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When should you break the property chain?
If there is one thing more stressful than buying or selling a property, it is doing both together. And of course this is what many of us do when we move on from our first home to our second, and to subsequent properties after that.
In an ideal world it makes sense to do the whole thing in one go – timing the sale of your existing property perfectly with the purchase of your new home, and doing it all in one move on completion day.
That way you only have one moving day, and one set of moving costs. Plus by going straight from one home to another, you don’t have to find anywhere else to live temporarily. It’s nice and easy.
Except that in many cases, being in a property chain isn’t nice and easy at all. It can raise your stress levels to the roof and cost you thousands of pounds if the chain falls through. Non-refundable mortgage fees, survey costs and solicitors are all lost if you lose your dream property because someone else in the chain pulls out.
To say it can be frustrating is an enormous understatement.
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What can go wrong?
Around one in four property transactions fall through and the longer the chain, the more chance of a serious delay or a complete collapse. Remember a chain is only as strong as its weakest link, and no matter how committed you are to your sale and purchase, someone down the line can mess it all up.
Property transactions can fall though in your chain for many reasons, including:
The survey throws up a major problem and the buyer walks away
A minor problem is highlighted but the buyer and seller can’t agree a reduced price
The lender decides not to lend because of something the valuer points out
Financial circumstances, like redundancy, cause someone in the chain to pull out
Personal circumstances, such as bereavement or divorce, cause someone in the chain to pull out
Another party offers the vendor more money – in other words you, or someone else in the chain, is gazumped
Because there is very little you can do to predict or prevent these things happening, many buyers take the decision to break up the property chain to minimise the risks of things falling through. They are also aware that being chain-free can give them an advantage over other buyers and sellers.
Chop the chain
By breaking the property chain it is more likely that your transaction will go through to completion, simply because there is less potential for something to go wrong. A chain of five parties for example needs a lot of families and their finances to hold strong, and relies on a lot of surveys coming back without major problems. Plus the timings have to work too.
Clearly a chain of two parties has better odds of things going smoothly – although there is no guarantee of course.
The easiest way to break a chain is by selling your property and temporarily moving into rented accommodation or with family for a while, before buying a new home. There are real benefits to this.
Firstly, you can sell your home as a ‘no chain’ property, which could be appealing to buyers who want to move quickly, and are worried about getting caught up in a long chain themselves. It also means fewer delays, especially if you sell to a first-time buyer, as there is just you and them.
Even better, once you have sold up, you effectively become a first-time buyer again, chain-free and ready to move, which will put you at a serious advantage over buyers with a property to sell. Basically you become what estate agents call a ‘hot’ buyer.
This could mean you get chosen over another potential buyer, because you are seen as the safer bet. In some cases you may be preferable to a buyer even if you can’t match their offer, especially if they still have a place to sell.
It sounds great in theory, but are there any downsides to breaking the chain?
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Cost and hassle
By breaking the chain you naturally break the moving process, which means that you have to pay for two separate lots of removals. Depending on how many belongings you have and where you decide to live in between selling and buying, you may also have to pay to store your furniture and other belongings.
Anyone who has gone through a moving day, especially if you have a family in tow, knows just what hard work it can be. Choosing to do that twice within a year or so is not something most of us would relish.
If you move in with family temporarily you can minimise costs, but it simply isn’t practical for many, so renting is the obvious answer. But renting is now on average £120 more expensive a month than buying, according to Halifax, so bear in mind that your monthly outgoings will probably go up compared to your previous mortgage. Letting agents now often charge fees to tenants as well as landlords, which can total a few hundred pounds, plus you will need to pay a month’s rent as a deposit.
Put simply, renting is not a cheap option.
However, if you can afford to rent for a while, breaking the property chain can put you in a fantastic position, meaning you potentially save money on the property you buy, since you are such a desirable type of buyer. In fact, it could make the difference between you getting the home of your dreams and missing out.
It’s not for the faint-hearted, but breaking the chain could well go a lot more smoothly than being in a long property chain that suffers delays and eventually falls through. Now that will cost you time and money.
