Broken property chains are an infuriating occurrence and an all too common symptom of selling a property on the open market - a task which in itself is no easy feat.
You do hours of property prep ahead of viewings (sacrificing time off work to do so), debate your asking price constantly, stress over the condition of the current market and then finally, when you manage to get an offer accepted and instruct a solicitor, your buyer pulls out before exchange. In short, this means if you don’t find a replacement sharpish, it’s likely your property sale will fall through. OUCH!
Sadly, the situation where a buyer pulls out before exchange is not uncommon, due to the amount of unpredictable variables that are involved in property chains. So, to minimise the likelihood of your house sale falling through or to help you out if it already has, we’ve poured everything we know about chain break into one bumper blog.
Want to know something specific about the affect of chain break on property chains? Use the menu below to navigate to the relevant section of our guide…
- What's a property chain?
- What does breaking the chain mean?
- Why does a house sale fall through?
- If a buyer pulls out before exchange, what's the cost?
- Can I protect myself against chain break?
- How do you stop a house sale from falling through?
A property chain is when multiple buyers and sellers are linked through the sale or purchase of a property, much like links in a chain. Your typical property chain comes in two parts, and alters depending on your position. See a breakdown below…
The upward chain - These are the sellers of the property you’re looking to buy, the sellers of their onward purchase and so on. A large upward chain can have its challenges, as your completion date will often depend on when those above you can move. Not ideal if you’re after a quick sale!
The lower chain - This is the buyers for your property, the buyers of their property and so on. The lowest person in the chain is someone who doesn’t need to move for a sale to go ahead. This could be a first time buyer living with parents, an empty property that’s been through probate or someone selling a second home. These parties with no dependant sale also hold the upward most point in property chains.
Property chains are pretty common in the house buying process and are typically less risky the shorter they are. This is why those with no dependant sale often have a stronger hand in negotiations. A long chain can be a significant deterrent for both buyers and sellers, as the likelihood that a buyer pulls out before exchange is higher. An occurrence that can prove to be time consuming, as well as stressful and expensive.
Property chains break when either a seller or buyer pulls out before exchange. This could be a pulling out of either a sale or a purchase, and can very easily cause sales along the entire chain to fall through - unless their position in the property chain is replaced by another party.
In the majority of cases chain break is perceived as a bad thing, however in some instances if a seller or buyer pulls out before exchange, it can be rather beneficial. For instance, escaping a long chain could actually help you move quicker, as fewer parties have to agree on a date for completion. You could also achieve more money for your current property, and (if you’re a shrewd negotiator) secure a lower price on your onward purchase. The perks of being an attractive buyer and seller! (No need to blush!)
Buyer pulled out before exchange? We could be the missing link in your chain...
Selling a house is never as simple as it sounds, especially when there’s a lengthy property chain involved. So to help you minimise the chance of chain break, here are the main reasons why a seller or buyer pulls out before exchange…
Stumbling upon hard times
Managing your finances responsibly is key to avoiding chain break. While financial issues are also affected by unfortunate circumstances, for instance job loss, a business going under etc., being financially responsible can ease the effects significantly and can prevent you or your buyer pulling out before exchange. However, it’s worth remembering that a sudden job loss can cause a lender to decline your mortgage, as well as decrease your chances with other lenders.
TOP TIP: Vet every buyer who makes an offer with a fine tooth comb, and ask for proof of their mortgage in principle before they submit an offer. Take these precautions to find yourself a reliable buyer and it'll far less likely that your buyer pulls out before exchange.
Exaggerating the truth
Just as we encourage you to do above, a mortgage lender vets all potential borrowers to assess how capable they are of making repayments. At this point the lender takes their research one step further to ensure that the details you provided for your mortgage-in-principle are correct. If there’s a noticeable difference – for instance, you told them you earn three times more than you actually do – the lender is perfectly within their rights to decline your application. A move that could cost you your dream home and have you being the buyer who pulls out before exchange.
We recommend avoiding these at all costs, as they're often the reason that more than one buyer pulls out before exchange. Why? Here’s the two main reasons…
• They’re serial timewasters – As their name suggests, indecisive buyers spend countless hours sat with agents and viewing properties without really pinning down what they’re looking for. Not that this stops them tempting you with offers and agreeing a purchase. After all, offers are only legally binding once a sale has exchanged, so what have they got to loose? If a property they were looking at previously undergoes a substantial price reduction, they can always pull out before exchange and go for that one instead. Not something you want to occur!
• They’re untrustworthy – Trust is what holds property chains together, so it's no surpise that indecisive buyers also cause others in the chain to pull out before exchange. Housing sales are stressful enough without the fate of your sale resting with an indecisive buyer. For many of us, we don’t want the hassle.
It’s worth bearing in mind that not all sellers want to sell their house. For some, a property sale could be triggered by their circumstances. They could’ve lost their job, have debts to neutralise or been ordered to do so by the court. So it's worth baring in mind that if such a situation is resolved mid-sale, they could also be 'that buyer' who pulls out before exchange.
Struggling to find a new home
The majority of us are particular about in what and where we live, and that’s not surprising. Our home says a lot about us to the outside world, not to mention the amount of time we spend in it. So as you can imagine, if you’re Sold SSTC struggling to find an onward purchase, you have two options. Either wait for the right property to come along or pull out of the chain before exchange.
Had your buyer bail on you? We'll take their spot in as little as 7 days!
Failed surveys are another cause of property chains breaking. Best case scenario, your buyer and lender have the upper hand, but the sale still continues. This may require you to accept a lower offer from your buyer and take out a different product from your lender, or pay a higher interest rate.
Worst case scenario is the buyer pulls out before exchange, leaving you forced to find a replacement. You may also have to seek other mortgage lending if the results of the survey have made your property less mortgageable. If you can't secure another mortgage, you many have to break the chain yourself.
A rather complex word to do with a property chain, with albeit a rather simple meaning. Gazumping is when a higher offer is made by another buyer (someone outside the chain), and accepted by the seller, which providing you don’t up your offer, can force you out of a chain before exchange. Gazzumpers are commonly cash buyers or someone with no dependant sale, with the ability to swoop in and take the stress of the chain off the seller’s shoulders. Think of them as a Get Out Of Jail Free Card. In doing so, Gazzumpers tear down the entire upper chain – a severe problem if it occurs at the foot of the chain, but less so if near the top.
Another funny term to do with a property chain, with an equally simple meaning. If you’ve been gazundered a buyer has lowered their offer on your property just before exchange. Cheeky we know, especially if done for no apparent reason other than to shave an extra couple of thousand off a purchase price. However, it’s worth remembering that there are some valid reasons why this may happen, many of which could mean your buyer pulls out before exchange. Here’s 2…
• Solicitors uncover a legal problem with the property. This could be to do with the title deeds, planning, boundaries, leases etc. and typically comes to light when solicitors ‘raise their enquiries’ - in essence, ask any questions they want to ask and look into a property’s specifics in more detail.
• Surveys that come back negative can also result in you being gazundered. If a buyer pays for a specialist survey in response to information uncovered by their solicitor, this could also lead to gazundering or, if the lower offer isn’t accepted, the buyer pulling out before exchange. We’d always advise getting specialist surveys if you’re unsure of a property’s condition or history. Getting them done quickly could make the chain break easier all round.
UPDATE: COVID expected to halt over half a million house sales!
In 2020, coronavirus pandemic has played a particularly large role in severing many a property chain. Due to its effects on jobs and the economy, many buyers have had to eat into savings that would have been their deposit and even in some cases lost their jobs. All of which has led to mortgages being declined, practically forcing them pull out; many sellers could only watch as their house sale falls through last minute.
Neither has it done wonders for property viewings – one of the most crucial parts of the property buying process. As instead of being face to face, the majority have now being forced online.
Couple this with talk of a ‘second wave’ and the end of the Stamp Duty Holiday, and it seems like the property market may be in for a rough ride.
If a buyer pulls out before exchange, it can be expensive as well as a large inconvenience. Just some of the costs that come with breaking property chains include…
|Solicitors fees||£850 - £1500+|
|Survey fees||£400 - £1500+|
|Mortgage arrangement fees||£1000 - £2000+|
|Search fees||Usually £3 each (for title search & title plans)|
|Lender valuation fees||£99 - £250+|
|Removals costs if paid upfront||£1000+|
*The figures above are a rough guide to the level of fees you may incur if a buyer pulls out before exchange. These will differ depending on your individual circumstances. The total has been calculated using the MINIMUM cost for each factor. Using the upper estimate would see the cost of chain break exceed £6,000!
Yes, you can.
Homebuyers Protection Insurance is by far one of the easiest and cost effective ways to ensure that if a seller or buyer pulls out before exchange that you're not left to recoup the costs. Typical policies cover costs like conveyancing fees, mortgage arrangement fees and surveys (the majority of the above.) in the event of chain break. We found quotes for as little as £47 pounds!
Although, you could just protect yourself for free and only buy a chain-free property. All you need to do for that is to find either a cash buyer or a buyer with no dependant sale, or both. Remind you of anyone?
We'll buy your house for cash in as little as 7 days - no chains attached.
As you're now well aware, property chains can be problemic. Not only can they take a toll on your pocket if a buyer pulls out before exchange, but they can also slow down your sale considerably. Even those property chains which do 'go to plan' aren't nice places to be. With the fate of your sale depending on the other X amount of people in the chain, you can never really be 100% sure on whether it's set in stone until you exchange. And even then parties can still pull out if they wish, althought very few do. If you ask us, long property chains are one of the most stressful ways in which to sell a house.
So to help you have a smooth and stress-free sale, or ensure you're prepared for the worst if your buyer pulls out before exchange, here's 6 useful tips to avoid property chains falling through...
1 Do your homework – Buying a property is a competitive process, so it’s no surprise that to look more appealing, some buyers elaborate the truth. Take the title ‘Cash Buyer’, for instance. While it means a buyer who can fund a purchase with 100% cash (like us), it’s also used by buyers with no dependant sale and a mortgage and those Sold SSTC, despite a mortgage not being cash, but a long-period loan.
NOTE: Don’t feel bad about drilling down into the finer details of how a buyer’s going to purchase your property. Remember, it’ll be you that’s fronting the cost if the buyer pulls out before exchange.
2 Agent Check-ups – Fail to keep your eye on your estate agent and you run the risk that your buyer pulls out before exchange. Why? Because agents aren’t just dealing with your sale – they manage a large amount of sales at once, so by not checking up on progress you’re basically giving them the green light to keep you on the backburner. In that time your buyer could realise their ‘dream house’ that was once out of budget, has now been reduced and choose to back out before you exchange contracts.
To prevent this from happening, we’d suggest weekly or fortnightly check-ins with your agent to discuss interest and what they’re doing to get your property sold. Emails don’t count! Agents can ignore emails but they can’t ignore you over the phone or in person. Do this, and you’re not only going to get your money’s worth out of the agent, but also keep things moving.
3 Know who you’re dealing with – Another easy way to ensure that no buyer pulls out before exchange is to communicate. Communication is the backbone of all strong property chains, so it’s a good idea to get social with buyers and sellers outside of your agent. This could be grabbing their mobile number during a viewing or meeting for coffee to discuss the chain once they’ve offered. However you choose to do it, building rapport is a great way to keep the chain strong. Someone in a chain will often find it a whole lot harder to let someone down (i.e. pull out of the chain) if they’ve established a strong rapport. So go grab a coffee – you can thank us later.
4 Get papers prepared (Yes, it’s really that simple) – Want to get through conveyancing quickly so that no buyer pulls out before exchange? Then the very least you can do is get your paperwork in order. Property chains rely on efficiency, so if you’ve got paperwork that should be with you solicitor under a pile of papers on the sideboard, stay up late and fill it in. Think of it this way, can you blame someone for breaking a chain if a form that should’ve been returned within two days is still outstanding after two months?! Exactly, so GET IT DONE!
5 Agree to a lower sales price – If someone’s let slip that they’re considering pulling out of the chain before exchange, then agreeing a lower sales price, although not great for you, could prove beneficial. If you’re a buyer without homebuyers’ protection insurance (detailed above) it’s also worth considering how much chain break would cost you, whether that be the costs detailed above or costs of finding a new buyer. If you can keep the buyer in the chain for a £2,000 discount and chain break would set you back £6,000 then that’s a wise decision, right? And don’t forget you’re not on your own in this. In the event a buyer pulls out before exchange, the entire upper chain would collapse, so you could potentially get others above you to contribute towards your discount or get all members of the chain to agree a lower price.
6 Choose a reliable buyer - As you've seen, a reliable buyer is everything to property chains. Not only do they ensure the sale goes smoothly and to schedule, but they also cost you far less hassle, and money too. So, if you're on the hunt for a reliable cash buyer, who'll not only stick by you, but also take the pressure of the property sales process off your shoulders then we may be able to help.
We're one of the UK's most established cash buyers of property, with over 50 years combined experience under our belt and an aim of making the sale of your house, simple. As you've probably twigged, being a specialist in off-market sales, we're not fans of property chains either. Rather than creating them, we'd much rather spend our time helping you either survive or escape them altogether.
So, whether you're after a chain-free sale or your buyer has pulled out before exchange and you're in need of a replacement, we can help make your sale a smoother experience. And it doesn't matter what property you have - we by any house in any condition in any location across England and Wales.
We'll be your buyer who doesn't back out before exchange