What is a Property Chain and What Happens if it Collapses?

 

A property chain is a link connecting many homebuyers and sellers.

How does this link form? Well, suppose you are selling your home and buying a new one. The person selling to you may also be buying a new home from a third person. Similarly, the person buying from you may be selling his current home to a fourth person. As this process continues, it creates a long link between many buyers and sellers.

The chain begins with a person who is only buying and not selling. It ends with a person who is only selling and not buying.

Although the concept of the property chain appears simple and logical, getting stuck in one could be a stressful situation. For one thing, the process of selling and buying becomes much slower since it moves at the pace of the slowest link. And if one link breaks, there is a domino effect which may cause the whole chain to collapse.

Why would a property chain collapse?

A property chain may entirely collapse even if one link in the chain breaks. There are many reasons why this could happen. Consider a few:

  • A buyer or seller gets a better offer and opts out of the chain
  • A buyer or seller cannot make the transaction due to an unexpected event
  • The survey shows major problems in a property causing a buyer to withdraw
  • The legal firm of a buyer or seller is unable to get the paperwork done in time
  • A buyer is unable to secure the mortgage loan needed for the purchase
  • A buyer reduces the offer at the last minute [Gazundering]
  • A new buyer from outside the chain offers a better price [Gazumping]
  • A buyer or seller attempts renegotiation but the new deal doesn’t work out

What happens when a property chain collapses?

If a property chain collapses, it can be extremely frustrating, causing a lot of stress and heartache. For example, think of how worrying it can be when you want to buy a new home but are unable to sell your present one. The situation gets especially complicated if you need to buy or sell urgently.

Apart from the stress and complications, a property chain collapse can cost you a fortune. You lose the money you spent on

  • solicitor fee,
  • property search fee,
  • non-refundable mortgage agreement or booking fee,
  • lender’s valuation fee and
  • survey fee.

To avoid the frustration of a property chain collapse, many buyers and sellers prefer to buy from and sell to a person who is not part of a chain.

But if you cannot avoid being in a property chain, here are a few steps you can take to protect yourself

  • Assess the chain situation carefully before entering it
  • Go for a Homebuyer Protection Insurance
  • Communicate well with all parties in the chain, dealing promptly with any financial issues

If you are looking for any expert advice, our conveyancers at Aristone Solicitors hold a great deal experience when it comes to property exchange matters, hence please do not hesitate to call us.

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