HOW DOES A PROPERTY CHAIN WORK?
How Does a Property Chain Work?
- What is a property chain?
- How do property chains work?
- What is a chain-free property?
- What happens when a house chain breaks?
- What causes a property chain collapse?
- How to prevent a property chain break
- How to fix a property chain break
- Ways to avoid a property chain
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1. What is a Property Chain?
A property chain is where home buyers and sellers are connected with each other through a property chain. When you’re looking for a house, but have to wait until the seller buys their next home before your purchase can go through—you’re in a situation known as being “in a property chain.”
When you’re in a property chain, moving house could take longer or is more complicated. The more people in the chain, the greater chance something will go wrong. When this happens this increases the chance of the property sale falling through.
You may think that buying or selling a house is an isolated transaction, but you would be wrong. Every link in the property chain relies on every other connection to succeed; if one sale falls through then all following transactions could also fail as well!
2. How do property chains work?
Your home sale is dependent on the seller in front of you buying their next one. If they don’t buy it then another property has not been sold which means that the chain hasn’t succeeded!
Home buyers and sellers are connected through a property chain. When you’re looking for a house, but have to wait until the seller buys their next home before your purchase can go through—you’re in a situation known as being “in a property chain.”
A small chain may look like the following:
First Time Buyer – The first time buyer is at the beginning of the chain and has no home to sell and is only looking to buy.
Homeowner – The homeowner is selling their property to the first time buyer and purchasing a property from a senior citizen.
Senior Citizen – The senior citizen is selling their property and going to live with family members.
There are two purchases in this chain and this is known as a two-person chain.
3. What is a Chain Free Property?
A chain-free property is where two or more people are not connected by a property chain.
Chain-free means you aren’t reliant on the successful purchase or sale of other properties. As a chain-free buyer, your home is independent and not dependent upon the sale of your own property.
4. What Happens When a House Chain breaks?
There are numerous outcomes that can happen if your house chain breaks. More often than not your house sale will get delayed you then have to wait for the deals to get sorted out. In other cases sometimes things don’t work out as planned and the chain breaks down completely and you’ll need to find another buyer or seller for your property.
Another situation is that the chain gets delayed and someone else in the chain cannot wait any longer and decides to pull out of the chain.
If your dream move gets delayed or the property chain collapse it is never ideal and can lead to a lot of stress and disappointment.
As well as the stress and disappointment this can also be expensive depending on what stage you are at in the chain. Money can be lost from solicitor’s fees, surveyor’s fees, and mortgage arrangement costs.
To avoid these costs you can apply for home buyers protection insurance which protects you in case this happens to you. You need to weigh up the pros and cons of this insurance but at the same time its not to expensive.
5. What Causes a Property Chain to Collapse?
If a sale falls through, it can have serious consequences for everyone in the chain.
The most common causes of a property chain collapse are:
A person in the chain has their mortgage refused.
A person in the chain changes their mind about buying or selling a property.
The estate agent, legal firm or solicitor does not get the paperwork completed in time for the deadline.
The property survey shows that there are costly or dangerous problems with a home in the sales chain.
Keeping in touch with your solicitor or estate agent is key to avoid any issues during the sale process. Check up on their progress every so often, and be sure not miss out!
Make sure you are properly organised. It’s important to get all of the necessary paperwork in order early on, such as your deposit and mortgage agreement.
6. How to Prevent a Property Chain Break
If you are selling your property and are in a chain then your safest option would be to sell before you buy. Another option would be to get pre-authorization for a mortgage and a bridging loan.
If none of these options are suitable look at pricing your property as low as you feel comfortable with. By reducing your property price you should have numerous people looking to purchase your home. You can then choose which person you’d prefer to buy your home, based on reliability and not price. You may have sold your property at a lower price than you expected but you will not go through the pain and stress of a chain collapse.
7. How to Fix a Broken Property Chain
If the worst does happen and your chain does break down there is still a possibility of rectifying the problem.
Look for a new buyer – Chances are you would of had more than one person interested in your property. You can then look to re-negotiate a deal with another buyer. Even better still look for a first time buyer or a cash buyer to speed up the process.
Look to move into a rented property – Although this is not an ideal solution it can keep the property chain going while you are waiting for your new home to be completed. If you are still looking for a house to purchase and are renting this will be an advantage to potential sellers.
8. Ways to Avoid a Property Chain
Sell to a chain free buyer – If you wish to avoid the risk of a property chain then look for a chain free buyer such as a first time buyer, a cash buyer or someone who is looking for a second home.
Become a chain free buyer – Move into rented, temporary accommodation or with family. This reduces the stress of deadlines and can make your more appealing to potential sellers.
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