Property chains are common in the UK. If the successful completion of a house sale is reliant on the sale of at least one other property, the individuals involved are in a property chain.
Almost half (49.8%) of all house sales in England and Wales fell through in the final quarter of 2018 and problems in the house sale chain are a common cause of a failed sale. Unless a seller is lucky enough to find a first time or cash buyer and have no upward chain themselves, both parties will be vulnerable to the risk of a broken property chain.
So why do house sale chains break and how can they be fixed?
Should I Worry about a Property Chain Breaking?
A fifth of failed house sales in the UK is due to people being unable to sell their home so they can purchase another property. When a sale fails before completion, the buyer loses any fees paid for conveyancing, valuation, brokerage and surveys. According to government figures, in 2017, homeowners lost over £500m a year to failed house sales.
Unless you’re fortunate enough to be able to wait for a buyer with no chain or you’re in a position to buy another property outright, understanding the potential problems that can arise and how to fix them could save a lot of time and money.
Common House Sale Chain Problems
Several common problems can break a property chain.
- The property survey reveals significant issues. Although a survey is not a legal requirement, most buyers are advised to pay for one to ensure the house they are buying is worth the agreed sale price. If the survey results reveal issues that would be expensive and time consuming to repair, a buyer may pull out of the sale or wish to renegotiate the sale price — which the seller may refuse.
- The buyer fails to secure finance to purchase. Lending criteria have become more stringent following the mortgage market review (MMR) in April 2014. Borrowers must meet minimum standards of “mortgage affordability” before their loan is approved. Many house sales fall through because the buyer cannot obtain the mortgage they need to purchase the property.
- One of the parties changes their mind. Often, the seller or buyer simply has a change of heart and pulls out of the sale. It could be the seller decides not to sell, or the buyer may decide the house is not quite right for them.
- The buyer is “gazumped”. If the seller accepts an offer and subsequently withdraws from the sale because they receive a higher offer, the original buyer is gazumped and their sale fails.
- Unforeseen circumstances result in the buyer or seller withdrawing. Illness, a relationship breakdown, redundancy — there are many potential changes in a person’s circumstances that could result in a house sale falling through.
How to Fix Property Chain Problems
- Sell and rent to avoid losing your buyer. If the house you were buying is no longer available for any of the reasons listed above, consider selling and moving temporarily into rented accommodation to avoid losing the buyer of your home. Not only will this prevent the entire chain breaking, but it will put you in a stronger position as a buyer because you will be chain free.
- Consider part-exchange. If the sale of your house falls through, a part-exchange scheme could facilitate the purchase of a new property — without needing to wait for another buyer. Part-exchange is only available for new build properties and is a popular choice for people moving into retirement housing. The developer of your new home will accept your old property as part payment.
- If financing is an issue, try renegotiating the sale price. A buyer who is refused a mortgage for the amount required to meet the agreed sale price should try to renegotiate with the seller. If the difference in price is not too large, the seller may well be willing to accept a lower fee to avoid the time and hassle of finding another buyer.
- Consider using a cash buying service for a quick house sale. Using a house buying company is the fastest way to sell a property. Such companies can make an almost instant cash offer for any property, regardless of its location or condition. Once a survey is complete, the seller can receive the proceeds of the sale in as little as seven days. A cash buying service is the only way to secure a guaranteed sale — fast.
Selling and buying property can be time-consuming and stressful. Be prepared for all eventualities and don’t panic if the worst happens and your house sale chain breaks. With a little patience, communication and compromise, all need not be lost. Focus on your priorities. If the primary goal is not to lose your buyer when it’s taken months to find them, continue with the sale if your purchase fails and move into rented accommodation. If not losing your dream home is all-important, do all it takes to sell your home fast — even if you have to accept a slightly lower sale price. A broken house sale chain does not have to mean disaster; it can be fixed.