A property chain is a sequence of property sales that must all happen at the same time. You are in a chain if you are buying from someone who also needs to buy a property, and so on. A property chain is created when these transactions all depend on each other. Property chains are fairly common in residential property transactions. Compare Estate Agents Here.
If you are a first time buyer and moving from a rented/ your parents house, the person from whom you are buying might be purchasing another house. You would become the end of the housing chain and reliant on their new purchase. First time buyers are an attractive option from a seller’s point of view due to the lack of chain they come with.
If you already own a property, you might have to sell it in order to be able to buy your new home, creating a link in the property chain. If the person buying your property also has a sale to make, this adds another. The longer the housing chain, the more risk there is in one of the links falling out, an obstacle for all buyers and sellers involved making their sales and purchases.
There are many reasons a property chain might collapse. Here are some of the most common reasons:
Sometimes it is impossible to avoid breaking a housing chain but maintaining good communications often keeps problems to a minimum.
In general, it is the job of the professionals, namely the conveyancing solicitors, to keep communicating, making sure everyone is doing what they are supposed to. Some estate agents have dedicated sales-progression teams whose main objective is to keep things moving forward. Some firms do not have such teams and/or are simply not that great at managing the process. In this case you may want to step in to keep the momentum going. Keep asking your estate agent and conveyance solicitor to chase people up who are stalling things. Here is a breakdown on how to maintain an effective property chain:
Finding yourself stuck in a housing chain can be stressful and expensive. If just one person drops out, the whole chain can collapse, and you and everyone else can suffer emotionally and financially as a result.
There are three main ways to avoid ending up in a housing chain:
If you sell first, hoping to buy soon after, you may have to rent for a while if there is nothing suitable on the market. This can prove very costly. Also, if prices are rising, then by the time you’ve sold, a new house could be unaffordable.
Bridging loans are high interest. If possible, only sign for one after you have exchanged contracts in case you get gazumped. Also, if you fail to sell your house straight after, you might have difficulties making repayments due to the interest builds up and if property prices fall, you may be unable to pay off the loan. Only consider a bridging loan if you have a fair amount of equity in your current property
You should do this as soon as possible after you have exchanged contracts since getting gazumped would leave you with extensive debt, accumulating interest. Look out for, and avoid, mortgages with early repayment penalties and remember: if you cannot sell your house afterwards you may owe lenders more than you can afford to repay each month .
It is often difficult to avoid a chain but good communication is often the key to limiting the risk of a problem. For other estate agent info, check out our other articles.
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