Stopping a Property Chain from Collapsing | Curtis Parkinson
Stopping a Property Chain from Collapsing

Stopping a Property Chain from Collapsing

Everything is set, and you’re ready to move. But then, someone pulls out, and the whole property chain is at risk of collapsing. Moving into the house of your dreams seems to depend on other transactions running smoothly.

Property chains are commonplace, even if you’re a first-time buyer. LIt’sikely, the person selling you their house (unless it’s a new build) is also buying a property themselves. In turn, the place they’re buying is being sold by someone who is also buying a house. And so, it goes. This is known as a property chain. And it can be a very stressful process. But is there anything you can do to stop the chain from collapsing?

Why Do Chains Collapse?

Naturally, every chain is different. Some fail due to an issue with financing the purchase. Others fall down because one seller can’t find a property to move to, their circumstances change, or they get cold feet and pull out.

Disruption or collapse can also occur when a seller finds a buyer willing to pay more (known as gazumping). Or perhaps the buyer reduces their offer at the last minute (called gazundering); equally, a critical home survey outlining potentially serious, costly issues can complicate matters. An argument over price ensues, and the link in the chain is broken, causing the connecting dominoes to fall.

Whatever the reason, according to detailed pre-Covid-19 research, one in four house sales fell through in 2019. An alarming statistic that’s unlikely to fall as the effects of Coronavirus and forecast recession take hold.

Possible Losses

If your house sale or purchase falls through, it’s not just frustrating, but it can also be financially draining. Depending on your stage, you may have already paid a non-refundable mortgage fee, along with legal and survey fees. If you opted for a full homebuyer’s report, the amount could be in the hundreds, if not thousands.

If you pull out of the process after contracts have been exchanged, you’re liable to lose your deposit, a significant amount.

Preventing the Chain from Breaking

Unfortunately, it’s pretty much impossible to stop a chain from collapsing, but there are things you can try to limit the chances of it happening.

  1. Keep in Touch: Communicate with all parties from the outset. This will help to minimise issues later on. If you’re selling and your buyer drops out, keep everyone in the chain informed (including your solicitor) while you search for another buyer. Lowering your asking price may help too;
  2. Be Organised: If you’re organised, the process will be quicker, with fewer surprises. Starting your property search with an agreement ‘in principle’ demonstrates you’re in a serious position to buy and limits your search to those you can get the finance for. Also, shop around for a solicitor before you start the process of buying or selling. That way, you’ll know what your expenses are in advance, and you’ll be ready to react quickly;
  3. Be Open: If you’re selling, be fair with the price and honest about your property’s condition. It’s rarely worth hiding problems that’ll be uncovered at the survey stage;
  4. Try to Negotiate: If you’re involved in a chain, and someone pulls out for financial reasons, it’s worth trying to persuade everyone involved to drop their price to avoid the chain collapsing. Naturally, this isn’t a process for the fainthearted, but it has been known to work when all parties accept there’s a mutual benefit;
  5. Consider a Bridging Loan: Essentially, this is where you borrow money against the value of your property. Whilst this option would allow you to proceed if your purchaser drops out, it can be a costly option (interest rates are usually much higher than a standard mortgage) and one that should be considered very carefully;
  6. Consider Renting: An option many go for, but it’s not stress-free, especially if you move in with relatives or friends or end up renting out of the area. At a minimum, you’re likely to be tied to a six-month tenancy, may have to store your belongings and incur additional cost and inconvenience of moving for a second time;
  7. Consider a Quick House Sale: There are several companies around that will guarantee a property sale in the event of a chain breaking. Usually, you’re given an “in principle” offer which may change once they’ve valued/surveyed your property. If this is a route you’re seriously considering, getting several independent comparison valuations from local estate agents is a good idea. Above all, tread carefully and make sure you read the fine print. Some contracts will tie you in and prevent you from selling to someone who offers a higher price in the meantime. Also, be aware that fee structures can be unclear, so make sure you know what you’re signing up for;
  8. Consider Insurance: Protecting yourself with Homebuyers Protection insurance means you will be covered for the loss of fees you would have paid to buy a property, should the transaction fall through at the last moment. As with any insurance, it’s a question of weighing the cost against the potential risk.

Our Advice

Without a doubt, in good times, property chains are delicate. Our advice is to be prepared, communicate clearly, and be proactive. Advice from a professional will pay off. Experienced lawyers are specially trained, up-to-speed with the latest advice, and are used to dealing with highly stressful situations.

If you’re concerned about buying or selling your house and need further information or specialist conveyancing advice, please contact us. We’re here to help.

Please note that all views, comments or opinions expressed are for information only and do not constitute and should not be interpreted as being comprehensive or as giving legal advice. No one should seek to rely or act upon, or refrain from acting upon, the views, comments or opinions expressed herein without first obtaining specialist, professional or independent advice. While every effort has been made to ensure accuracy, Curtis Parkinson cannot be held liable for any errors, omissions or inaccuracies.

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