What is a Property Chain and How to Avoid It?
- Maggie Boycheva
- Oct 7, 2024
- 4 min read
Updated: Mar 12
What is a property chain, what happens when a property chain breaks and how to avoid it. Find the answers to these questions and more in our blog below.
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What is a property chain?
A property chain happens when a series of property sales are connected. For example, someone is selling their home and buying another but they need to wait until someone else buys the property they are selling before they can complete their next house purchase.
If you already own a property, it is likely that you will need to sell your current property in order to be able to purchase a new property. If the individual buying your property also has a property to sell, this will add another link to the chain.
When you’re in a property chain, buying your next house could take longer and is more complicated. The more people in a chain, the more likely it is that something can go wrong. If the property chain breaks, the purchase or sale of all properties involved can fall through.
How does a property chain work?
Let’s look into more details of how the property chains work.
Each transaction within the property chain relies on the success of every other transaction before it.
A typical property chain can look something like this:
First-time buyer – At the start of the chain. This person isn’t selling a home, only buying
Homeowner – Selling their home to the first-time buyer and purchasing a new home from a retiree
Retiree – Selling their home to the homeowner and moving in with family. This person is not buying anything, only selling
In the chain example above there are two house purchases that need to take place. However, house chains are often more complicated than this and involve more than 2 parties.
How often do house chains collapse?
You’ll be surprised how often property sales fall through. A recent survey showed that sometimes the percentage of broken house chains can be as high as seventy-five percent:
A house chain with 2 houses: 42% chance of a sale falling through
A house chain with 3 houses: 56% chance of a sale falling through
A house chain with 4 houses: 67% chance of a sale falling through
A house chain with 5 houses: 75% chance of a sale falling through
These numbers are very high and also very concerning for anyone looking to sell or buy in the future. Are you facing a broken house chain? We can help! Get in touch with use today and avoid being stuck in a house chain.
What happens when a property chain breaks?
When a property sale chain breaks, it can have significant consequences for both buyers and sellers involved in the transaction. Here's a breakdown of what can happen:
Consequences for Sellers:
Delayed Sale: The seller's plans to sell their property may be disrupted, leading to a delay in receiving the sale proceeds and affecting their own onward purchase.
Resell at a lower price: If the buyer withdraws from the sale, the seller may miss the opportunity to sell their property at the agreed price and may have to relist it, potentially at a lower price.
Missed Opportunity: Not being able to sell their own property, means that the seller can also lose the property that they were planning to buy next.
Holding Costs: Sellers may have to bear the ongoing costs of maintaining and securing the property while it remains unsold, such as mortgage payments, utilities, and insurance.
Consequences for Buyers:
Delays in Moving: If the chain breaks, the buyer may experience delays in being able to complete the purchase and move into the new property as planned.
Financial Implications: Buyers may have to cover additional costs, such as extending rental agreements, storage fees, or mortgage arrangement fees if the completion date is pushed back.
Stress and Uncertainty: The uncertainty and stress of a broken chain can take an emotional toll on buyers, who may have made plans and commitments based on the expected completion date.
Why do property chains collapse?
There are many reasons why property chains collapse but here are some of the most common ones:
Mortgage application is rejected
The conveyancing process is taking too long
The survey or home report show unexpected problems that the new buyers are unable to fix
Someone simply changes their mind about buying the property
How to mitigate the impact of a property chain?
Communication and Transparency: Maintaining open and transparent communication between all parties in the chain can help you identify potential issues early and work towards a resolution.
Contingency Planning: Whether you are a buyer or seller (or both), consider having contingency plans in place, such as having backup financial arrangements or alternative moving dates, to help cushion the impact of a broken chain.
Flexibility and Compromise: You may need to demonstrate flexibility and willingness to compromise to find a solution that works for everyone and minimises the disruption.
Insurance: You can get certain insurance products, which will help you claim some of the expenses if your house sale falls through.
How to avoid a property chain?
Unless you are a first time buyer purchasing a new built property, you will likely be in a property chain.
However, having a chain free buyer for your property can streamline the process and reduce your risk as you will have more options.
One such option are property cash buyers, like Express House Buyers Scotland. We work with vetted investors who have funds available. We can buy your property in cash in as little as 7 days, freeing you from the property chains so you can move on with your life and your next home purchase.
Interested to find out more? Fill in your details below and a member of our team will be in touch! 👇