My housing chain has broken - What do I do now?
In the UK, 1/3 of property sales fall through after offer - so broken chains are all too common. Here are our tips on what to do if your chain collapses.
What is a 'housing chain'?
Unless it’s your first step on the property ladder, you’re likely to be selling your current property while also searching for somewhere new. If the person you’re buying from is in a similar position, this creates what’s known as a 'housing chain' – where the successful purchase or sale of a property is dependent on the success of every other link in the chain.
Why do housing chains break?
There are a number of reasons why housing chains break:
- A chain may break due to a change in the personal circumstances of a buyer change in personal circumstances. A loss of a job, family issues, illness or even just a change of heart can lead to a buyer or seller pulling out.
- Property market concerns are increasingly common as the economy, particularly in light of COVID-19, looks uncertain.
- A buyer might be gazumped when a seller who, having already accepted an offer on their property, subsequently accepts a higher offer from a different buyer.
- A seller might be gazundered when a buyer reduces their offer at the last minute.
- An adverse survey result could highlight potentially costly defects. Typically, a buyer will want to reduce their offer in line with the estimated cost of remedial works (repairs) identified in the survey. If the seller refuses, or a compromise cannot be found, the sale will probably fall through.
- Slow conveyancing means the sale process takes too long and a buyer or seller in the chain changes their mind about moving.
- The mortgage lender down values a property, meaning a buyer's purchase is no longer financially viable.
- A seller can’t find a property to buy and their buyer loses patience.
What are the first things to do if my chain collapses?
Once a housing chain breaks it can be very difficult to rescue the sale – especially if it is not your buyer who has pulled out. That doesn’t mean you shouldn’t try.
When a buyer has developed cold feet, it’s worth reaching out, either directly or via the agent, to discover why. If it is a financial issue, one possibility would be to press everyone in the chain to reduce their asking price.
If the other parties in the chain are uncooperative, you can still decide to take the hit and lower your asking price. This may be uncomfortable but when weighed up against the alternative of starting again, it may be preferable.
If you’re a buyer who is struggling to raise a large enough mortgage, consider renegotiating with your seller for a lower sales price. Renegotiating a lower price at the eleventh hour can feel uncomfortable but, depending on the reason and amount in question may well be acceptable.
Securing a short term bridging loan is an option if you lose your buyer and still want to go ahead with your purchase.
These short-term loans are aimed at property buyers and are designed to bridge the gap between buying a new house and selling your current property. Bridging loans attract high-interest rates, however, and their uptake in the UK is consequently low.
If a seller withdraws their property from the market or accepts an alternative offer, you are still in a strong position to find another property as you have a buyer, and chain, in place. You will probably have to move quickly though.
Ask estate agents if they have any sellers who are in a hurry. Sellers who are particularly anxious to move quickly may be prepared to substantially reduce their asking price, given the strength of your position.
Can I avoid a property chain?
As a first time buyer, you could try and find a property where the seller has no onward chain. Alternatively, you could consider a new build property.
As a seller, you could prioritise an offer from a chain free buyer. It may even be worth accepting a lower offer in favour of a chain-free buyer. Alternately, you could contact a house buying company, although this option probably won't get you the best price.
Communication is key
Wherever you are in a chain and whatever stage of the conveyancing process you are at, communication is a critical weapon in your arsenal.
By prioritising prompt and clear communication, you can set the tone for the whole transaction.
Ensuring that both you and your solicitor communicate clearly with all parties and that you tackle any potential issues quickly and proactively, you can make the difference between a successful sale and a broken chain.
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