collapsing and How Cash Buyers Can Help?
Estimated reading time 8 minutes
What is a property chain?
A property chain involves multiple house buyers and house sellers linked together as each purchase and sale needs to go through to enable the other transactions to take place.
Put simply if you are selling a flat and have found a buyer and have been lucky enough to also find a house to buy but need to have the money from the flat you are selling to buy the house you want then you are in a chain.
The chain typically begins with a first-time buyer or someone who does not have a property to sell, and ends with someone who is only selling their property, not purchasing another home. The chain may continue to increase if the buyer of your flat has something to sell and seller of the house you want to buy is also buying somewhere.
Everyone in the chain is reliant on those above and below them in the chain. This type of process is very common when buying and selling through an estate agent.
What are the key steps for a property chain?
- Obtaining a mortgage in principle
- Making an offer
- Property moved to SSTC (Sold Subject To Contract) by the estate agent
- Instructing a solicitor
- Organising legal objectives
- Ordering a survey
- Mortgage finalisation
- Exchange of contracts
- Completion day
Why one in five property chains are collapsing?
Unfortunately, property chains are collapsing more frequently than ever before as they are extremely complicated and fragile given the number of individual parties involved and the number of steps that need to move along smoothly.
When you take into consideration that each property has a solicitor/conveyancer acting for the buyer and seller and each property has a mortgage lender, a surveyor and an estate agent involved, the number of people involved quickly spirals and with so many people involved in the process it is easy to see why things can quickly unravel and why one in five property chains are collapsing.
Not only must everything run smoothly between solicitors, everyone needs to be able to obtain the necessary finance. Plus, all parties need to agree on a completion date, when all transactions will become final and legally binding, and everyone can move. The longer the chain the higher the probability of things falling through.
What are the most common reasons why one in five property chains are collapsing?
One in five property chains are collapsing when selling your home. There are any number of reasons as to why this can occur such as survey issues, conveyancing delays, gazumping and a breakdown in negotiations. The larger the number of house buyers and house sellers in the chain the probability of the chain collapsing increases.
Common reasons why property chains are collapsing
Survey issues can arise after a prospective buyer puts forward an offer that is accepted and then notifies their mortgage company. The mortgage company instructs a surveyor who may or may not agree on the value of the property and the amount they are willing to lend against it. Surveyors may take time to arrange their inspection and, in their reporting back to the mortgage company with their findings. During that time an unincumbered buyer may appear and step in. The surveyor may uncover something that was not declared by the seller and it could throw a spanner in the works.
Conveyancing delays occur as everyone in the property chains paperwork must be fully supplied and solicitors must be instructed in a timely manner. Missing documents and deeds take time to find and or replicate and some local authorities take up to four weeks to respond to searches. So much variation on the amount of time required for each stage of the process causes hold ups and puts the chain at risk.
Often, there are problems obtaining leasehold packs from third-party managing agents as the managing agents can take their time in producing the full information required due to the sheer volume of what needs to be supplied.
Mortgage issues caused by significant delays in the process could see mortgage offers expire and therefore the purchaser may have to reapply to buy the house for sale. If the property is down valued by a surveyor then the prospective buyer will not be able to secure the necessary funding and the sale will fall through, which in-turn will cause the chain to break the same is true if a buyer does not get approved for a mortgage. If the surveyor turns up something untoward that results in the mortgage company revoking the funding again the property chain is likely to collapse and chain runs the risk of falling apart.
Gazumping is when a house seller having already accepted an offer for their property, accepts an improved offer from another buyer. This is still legal in England and Wales. It can happen because a verbal agreement to buy or sell a house is not legally binding and estate agents are legally obligated to pass every offer they receive on to the house seller. Which means it is against the law for them to refuse to submit an offer from a new even if the house seller has already accepted an earlier offer. Note until contracts are written and exchanged another party can step in and buy the house for sale at any time prior to this.
Negotiations collapsing a buyer or seller may just decide they are no longer in a position to sell my home due to unforeseen circumstances. If a buyer in the chain tries to gazunder lowering the price just before the exchange and the seller does not want to accept then the chain will fall apart.
REMEMBER a property chain only moves as fast as its slowest link, any delays increases the chances of the chain being broken. It only takes one chink in the chain to increase the likelihood of a break.
The Lengthy Process of Selling Property in a Chain
One of the biggest problems with property chains is that it can take a long time to sell a home that is part of one. This is because each chain has its own rules and procedures, and it can be difficult to coordinate sales between buyers and sellers. In some cases, it can take over a year to sell a home through a chain. This is especially problematic for buyers who are looking for a quick solution to their housing needs.
What is the average property chain length UK?
Generally, the longer the chain, the longer it will be until you get the keys to your new home. According to the Gov.uk website whilst buying or selling a home normally takes 2 to 3 months the process will take a lot longer if you’re part of a chain of buyer and sellers.
If you are in a chain it is imperative you do two things to shorten the average property chain length.
- Keep the processes moving quickly
- Keep the lines of communication open
When selling a house in a chain the house selling fees start to grow quickly and the average cost of a collapse in a chain is £2,700 as the buyers and sellers incur the associated costs of surveys, conveyancing and mortgage arrangements.
How to avoid property chains
- Request a chain-free buyer, prioritising first time buyers and cash buyers who are not involved in a chain.
- Sell and rent while you find a property to buy. You will make yourself an attractive chain-free prospect to a house seller.
- Buy a new-build home as there will be no one above you in the chain and some developers offer part exchange.
- Use a leading cash house buyer, by contacting Gaffsy you can guarantee yourself a quick house sell. We can purchase any property in UK no matter the condition and history. We ensure a quick and smooth sale and work to a timeframe that suits you.
Why using a Cash Buyer overcomes these issues
When it comes to buying houses, buying flats, buying land, buying garages in fact buying any type of property there are typically two main types of buyers:
- Cash buyers
- Those who need to secure funding to buy
We know the problems associated to selling your home to a buyer that needs to secure funding and is part of a chain.
Why now it’s time to consider a cash buyer?
Cash buyers are typically more interested in buying properties quickly and without complications. This is because they don’t have mortgage company paperwork to contend with and avoid the lengthy waiting periods needed to secure the approval that comes with using a mortgage. You can discover more around ‘do cash buyers offer less‘ today.
Those who require a mortgage will have to go through the loan approval process and the property will similarly have to be surveyed and the lending approved before a purchase can actually proceed to exchange.
Both types of buyers have their own advantages and disadvantages. When it comes to property chains, using a cash buyer can be the quickest and easiest solution for buyers who are looking for a quick sale.
Gaffsy says ….
A quick, chain-free house sale is the dream, and Gaffsy can make it a reality. We can offer you a no obligation cash offer on your property now.
Give us the green light to buy your home today, you won’t pay a penny and we even cover your legal fees.