How does a property chain work?
What is a property chain?
A property chain is quite simply, a sequence of linked house purchases. When you are in a chain, buying or selling a house depends on the purchases either side of your property. If you are a first-time buyer, your chain only moves in one direction, as you do not need to sell a property to be able to purchase your new home. This is also true (but in reverse) if you are selling a property but not buying another one (such as if you inherited a house which you then wish to sell, or you are going into rented accommodation) – the chain is one way.
Essentially, a property chain begins with someone who is only buying, not selling, and ends with someone who is only selling, not buying. A property chain will have a minimum of two people in it (unless you are buying a new build), but there is no maximum number of people in a chain. The longer the chain, the more complicated the transaction will be, which is one the reasons why some transactions can take longer than others – because there are more parties to coordinate.
The chain will only progress at the pace of the slowest link; the tricky bit is knowing who that is at any one stage and encouraging them to get a move on.
The key steps
Nearly all house purchases will follow the same steps, from getting a mortgage agreed in principle to completion. Each step can potentially cause a chain to collapse or provide a reason for why things may take longer than anticipated to move forward. The key steps you go through during a property transaction are as follows:
- Mortgage agreed in principle
- Making an offer and property sold subject to contract (SSTC)
- Arranging a solicitor
- Ordering legal searches (surveyors which includes a value survey, a property survey and a local survey)
- Finalising your mortgage
- Exchanging contracts
Please also read our article on First Time Buyers Conveyancing Timeline article which explains the above process in more detail.
What causes a chain to be held up?
When you have multiple parties that all need to do things in sequence for a process to progress this causes issues. Delays can be driven by multiple reasons, consumers don’t know what they need to do next and when, some agents and legal advisers don’t proactively chase their customer to action things, properties have problems, people change their mind, the lack of transparency all makes it really difficult to understand if a transaction is running into delays.
Another reason would be if a potential problem is raised during property searches, such as the property survey revealing a structural issue, which then scares the buyers. This could cause the buyers to pull out of the sale leading to the collapse of the whole chain. Sometimes, it doesn’t even take a problem to be flagged to cause a buyer to change their mind- they may get cold feet and pull out regardless, which again can cause issues.
What does it mean when a property chain collapses?
The collapse of a property chain means that the sale of the houses involved will no longer go through. This can happen anywhere within a chain and can be the fault of any party. When a property chain collapses, it can not only be incredibly frustrating, but also very expensive. Depending on what stage you are in with in the house moving process, you can lose the money paid for solicitors’ fees, surveys, and a non-refundable mortgage arrangement fee or booking fee, which could total thousands of pounds.
What can I do to prevent collapse?
Previously, there was little you could do to prevent problems occurring in your chain, except ensuring your own finances were in place and constantly calling your estate agent to check the status of all parties. Legal searches, for example, usually cost around £300, so traditionally people have been reluctant to order these until they feel reassured that their claim won’t fall through, and the moving process will continue albeit all of Express Conveyancing’s property searches come with free search insurance.
How to keep a house chain moving
Theoretically, it should be the job of the professionals to keep communicating and ensuring the right things are happening.
However, some firms aren’t great at managing the process, and you may find you have to step in to keep things on track. Ask your estate agent and conveyancer whether you can help chase people who are holding things up (if you do contact other parties directly, remember that manners and friendliness go a long way in these situations).
If you’re unable to contact others in the chain yourself, ask who will call them and when they’ll be able to update you.
As well as chivying others along, responding to questions and completing tasks quickly yourself will help. Make sure you:
- employ a good, experienced estate agent and conveyancer/property solicitor
- speak to your representatives regularly but within reason and ask if there is anything, they or you should be doing
- get your finances in place early, especially cash for your deposit at the time of exchange
- file everything, including copies of your correspondence and notes of telephone conversations
- keep copies of your service providers’ contact details at work, as well as at home, in case you need to contact them urgently
- have copies of documents that are likely to be requested to hand
- sign and return all your paperwork promptly
- deliver documents by hand, courier or special delivery
- put clauses in your buying and selling contracts stating the dates of exchange, surveys and completion.
Other and most important steps you can consider are:
- Don’t just choose a conveyancer based on price. If they have good communication skills and can work quickly, this will save time and money in the long run.
- Have the finance in place early before you find the property.
- Regularly speak to everyone involved in the transaction, especially the estate agent and conveyancer to keep the momentum going.
- Be honest – if there is something that you think might affect the transaction flag it up early.
- Keep a track of the paperwork, most transactions are dealt with electronically these days and you may not get them all at the same time.
- The paperwork will require original signatures and therefore takes time to arrive.
- If you are selling as well as buying, you will have to supply information about the property, make sure you have this to hand in advance.
- Talk about time frames. It is good to discuss potential time frames early so that each party is clear on what the goals are so that when you try and push things along it is not a surprise to anyone.
- If there are multiple buyers or sellers agree for one person to be the contact so there are fewer people involved.
When you are looking to buy or sell a property, it is useful to ask the agent whether your seller or buyer is part of a chain, as the answer might affect your decision or price. The longer the chain, the more complicated the process could be and the greater the risk of the transaction failing through no fault of yours or the other sides. If this is something that worries you, be sure to talk to your solicitor at the outset of instructing them, and they can advise you further.
Disclaimer – our articles are designed to give you guidance and information. There is no substitute for proper direct advice, particularly as everyone’s circumstances are different. If anything in this article may affect you, please contact us for advice that is specific to your circumstances.