What exactly is a property chain and how does it work?
A question many people ask when buying or selling property is ‘how long is the chain?’ Although long, complex chains are notoriously stressful, time-consuming and difficult to manage, it can be confusing to understand exactly what this means, particularly if you are new to the property market and buying your first home.
So, what exactly is a property chain, and what are the key things you should be aware of when looking to buy or sell a property?
View My Chain is the first and only data driven sales progression tool on the market that makes property chains transparent — reducing fall-through rates, and speeding up property transaction times by up to two weeks. A cloud-based platform, View My Chain does not depend on data entry from estate agents, legal representatives or integration with any third-party systems. Its system of real-time red, amber and green lag alerts exposes the guilty party in any chain delay and means fall-through rates are dropping.
What is a property chain?
Sohail Rashid says: “A property chain is quite simply, a sequence of linked house purchases. When you are in a chain, buying or selling a house depends on the purchases either side of your property. If you are a first-time buyer, your chain only moves in one direction, as you do not need to sell a property to be able to purchase your new home. This is also true (but in reverse) if you inherit a house which you then wish to sell — the chain is one way.
Essentially, a property chain begins with someone who is only buying, not selling, and ends with someone who is only selling, not buying. A property chain will have a minimum of two people in it (unless you’re buying a new build), but there is no maximum number of people in a chain.”
What are the key milestones involved in a property chain?
Sohail Rashid says: “Unfortunately, at present, figures show that one in three property sales fall through. Nearly all house purchases will follow the same steps, from getting a mortgage agreed in principle to completion. Each step can potentially cause a chain to collapse, or provide a reason for why things may take longer than anticipated to move forward. Below I have highlighted the key steps you go through during a property transaction:
• Mortgage agreed in principle
• Making an offer and property sold subject to contract (SSTC)
• Arranging a solicitor
• Ordering legal searches (surveyors which includes a value survey, a property survey and a local survey)
• Finalising your mortgage
• Exchanging contracts
What causes a chain to be held up?
Sohail Rashid says: “When you have multiple parties that all need to do things in sequence for a process to progress this causes issues. Delays can be driven for multiple reasons, consumers don’t know what they need to do next and when, some agents & legal advisors don’t proactively chase their customer to action things, properties have problems, people change their mind, the lack of transparency makes it really difficult to understand if a transaction is running into delays and most importantly why?
Another reason would be if a potential problem is raised during the legal searches, such as the property survey revealing a structural issue, which then scares the buyers. This could cause the buyers to pull out of the sale which will impact the whole chain. Sometimes, it doesn’t even take a problem to be flagged to cause a buyer to change their mind — they may get cold feet and pull out regardless, which again can cause issues.
Industry terms such as ‘gazundering’ (when an offer is reduced at the last minute) or ‘gazumping’ (when the vendor accepts a higher offer from a last-minute buyer) can also be the cause of problems.
What does it mean when a property chain collapses?
Sohail Rashid says: “The collapse of a property chain means that the sale of the houses involved will no longer go through. This can happen anywhere within a chain and can be the fault of any party. When a property chain collapses it can not only be incredibly frustrating, but also very expensive. Depending on what stage you are in with in the house moving process, you can lose the money paid for solicitors’ fees, surveys, and a non-refundable mortgage arrangement fee or booking fee, which could total thousands of pounds.”
What can I do to prevent the above?
Sohail Rashid says: “Previously, there was little you could do to prevent problems occurring in your chain, except ensuring that your own finances were in place and constantly calling your estate agent to check the status of all parties. Legal searches, for example, usually cost around £300, so traditionally people have been reluctant to order these until they feel reassured that their chain won’t fall through and the moving process will continue. Our data shows that when all buyers in a chain have ordered legal searches (which is typically the first financial commitment in the process) the chain is 3 times less likely to fall through.
However, the launch of View My Chain means that there is now complete transparency within the chain process and visibility on exactly which party is causing the hold up, so that everyone is kept updated and aware of any potential risks. It’s a data driven tool which tracks 60 different data points — including property listings, legal searches, mortgage applications and Land Registry records.
By tracking these data points, View My Chain users are able to view automated key buying and selling milestones so that they can track the whole process. Through View My Chain, we aim to completely revolutionise the chain process — significantly reducing the amount of collapsing chains and speeding up completion times by an average of 15 days.”