A property chain is what happens when buyers and sellers are linked together because they are purchasing and selling houses from each other. Your part in the chain involves your existing house and who you sell it to, and your new home and who you buy it from. As the chain involves various processes, people and documents, it can be a stressful time, especially when unexpected issues arise, causing the chain to break. We’ve therefore created this handy guide that covers the whole chain, ensuring you know your options and what you can do to manage it effectively.
What Should I Do First?
In an ideal world, you’d sell your current house and buy your new home on the same day, allowing for a quick switch. However, it’s likely you’ll need to decide between selling your house first, or buying your new one first. Let’s take a look at what each option entails:
Buying Your New House First
You may want to buy your new home first to secure it against other potential buyers and to provide yourself with somewhere to live straight after selling your house. This is clearly expensive, so taking out a bridge loan can help with the down payment for your new home. A bridge loan effectively bridges the gap between the time your current house is purchased and the new one is bought, and is taken from the value of your current property.
Things To Bear In Mind
- Your current house may be on the market for months, meaning two mortgages, house taxes and maintenance costs.
- You may have to lower your original home’s asking price to sell it faster.
- An interest rate of up to 18% of the original loan per year could be incurred.
Selling Your Current House First
Selling your house first provides you with funds towards your new property and means you aren’t waiting around for someone to buy your house, which is very attractive to the seller of your new home. Therefore, you may be able to negotiate the price to your benefit, as selling to you will mean they won’t have to enter a property chain.
Things To Bear In Mind
- Selling your home first could take a while, meaning you miss out on your dream home.
- In the time between selling your house and buying a new one, you may have to rent a place, which can be expensive.
- If house prices rise during this time, a new home will be less affordable than once thought.
It’s important that you take all this into consideration, and if possible, try and get the buying and selling days as close together as is possible.
What Fees Are Involved In The Property Chain?
The property chain can be costly, so ensuring you understand the associated fees is a must. We’ll now discuss the main fees you’ll encounter.
Related Fees: Buying A Home
- The Deposit: Usually 5-10% of the property’s sale price.
- Stamp Duty Land Tax: A government-enforced tax that is paid on homes costing over £125,000. The current rate is 2% of the price up to £250,000, 5% up to £925,000, 10% up to £1.5 million and 12% for prices above this.
- Valuation Fee: If you’ll be taking out a mortgage, your lender will determine your home’s value, and then how much to lend you. This can cost anywhere between £150-1500 depending on its value.
- Surveyor’s Fee: It’s recommended that you have a surveyor exhaustively check the house for any damage, defects or issues that you may have missed, which otherwise becomes your responsibility after contracts are exchanged. A survey can cost anywhere between £250-1000+, but can end up saving you a fortune in repairs.
Other costs include legal fees, land registry fees and of course, your mortgage.
Related Fees: Selling A House
- Removal Costs: Costing anywhere from £300-900, though you could also hire a removal van.
- Energy Performance Certificate (EPC): £50-120.
- Conveyancing Fee: £500-1500.
- Estate Agent’s Fee: This is determined when the house is put on the market, though is usually 1-3% of the sale value, with an extra 20% VAT.
Why Might A Property Chain Break?
There are several reasons why a property chain may collapse or break, including:
- The offer to buy your house is withdrawn.
- The price originally offered for your house is reduced (gazundering).
- The seller gets offered a higher price for a house you wanted to buy (gazumping).
Unfortunately, if this all takes places before contracts are signed, then it’s perfectly legal.
What To Do If You Face Issues Within The Property Chain
Always contact your estate agents as they will be able to offer advice and guidance. For example, if the seller pulled out due to being offered a higher price, your agent could discover the new price and, at your request, make another offer. If the buyer pulled out due to a failed survey, the agent could suggest home improvements that may get the buyer back on board. There are countless reasons why your chain may break, but there are also many ways to fix it.
Final Words: How To Keep A House Chain Moving
Ensure you hire an estate agent with a dedicated sales-progression team who move the process forward by communicating frequently with your buyer and the seller of your house and new home.
Other things you can do include:
- Organise your finances early, including the funds for your deposit so that you’re ready at the time of exchange.
- Sign and return all of your paperwork swiftly.
- Deliver documents by hand, courier or special delivery for a personal touch.
- Speak to your estate agent, surveyor, mortgage lender and legal firm regularly and if there’s anything you can do to help.
Not only are we an award-winning estate agents, but we are experts in property chain management. If you are considering entering a chain, call us today for help on how to get your house on the market and to discover how we can help you navigate the chain processes.