How much is being a chain-free buyer worth?
Explaining what it means to be 'chain-free' the benefits it can bring and how to become a 'chain-free buyer'...
When selling a house, you may hear the term ‘chain free buyer’ being thrown about. But what exactly does it mean?
We’re going to explore the reason why some properties are chain-free, the problems of being in a property chain and how you can become a chain-free buyer.
What is the property chain?
The property chain is a term used to describe the way in which house sales work. The property chain describes the way that all house sales in the property market are linked together, much like the links in a chain.
The majority of house sales go through the property chain, as most people need to sell their houses to raise the funds to buy their dream home.
For example, there may be a first-time buyer who is looking to purchase a small flat, the owner of the small flat is looking to buy a small house, the owner of the small house is looking to buy a larger house, and so on. Each person depends upon the next in order to be able to move up the property ladder.
If one person drops out of the chain, it causes the chain to collapse and stops the other sellers involved from being able to continue on in the chain.
What does it mean to be chain-free?
If a property is chain-free, it means that it is independent of the property chain. The seller of the chain-free property is not reliant on the sale of the old property in order to purchase the next one.
Chain-free property is fairly rare in the UK, with only around 10% of all sales.
Reasons for chain free properties
There are many reasons why a property may be listed as chain free:
Homeowner reasons – The current homeowner may already have a new home that they wish to move into, the seller may not be buying a new home, the seller may be emigrating or they may be selling on behalf of a deceased family member or friend.
Financial Institutions (Such as Lenders, Banks, and Building Societies) – These institutions can acquire property through repossession, probate, or equity release and are re-sold on the open market. As the seller is not a private individual and is instead a company, there is no property chain.
Homebuilders – Properties that are acquired in a part-exchange transaction and are now being re-sold on the open market by a company. As the property is not being sold by a private individual, there is no property chain.
Professional Investors – Properties that have been purchased by professional investors as part of a portfolio and not for the owner to reside in are classed as chain-free properties. As they are purchased as investments and the vendor is selling them for business reasons and not to enable them to move on, they are not involved in the property chain.
New Build – New build homes are another example of a type of property that is chain-free. As they are new homes, they have no current owners and so are not reliant on anyone selling their home before moving.
Problems with being in the property chain
One of the biggest issues with the property chain is how much it can slow down the sale of a property. As the chain relies on the sale of other houses and relies on other sellers being as keen to sell and move as you are, it can lead to delays in the chain when the wrong information is given or if a sale falls through further down the chain.
Below are some of the most common reasons why there is a delay in the property chain:
Solicitors are not instructing quickly enough
Legal teams and agents are not proactive enough in the selling of the property
Buyers and sellers being unsure and unaware of their next move
Surveyors’ reports highlighting problems with a property in the chain
Delays in the signing and completion of documents
The buyer has a change of personal circumstances, such as losing their job, splitting up with a partner, or even falling ill
Slow processing of local searches
Those involved in the chain going on holiday
Incorrect information is given to the mortgage lender
The buyer fails to get the mortgage scheme that they need
The mortgage offer expired
Loss of deeds or other documentation
Issues with the transferal of funds
Buyers backing out of deals
Delays in the property chain are not the only problem that you can face whilst in the property chain. A delay in the property chain opens you up to a whole host of other problems, such as an increased risk of a sale falling through as well as leaving you open to gazumping. Buyers are more likely to go for a buyer who has the money upfront to buy rather than somebody still in the chain.
How much is being chain-free worth?
It is hard to put a price on the value of being chain-free, as it gives the buyer the opportunity to buy at their own pace, as they are not under pressure to sell cheaply, as well as giving you peace of mind and putting you in a stronger negotiating position.
Benefits of becoming a chain-free buyer
Below are some of the benefits of being a chain-free buyer.
Lower Risk – As you are not in a chain, you are not relying on selling your current property to purchase a new home, there is a much lower risk of delays or of a sale falling through.
How long does it take to sell a house with no chain? – A property transaction that involves no chain, at least on your side of the deal, will progress far quicker than a sale in which both properties are part of a house chain.
Peace Of Mind – Trying to balance both the sale and the purchase of a property can be extremely stressful. Selling without a chain can provide peace of mind and be far more straightforward than selling as part of the property chain.
A stronger negotiating position – Being a chain-free buyer puts you in a much stronger negotiating position as sellers love chain-free. It allows you to negotiate on both price and terms, such as the date of completion.
How can I become a chain-free buyer?
Extend your mortgage scheme
One way that you can become a chain-free buyer is by extending your home repayment scheme on your existing property and then using that money as a deposit on your next property.
There are two ways that you can do this:
Rent Out Your Old Home – If you rent out your old home you can then use the rental income to pay the mortgage scheme on that property. This transaction is known as “let to buy” and is a good investment as you are letting out your previous property to help buy your new one.
Alternatively, you can sell your house at your own pace, and whilst you will have two home repayment schemes, you will be able to use any profits from the sale of your old house to pay off parts of the new home repayment scheme.
However, you can only do either of these things if you have a low loan to value ratio on your current home repayments. If you do not have this, you won’t be able to extend your mortgage enough to cover the cost of a deposit for your new house.
Whilst extending your mortgage will allow you to break out of the property chain, there are a few things you need to be aware of:
Only arrange to extend your mortgage once there has been an exchange of contracts. If you extend your mortgage before the exchange and the sale falls through, you will be left with a higher mortgage debt accumulating interest.
You should try and avoid mortgage schemes with early repayment penalties as you will be stuck with extra costs if you are planning to use the money from selling your current house to pay off the new one.
If in order to afford the monthly payments on the extended mortgage you need to sell your current home, make sure there is interest in your property before increasing the mortgage. You don’t want to end up in a position where you can’t sell your home or afford the mortgage.
If you temporarily own two homes, you may have to pay the stamp duty surcharge.
Another way you can become a chain-free buyer is by taking out a bridging loan. A bridging loan allows you to complete the selling of your old home before the purchase of your new home by ‘bridging’ the gap. A bridging loan is a way to borrow money in the short term and can be arranged quickly.
However, a bridging loan can be expensive and risky, but if you have found your perfect home then it may be worth getting a short-term loan secured against your property, and paying it off once you sell.
With a bridging loan you become a chain-free buyer
It allows you to buy your perfect home
It shows the seller that you are serious about buying
Whilst a bridging loan is convenient and fast, you pay for this with a higher interest
They can also come with a range of fees that add to their expense
As bridging loans are a secured form of borrowing, you will need to put up an asset against the loan. This means you risk losing the asset if you cannot repay the loan.
If property prices are falling then, you may be left without the funds to pay off the loan.
A bridging loan is a good way to get out of the property chain, there are a few things to consider before taking one out:
You should only try signing for a bridging loan once you have exchanged contracts to avoid being gazumped and wasting money.
Put your property on the market to see if there is interest before taking out a bridging loan to avoid struggling to pay back the loan if no one is interested.
The quickest and easiest way to become a chain-free buyer is by selling your property to a cash buying company. A cash buying company acts as a cash buyer would on the open market, meaning they have the funds available to purchase your property and they’re a chain-free buyer.
As cash buying companies have the funds available, there is less paperwork meaning sales can be completed in a much quicker timescale. This means you become a chain-free buyer faster and can move into your dream home quicker.
If this sounds like something that you would be interested in then look no further because we are here to help!
At The Property Buying Company, we are a cash buyer of houses who buy any house in any location in a time scale that suits you! Plus, we cover all the fees for you – including the legal ones!
We will only require one quick viewing to make sure that our cash offer is accurate and as we are a genuine cash buyer, once you’ve accepted our offer that is the amount you will get in FULL in your bank!
We are also a member of the National Association of Property Buyers and The Property Ombudsman, as well as being rated excellent on Trustpilot, with over 1000 reviews, allowing you to feel safe in our hands.
So, if you are ready to become a chain-free buyer and see for yourself exactly how much being chain-free is worth, give us a call or fill in our online form for a free, no-obligation CASH offer which we could have in your bank as soon as you choose…