Being part of a property chain can present a number of problems; if you are buying from a seller who is also purchasing a home, and so on – the risk increase. Unfortunately, when one link breaks – the whole chain can end up collapsing, proving to be a turbulent and expensive incident.
In a bid to ease some of the stress associated with buying a home, we will explain the reasons for property chains breaking, how to prevent it and what to expect if it happens to you.
It’s a sad fact that on average, around 30% of house sales fall through, and this can be down to several reasons. Buyers coming up against challenges when raising the finance that they need, because the seller hasn’t found a property of their own, a simple case of cold feet or because of gazumping or gazundering.
While you might not be familiar with the terms, you will be familiar with the scenario. Gazumping takes place when a seller comes across a buyer who is willing to pay a higher price for the property and gazundering is when a buyer decides to reduce their offer last minute.
Another reason that house sales fall through is because of something that has been found after a survey has taken place. Especially in older properties, when the cost of repairing an issue requires the buyer to part with more money; when a disagreement arises over which party is liable for the cost of a repair, the threat of collapse soon becomes very real.
In reality, there is nothing that can be done to stop a chain from breaking, but there are steps that you can take to limit the chances.
From the very beginning of the process, it’s important to be honest and transparent about your financial situation, in theory, this should reduce the chance of problems arising when it comes to securing your mortgage. It’s best practice to obtain a mortgage in principle before beginning your property search, so you ensure you are looking at homes within your true budget.
It’s also imperative that you find a solicitor who will be honest and transparent with you; we cannot stress how vital communication is throughout the whole process. Be clear from the very beginning of the relationship with regards to your expectations when it comes to communication – often chains can begin to deteriorate when there is a lack of communication and honesty. Often, it becomes the blame game and frustrations increase rapidly. The delays may be down to a third party, but your solicitor should still respect the required standard of customer care.
When it comes to selling, the temptation can be there to push your agent to market your property at an inflated price. While it’s disappointing if the valuation doesn’t come in at the price you were hoping for – a fair and realistic price will be more enticing. Don’t fall prey to hiding any damage or problems with the property; they may not be picked up by estate agents or potential buyers, but they will be unearthed when the survey take place and threaten to rock the sale.
Of course, to minimise the risk altogether, you could seek out a sale whereby there is no chain- but this could severely limit the properties available.
It can be an extremely stressful and upsetting time if a potential sale, that looked promising, falls through. It’s likely that you had already mentally moved into the property – but this is the time to be practical and pro-active. Contacting local estate agents to enquire about current and upcoming properties will allow you to maintain the sale of your property.
If you have made it to the stage where contracts have been exchanged, but you feel that your buyer is delaying the process, you can serve a ‘notice to complete’. This notice sets a deadline for the buying party to complete within ten days or face losing their deposit.
If your buyer drops out, it’s imperative that everyone else in the chain is kept informed, it may be worth lowering your asking price; we recommend this is when the price of your property is close to a Stamp Duty threshold. It’s a good strategy to undercover the reason that a buyer has pulled out, if it’s a financial issue, there have been occasions where everyone in the chain agrees to lower the sale price. There are also specialist companies that will guarantee a house sale should the chain break; these companies typically buy the property in question for around £20,000 less than its value – however, you do save on estate agents fees.
The other option in these instances is bridging loans, which allow you to borrow against the value of your current home. However, these loans can be an expensive option and should be viewed as a last resort.
It can be a financial burden, not to mention emotionally draining when a house sale falls through. Depending on where you are in the process, you stand to lose solicitors and survey fees, this could run up into the thousands, if for instance you chose a full home survey. You may have also paid a booking fee, or non-refundable mortgage arrangement fee.
In a final act to prevent the disaster of a collapsed chain occurring, be sure to find out the status of the seller in the early stages; do they have another property lined up, are their finances and legal team I place? Set time boundaries where possible, aim to keep the length of time between exchange and completion at two weeks.
The more information you have from the off, the greater your chance to reduce a collapse in the chain.
Article supplied by Taylor Rose TTKW solicitors of London.