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Property Purchase & Sale Chains Explained
If you are on the hunt for a new property to purchase (whether it’s your forever home, a home-for-now, or a buy-to-let property), you may come across the term “chain-free”, used by Estate Agents when advertising the property. If you have been wondering what this term means, wonder no more; our Property Conveyancing Solicitors at MG Legal have explained the term and what it means for you, below.
What is a chain in property sales and purchases?
A property chain is created when there are more than two property transactions in one matter. For example, where the buyers of a property have their own house to sell to fund their purchase, a chain is created. Chains can vary in length, but could go on and on, with people buying and selling, until there are 10 or 15 (or sometimes even more) related property sales and purchases. The party at the bottom of the chain will, usually, be someone who doesn’t need to sell to buy their new home – such as a first time buyer - and the person at the top of the chain will be someone who isn’t buying after they’ve sold – such as someone selling a buy-to-let property, or moving into rented accommodation.
Between the top and bottom of the chain, there could be any number of people who are both selling and buying. In some cases, there may be one couple who are selling the same property and then both buying separately (for example, if the couple has separated or divorced. You can get advice from our Family Law and Divorce Solicitors about dividing your property on separation, here).
Whilst not every matter that our Property Conveyancing Solicitors deal with will have a long chain, we have had a few transactions where the matter involves over 10 different parties (all with a perfectly organised and speedy completion, we would add). However, to make sure that our team are prepared for any potential delays in coordinating a longer chain, we would always make enquiries, as soon as you had instructed us, to ascertain how many property sales and purchases are involved in your property chain.
Risks involved with a property chain.
Sadly, if one party in a property chain pulls out the whole chain can collapse. The more parties involved in a single chain, the higher the risk of there being an issue at some point down the line. But, why would the chain collapse?
Well, one party may find an alternative property to purchase and, therefore your seller may no longer have a buyer for their house; one of the parties selling further down the chain may receive a better offer for their property, which means that the original buyer may no longer be a part of the chain. Another issue could be that one of the buyers in the chain is having issues with their mortgage and either experiences delays or has to pull out due to the issue. Unfortunately, the list of potential issues is not limited to these; a number of issues could occur. This is not to say that the chain, as a whole, would collapse as, in certain circumstances, members of the chain may agree to break the chain, in order to facilitate the transactions below them. This, commonly, occurs in lengthy chains, to avoid a collapsed chain for all parties involved. This may be enabled by one party temporarily moving into rented accommodation, or ‘sofa-surfing’, in order that other transactions in the chain may proceed.
Our Property Conveyancing Solicitors would, however, advise that a property sale and purchase can come with the above-named risks, even where the matter is “chain-free”. Being part of a conveyancing chain should not, necessarily, put you off from making an offer on the property you wish to purchase. Weigh up the pros and cons of being part of a chain, and make a decision based on what is right for you.
Why would a seller or buyer pull out?
There are two common terms that are used by Property Conveyancing Solicitors which you, hopefully, won’t come across throughout your transactions: Gazundering and Gazumping. Both of these can put any property chain at risk.
Gazundering is the term used in instances where a buyer reduces their offer to purchase the property at last minute. Generally, this could force a seller to either pull out (and risk making the chain collapse), or could force them to accept the lower offer, so as to not let their property sale (and perhaps related purchase) fall through. In this case, the seller could lose out, by accepting a reduced offer in order to allow the chain to proceed. This is, of course, less than ideal and our Property Conveyancing Solicitors would be able to advise you of your options in this regard, should the need arise.
Gazumping is the term used in the event that a seller accepts a higher offer, from another person at the last minute. This could mean that the seller’s original buyer suddenly has nowhere to move to, and is forced to postpone their related sale. An alternative is that they may decide to match or better the new buyer’s offer, however, saving for a property can take a substantive amount of time, therefore, on the buyer’s current budget, this may not be possible. Again, your property expert would be bale to advise of the options available in such cases.
Are Gazumping and Gazundering Legal?
Unfortunately, both Gazumping and Gazundering are legal. They are, however, unfortunate and can be unsatisfying for everybody involved in the property chain. That’s why, at MG Legal, our Property Conveyancing Solicitors always want to make sure that you are happy with your property sale or purchase before you commit to exchange of contracts. You can read more about exchange of contracts in our blog, here.
How can MG Legal’s Property Conveyancing Solicitors help?
A crucial part of our role is to make sure that your property sale or purchase progresses as quickly as possible, to help prevent long delays and itchy-feet with the parties in the chain. Each party should attempt to complete their legal work as soon as possible, to avoid any delays in the crucial time before exchange of contracts.
If you are thinking of buying or selling a property, as part of a chain or in a chain-free transaction, our team of Property Conveyancing Solicitors can help. We are not fazed by any length of chain, and will make a conscious effort to complete your property sale or purchase as quickly as you need to. You can contact our team at your local office, email us at email@example.com or contact us online.