Property chains are delicate. If you are buying and selling property at the same time, then you will be in the middle of a chain, with people both above and below you. It’s also likely that there will be multiple transactions happening at once with each being dependent on the other for the chain to remain intact.
Being involved in a property chain can slow down your individual property transaction as the chain will only progress at the pace of the slowest link. More importantly, if a transaction within the chain falls through, it will break, and everyone involved will feel the effects.
The Covid-19 pandemic has also had a major impact on the property market and the lockdown restrictions that have been put in place have massively increased the chances of your property chain collapsing if you are looking to buy or sell.
Here’s a look at what could happen if your property chain collapses and what steps you can take.
How does a property chain collapse?
Your property chain could potentially collapse for a number of reasons. These can include:
- Buyer or seller’s personal circumstances changing
- Finance falling through at the last minute
- Paperwork deadlines being missed
- Issues coming up during the building survey
- A buyer simply changing their mind
- A buyer reducing their offer (gazundering)
- A buyer outside the chain coming in with a higher offer (gazumping)
When an issue occurs that is out of your control, it can be hugely frustrating. Unfortunately, until the contracts of the sale are exchanged, the deal is not legally binding on either party. You may still able to renegotiate terms with the other party before the deal collapses all together, but this isn’t always a viable option.
Covid-19 and property chains
The Covid-19 pandemic has caused widespread disruption to the property market, naturally having a detrimental impact on property chains.
The government have insisted that there is no need to pull out of any current transactions, but home buyers and renters are now being advised to delay moving to a new home while measures are in place to fight the virus. Property viewings are also not allowed.
You will be able to make or accept an offer for any existing listings, but you need to be aware that the process will take much longer than usual to complete.
If you are looking to move into a new home, you’ll only be able to continue with your transaction if the property is unoccupied.
Further guidance on what Covid-19 means for property transactions can be found on the government’s website.
Can you fix a broken property chain?
If your property chain collapses, don’t panic straightaway. The situation may not be completely irreparable, and there will be options available to you.
If you were looking to sell your home and a buyer has pulled out at the last moment, it may have prevented you from moving into a new property. It’s therefore important to keep your conveyancing solicitor, or anyone else involved in the chain, informed, so that another suitable buyer can be found as soon as possible.
It may be the case that there are a number of other potential buyers who will be able to step in to purchase the property, so all is not lost.
Coordinate a new deal with everyone in the chain
If your transaction has collapsed due to mortgage or finance issues, then it may be worth proposing a new deal to everyone directly involved in the chain. For example, if a potential buyer for your property has pulled out due to money concerns, then it may be worth proposing a lower sale price to everyone involved in the chain. It may seem like a long shot, but you won’t know unless you try.
Using a ‘Quick Sale’ Company
Using a ‘quick sale’ company who will offer to buy your home very quickly at a discounted price is a potential avenue you can explore. However, it’s important to tread very carefully if you are considering doing so.
The offer made by the company will be significantly lower than your property’s market value. Even if it does lead to further hassle, selling your property in the traditional manner is likely to be the more cost-effective solution in the long term.
Take out a bridging loan
If you are struggling to find a buyer for your current home (or they are progressing too slowly) you may consider taking out a bridging loan so you can complete on the purchase of your new home. A bridging loan means that you will borrow money against your current property. This should be a last-ditch resort, as this is a very costly way of borrowing, with interest rates being much higher than usual loans.
Can you prevent a chain from collapsing?
While you may be able to salvage your property transaction in the event of a property chain collapsing, you can also take certain measures to reduce the risk of the chain collapsing in the first place.
Sell to people who aren’t in a chain
If you have multiple offers for your home, choosing to sell it to someone who is not currently part of a property chain reduces the chance of issues arising that are out of your control.
For example, selling to a first-time buyer would be a safer option as they do not have to worry about selling a property themselves – so long as you are able to secure a suitable price with them.
Consider renting while you sell
If you are looking to buy and sell a property at the same time, the chances of the property chain breaking are significantly increased. However, this can be partially avoided if you opt to rent while you sell instead of buying straightaway. This will mean that there is no chain above you while you sell and you will be much more appealing to a vendor when you are ready to look for a new home.
You can rent privately, or even temporarily move in with friends and family if possible. This option isn’t for everyone, especially as it can bring about other inconveniences such as having to move twice or being tied into a tenancy agreement for a certain period of time (usually at least six months).
Make the most of property chain tools
There are multiple tools available to you that will help prevent your property chain from collapsing. For example, View My Chain tracks the entire conveyancing process, allowing agents, buyers and sellers to view automated buying and selling milestones such as searches being ordered and mortgages being applied for.
There are also tools that can lock buyers and sellers into a deal, preventing them from pulling out at the last minute, such as Gazeal.
The collapse of a property chain at the last moment is not just an inconvenience – it can result in serious financial consequences. With this in mind, protecting yourself from potentially losing thousands of pounds in upfront excesses is sensible.
Protecting yourself with Homebuyer’s protection insurance means that you will be covered for the loss of fees you would have paid to buy a property, should the transaction fall through at the last moment.
Get expert conveyancing advice
If you are concerned that your property chain is being delayed or you are fearful that it may collapse altogether, our conveyancing team are on hand to provide you with the expert advice you need.