What is a Property Chain and How Can it Affect You?
A property chain is when the successful completion of a property sale depends on several other purchases going through. If one person pulls out of the chain or runs into problems or delays, it can affect the house-buying process for everyone else.
Once your offer to buy a property has been accepted, there is a good chance you’ll enter a ‘property chain’, where the successful completion of your purchase depends on other property transactions going through too.
What is a property chain?
Property chains are quite common when you’re buying a home because most home movers use the money from the sale of their existing home as a deposit for a new property.
A property chain refers to a series of buyers and sellers who need to successfully complete a property purchase before anyone can move home.
For example, your seller may need to find a home to buy. And the owner of that property may need to find somewhere too, creating a chain of linked transactions.
Why property chains can be difficult
Property chains can become quite long and may delay your ability to move house if the other sellers and buyers run into trouble. If a sale further up the chain experiences delays or, worse still, collapses, it is likely to have a knock-on effect on your own move.
Common reasons why there may be delays or collapse of a property chain include:
- someone pulling out of the process
- gazumping – when a seller accepts a higher offer at the last minute
- gazundering – when a buyer reduces their offer at the last minute
- an issue with the mortgage process
- a house survey revealing problems with the property
- unforeseen events, such as a serious illness
Delays or the collapse of a property chain can affect the cost of buying a home. For example, most mortgage offers only last between three and six months so if your purchase is pushed back, you may have to re-apply for a new deal. If a sale falls through, you may also lose some of the money you spent on conveyancer fees and house surveys.
Generally speaking, the more homes involved in a property chain, the more likely there are to be delays.
» COMPARE: Mortgage rates and deals
How to manage a property chain
Although property chains can be inconvenient, the following tactics can help you manage them:
- Do some digging: Ask the seller or estate agent about the size of the property chain ahead of you. Similarly, if you’re selling a home, it’s worth checking how many transactions your buyer is relying on before they can buy your property.
- Maintain good communications: Keeping in contact with your estate agent and conveyancer can help you stay on top of the property transactions and catch any issues early.
- Have your documents ready: Having your finances and documentation in place as early as possible will help you respond quickly to requests for information or signed paperwork. This reduces the risk of you causing delays in the chain.
- Consider insurance: If you find yourself in a long property chain, it may be worth taking out home buyer protection insurance. This type of policy covers some of the costs you may lose out on, such as money towards survey costs and conveyancing fees, if anything falls through.
What is a chain-free property?
A chain-free property is one where the sale doesn’t rely on another property transaction going through. That means a seller doesn’t depend on the money from the sale of the property to move to a new home.
The most common types of chain-free properties include: new-build homes, properties that were previously rented out, or those where the previous owner has died.
Without a chain to slow things down, the sale is more likely to be straightforward and complete quickly.
What is a chain-free buyer?
A chain-free buyer is someone who doesn’t need to sell a home before they can move into another. First-time buyers are the most common type of purchaser in this category.
Being a chain-free buyer can boost your chances of having an offer accepted because your offer for the property isn’t conditional on selling your own home. In some cases, it may mean you can negotiate a better price from the seller.
So if you aren’t tied into a chain, make sure you tell sellers and your estate agent and use it to your advantage.
» MORE: How much mortgage can I afford?
Image source: Getty Images
John Fitzsimons has been writing about finance since 2007. He is the former editor of Mortgage Solutions and loveMONEY and his work has appeared in The Sunday Times, The Mirror, The Sun and Forbes. Read more
Brean is a personal finance writer at NerdWallet. She covers a range of financial topics and has written for consumer titles including Which?, Moneywise and The Motley Fool. Read more