Chain

A Chain as used in real estate is the process of purchasing or selling a house via a series of deals where each deal depends on the preceding and subsequent purchase. It is a common practice in the UK.

It describes a line of buyers and sellers connected together, because each person is buying or selling property from the other, besides individuals at the beginning and end of the chain. The chain can begin with someone who is only purchasing, not selling, and end with a vendor who is only selling not purchasing. The ‘links’ within a chain comprise of people in between who are hoping to buy and sell a property.

A major cause of delay in chains is that a seller may be hoping to move into a new home themselves. As a result, they can’t sell their property until they have finalized their own purchase, thus slowing down the sale of their home to waiting buyers. And if the seller they hope to buy from is in the same waiting situation, the chain could go on and on.

Besides the vendor, each property in a chain will normally have its estate agent, solicitor, surveyor, and mortgage-provider assigned to it. As a result, there could easily be dozens of professionals attached to one chain.

If there is a setback in a chain, there could be a delay in the whole process. For example, if a surveyor is unable to show up to work for some reason, or a solicitor omits something in a contract, the progress of the property sale or purchase will be delayed. In some cases, it can run into days or weeks.

A housing chain is only as fast as its slowest link. The tricky part is recognising who could cause a delay and encouraging them to move on with their part.

How to Avoid falling into a property chain

Falling into a chain can be a major setback for any person, especially if they have to meet up other obligations tied to selling or buying a property. It is easy to avoid making the mistake by preparing adequately and researching right.

The following ways can help prevent one from entering a chain;

• A person who is selling and has several offers on their table can select a buyer who isn’t a chain. For instance, a first-time buyer.

• If a seller is finding it difficult to get offers on their property because they are in a chain where other buyers are chain-free, they can sell that property and move into a short tenured rental, or with friends or family.

They will become a chain-free buyer which is a significant advantage when making an offer because of the high appeal to other vendors. The risk with this strategy is that finding a property to buy afterwards is not guaranteed.

• Buyers who have substantial purchasing power can look to properties with a short upward chain, or a non-existent one. For example, one where the previous owner has been moved into a care home or where the vendors had it as a second home and don’t need to find another place to live in.

• New build homes lack an upward chain for apparent reasons, and people with a property to sell can meet the builder for a part-exchange. This means they might offer to purchase the seller’s old property to hasten the process. However, sellers may not get the best price for the value of their property.

What’s the bad thing that can happen in a chain?

Besides the hassle of having to monitor each player in a chain, or wait for the seller to conclude their purchase on the front end, the bad thing that about chains is the high rate of failed transactions (broken chain).

What does it mean for a chain to break?

This is when a prospective property purchase or sales deal fails to go through. There are many reasons for this, from the vendor receiving higher offers, to the buyer being unable to meet the mortgage-lender’s terms. In some cases, people identify major problems during the property survey and back out. Once a link is broken, the whole deal is ruined for other players in the chain.

Two common terms associated with broken property chains are gazumping and gazundering.

Gazumping is where a seller finds a buyer who is willing to pay more and automatically decided to pull the plug on the deal, even after the potential buyers have placed deposits and made other commitments.

Gazundering is where a potential buyer opts to reduce their offer at the last minute for a number of reasons, including a general market drop, or discovery of imminent repair projects or a better offer elsewhere.

These factors contribute to the collapse of a chain, waste of money, time and effort.

Other reasons that could cause a chain to break include:

• A seller whose has lost a new home purchase and thus cannot sell their own home.
• A potential buyer who has lost their job and cannot meet the financial obligations
• A broken relationship/divorce can affect a couple’s home purchase/sale
• Bureaucratic survey or mortgage lending process leading to delays

Buyers or sellers who believe any of these reasons could affect them should deal with them before proceeding with the transaction in the first place.

Sellers should have estate agents vet prospective buyers thoroughly before going along with the sales process.

Managing a house chain to keep it moving

Normally, it is the responsibility of a professional organisation to maintain communication and ensure every aspect of the deal is going as expected. While some real estate agencies are competent on this front, others are not. Buyers or sellers who are unfortunate to be involved in a chain and are unable to back out, can manage it to keep it from breaking.

Individuals can inquire from their estate agents whether they can help by hurrying up other players who are halting the entire process. This includes visiting or calling to remind them about their obligations.

Because of the stress involved in badgering people to do their jobs, it is important to get it right from the start. This means employing a trustworthy and experienced real estate agent, conveyancer or property solicitor.

When buyers and sellers learn to recognise chains and avoid them, it will facilitate more property transactions to go through successfully.

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