When it comes to selling a house, first-time buyers and cash purchasers are often favoured by sellers because there isn’t a chain to worry about. Any house sale and purchase that involves a chain of people who need to sell their house before they can buy another carries the risk that the chain will break. The longer the chain, the greater the risk that someone in it will be unable to complete their sale and related purchase.
This is probably the most stressful element of buying and selling a property. The other people in the chain, and their personal circumstances, are entirely out of your control. All you can do is hope that everyone is ready to swap houses and money at the same time. Having some information at your fingertips about what happens if your chain breaks can help you to manage the problem if it does arise.
Why do property chains collapse?
Some of the most common reasons for property chains breaking are:
- The buyer changes their mind about the property.
- The buyer is unable to secure their mortgage.
- The buyer pulls out or fails to successfully renegotiate the price after survey reports.
- Either party becomes frustrated with slow progress (with delays caused by solicitors, search enquiries or surveyor reports).
- The seller can break the chain by deciding not to sell (perhaps due to a change in their personal circumstances), or by remarketing the property for a higher price.
Unfortunately, about a third of house chains have fallen through in recent years. This may be because of rising mortgage interest rates, which can give buyers cold feet before committing to a purchase. Sometimes, the buyer will try to renegotiate the purchase price with this in mind, and the seller may decide to remarket instead.
What happens if the chain collapses?
If someone pulls out of the chain and it collapses in the early stages, unfortunately there is nothing that can be done about any money you may have already spent on searches, surveys and legal fees. This is considered a normal risk of buying a property.
The two final stages to a house purchase are exchange and completion. These usually take place on the same day, but if there is a long chain involved it can be preferable to exchange contracts with an agreed completion date for everyone to aim for. This is because upon exchange, the sellers and buyers become legally committed to go through with the sale and purchase, and if they don’t then they can be sued for breach of contract. This makes it more likely that completion will go ahead.
If contracts have been exchanged and the buyer pulls out, the buyer will forfeit the deposit they’ve paid - the seller gets to keep that deposit. However, if the seller is then unable to complete on their own purchase (because they don’t have the money without selling their home), they will have to forfeit their deposit, and so on up the chain.
If a buyer has pulled out after exchange, but their seller is able to find another buyer, the chain may survive. The new buyer will need to do all their searches and secure their mortgage offer and so on, and all of that takes time. The completion date is therefore likely to be delayed.
If the completion date can’t be met, anyone within the chain who has been inconvenienced or put to expense for this could seek compensation for a breach of contract. So, someone at the top of the chain may have spent money on removals fees or storage, and seek to recover those from the person they are selling their property to. If any compensation is sought, claims need to be made all the way up or down the chain and can affect everyone involved.
Can a broken property chain be fixed?
The issues that lead to property chains collapsing have always existed, but in previous years it has usually been quicker to remedy a broken chain. In a booming property market where there’s an abundance of potential buyers, a buyer who has pulled out of a purchase is swiftly replaced.
The housing market in 2023 and 2024, however, has been slow due to rising interest rates and anxiety over the cost of living, so if a buyer pulls out of a purchase it can take several weeks or months to find another.
So yes, a property chain can be fixed, but it may take a long time. If everyone in the chain is prepared to wait for another buyer to fill the gap, the chain can be repaired. If not, others in the chain may pull out and seek other buyers or other properties to buy, causing the chain to collapse altogether.
How do you avoid the chain breaking?
To minimise your chances of your property chain breaking, you (and your estate agent and solicitor) need to ensure that you and your buyer have the funds available in the form of firm, valid mortgage offers. Mortgage offers are time-limited, so if there are any delays to the sale/purchase it’s important that your solicitor checks that your mortgage offer is still in date, and asks the buyer’s solicitor to do the same.
It is important that you choose a solicitor with a good reputation for progressing their cases. A good solicitor is proactive and will request information, challenge and query anything unusual in the documentation from searches and surveys, and communicates well throughout.
Once the surveys have been completed and all searches have come back, consider seriously any attempts by your buyer to renegotiate the price. Bear in mind the cost of delays incurred in finding another buyer when deciding whether to accept a lower amount, as well as deciding if you can still afford the property you intend to buy.
Exchange contracts when your solicitor is confident that everyone in the chain has the funds to complete and is willing to go ahead. The timing of this needs to be careful - too early, and you risk financial penalties and unwanted expense if the chain collapses after exchange; too late and you may risk the chain collapsing through people pulling out on a ‘whim’, through a change of heart or frustration at lack of progress.
What to do if the property chain breaks
If, despite your best efforts, the property chain breaks you can do one of two things.
You can hold your nerve (if everyone else in the chain is willing to do so) and hope that the missing buyer/seller in the chain can be replaced quickly.
Or, you may need to remarket your house and/or find another property to buy outside the chain.
What to do if your buyer pulls out of your house sale
If your buyer has pulled out, you can’t force the person selling their house to you to wait for you, all you can do is ask and explain the situation. If they want to remarket their house in the hope of selling it to someone else quicker, there’s nothing you can do to prevent this.
If you need to find another buyer quickly, remarket it immediately but also ask your estate agent to approach any others who have made offers on your home in the past if they’re still interested. Depending on your circumstances, you might decide to look into companies that buy houses quickly, though bear in mind that they are likely to give you far less than the market value for your house.
What to do if you can’t buy the house you wanted to?
If the chain collapse means that you can no longer buy the house you wanted to, you have a choice to make.
You could inform the buyer that you’re unable to sell until you find another property. They may be prepared to wait, or they may decide to look for another house to buy.
Or, you could go ahead with your sale. If you’ve emotionally ‘checked out’ of your house and really want to move, or need to move to a different area for work / family, you may decide to carry on with the sale even if you don’t have anywhere you want to buy.
When you’ve sold your home, put your house sale proceeds into an interest-bearing account and use the interest to cover any extra costs.
You could move in with family or friends while you find the house of your dreams, or you could rent a property or holiday let for a short period. If you do either of these things, you may need to put many of your household belongings and
furniture into storage. If you’re staying somewhere temporarily, it doesn’t make sense to take a houseful of possessions with you, only to have to repack and transport it all to your new permanent house in a few weeks or months.
Instead, you could put your household contents into a
self storage unit for safekeeping until you’re ready to move it all into your new, permanent home. This is likely to be cheaper than renting a larger property, and your belongings will be kept safe, clean and dry and out of the way.
You could ask your removals firm to take your household contents direct to your self storage unit, and take the basics with you to your temporary home.
Hope for the best, prepare for the worst with self storage
If you are worried about your chain breaking and need to move house come what may, please get in touch with us for a quote and any other information you need about a self storage unit for your belongings. You can reserve a unit without a deposit and at short notice in most of our stores, and as we have stores all over the country we’re likely to have a store close to where you want to move to.
At least with self storage as a Plan B you can relax a little knowing that at the very least you can go ahead and sell your property even if you can’t then buy the one you’ve invested your time and energy in so far. Yes, it will be disappointing to lose out on a house you want, but there will be others that are just as good if not better, and you can search without the pressure of having to tie in a sale!