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How do property chains work?
One of the biggest hurdles when buying or selling a home can be the property chain. We explore what a property chain is, how it works and the potential pitfalls to be aware of.
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What is a property chain?
When buying or selling a home, you’ll more than likely be reliant on other property sales/purchases going through at the same time. This is your property chain.
A chain begins with a buyer who doesn’t need to sell their property to buy (usually a first-time buyer) and ends with a seller who isn’t purchasing another property. The buyers and sellers in between create the ‘links’ in the chain.
How does a property chain work?
Let’s take a look at a typical home buying scenario…
A first-time buyer puts in an offer on their dream home, which is being sold by someone who’s buying a larger property
The family selling that larger property may be downsizing, moving in with a relative or simply not buying another home
This creates a chain of four transactions (two property purchases and two sales)
Each party in the chain must, along with their respective estate agents, solicitors, mortgage brokers and lenders, coordinate for each transaction to complete at the same time
Sometimes chains can be much more complicated, with several house purchases happening simultaneously.
For a house chain to be successful, each sale and purchase that’s part of the chain has to happen at the same time. This means that the speed of the entire chain - and indeed a successful completion - is dictated by the slowest link.”Jason McDonald, Mortgage Expert
What is a chain-free property?
A ‘chain-free’ property is one where the property sale doesn’t rely on another transaction happening. This can happen for several different reasons. For example, the homeowner is moving into a rental property or selling an inherited home.
Chain-free properties and chain-free buyers can significantly simplify and speed up the transaction process. That’s why you’ll often see estate agents use the term “chain-free” as a big selling point.
Home buyers beware of the house chain collapse
When one of the linked property sales falls through, impacting the entire chain, this is known as a ‘house chain collapse’. As a worst-case scenario, this can effectively leave the remaining buyers and sellers starting from scratch.
There are lots of reasons why a house chain could break:
Financial problems. Maybe the buyer is struggling to secure a mortgage, or their financial circumstances shift unexpectedly.
Survey issues. A mortgage valuation or full property survey could reveal issues, leading a buyer to withdraw or negotiate their offer.
Personal reasons. Sometimes, a buyer or seller simply changes their mind about the transaction.
Gazumping or gazundering. A seller could accept a higher offer from a different buyer at the last minute (gazumping) or a buyer may lower their offer just before exchanging contracts (gazundering), which can cause issues for the rest of the chain.
Delays. Slow progress from third parties such as solicitors can lead to buyers or sellers pulling out.
What happens when a house chain breaks?
It really does depend. A buyer may be able to find another property or a seller may be able to find an alternative buyer, thus resuming the process with a new party fairly quickly. However, if you’re all quite far along in the process this could cause significant delays.
As a home buyer, the worst-case scenario is that you need to find a new property. If the chain collapses before contracts are exchanged, you may have already spent money on surveys, solicitor fees etc which can lead to a financial loss as well as missing out on the property.
Warning signs of a weak chain
It’s not always obvious if a property chain is likely to collapse. However, there are a few signs to look out for that suggest things aren’t moving forward in a positive direction:
Lack of communication. If you’re finding it difficult to get updates from other parties in the chain, this could be a red flag.
Missed deadlines. If other parties are delaying signing or returning documents, this could be a sign of disorganisation or hesitation. This could cause issues further down the line.
Indecisive home buyer. If a seller in your chain hasn’t found a property to buy, and seems to be taking their time looking, it can create significant delays.
Too many moving parts. Generally speaking, the more links in a chain, the higher the risk of something going wrong. That’s because a delay or disruption several transactions away from yours can easily filter down and start to impact your purchase too.
How to avoid a chain collapse
While you can’t always do something to prevent other buyers or sellers from changing their minds or pulling out of a transaction, there are some steps you can take to lower the chances of a chain collapsing:
Get your paperwork ready. Make sure you have all necessary documentation ready to avoid being the cause of any delays.
Communicate often. Regularly keep your estate agent, solicitor and mortgage broker updated to keep the process moving.
Consider chain-free properties. If you’re looking for a smoother home buying journey, consider buying a property without a chain or a new-build home.
Sell up first. If you already have a home, you may wish to move in with relatives or into rental accommodation rather than buy straight away. This will make your home a chain-free property, which is often more attractive to buyers.
Try to be flexible. This might not always be possible but, if problems do crop up, being open to negotiation or flexible to adjusting timescales can sometimes save the chain from collapsing.
Property chain FAQs
How does buying a house in a chain work?
When you buy a house in a chain, your purchase is dependent on the person you’re buying from successfully buying their next property too, and so on up the chain. You’ll need careful coordination between all parties (and their solicitors and estate agents) to ensure all transactions complete at the same time.
What is an onward property chain?
An “onward chain" or "upward chain" refers to a seller who’s also in the process of buying another property. That means they’re reliant on another transaction taking place before they can sell their home to a buyer.
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