You’ll hear the word ‘chain’ thrown about a lot when buying a house, but what does it mean?
This guide introduces and explains various chain terms, and gives an example property chain.
What is a property chain and how does it work?
In short, a chain is all the people buying and selling properties who are dependent on other people buying and selling before they can move out of their current home and into their new one.
A property chain begins with a buyer who is not selling a property and ends with a seller who is not buying one. The longer a chain, the more layers of dependency there are.
The average chain length and how many houses are in a chain will vary; traditionally, the longer a chain, the more scope there is for delays and problems:
- Sellers may need money from their buyer before they can afford to pay for the house they are moving into.
- Someone in the chain may change their mind, although there are penalties in place to reduce the risk of this.
- Someone in the chain may fall ill or their circumstances may change, forcing them to pull out.
- Someone may be denied a mortgage, meaning they can no longer afford the property they want.
- A problem may be found with a property during or after a survey, meaning it is no longer fit for sale.
- A conveyancer may forget to file paperwork on time.
It is the responsibility of legal professionals to keep the chain moving and to move toward an agreed completion date throughout the chain.
What does it mean when a house has no chain?
You may hear this referred to as a chain free property.
In this situation, only one person is involved in the process. This could be a first-time buyer moving into a new build, or someone who owns multiple properties selling one to somebody who does not need to sell their property to afford the purchase.
In this case, there are no other people in the chain who are dependent on the buyer or seller. It is relatively rare for a house to have no chain.
What does no upward chain mean?
You may hear this referred to as no onward chain. This term refers to the seller at the top of the chain who is not dependent on anyone above them.
If you are moving into a property with no upward chain, the suggestion is that you will have a smoother journey than moving into one further down the chain. This is because once you have paid for the house you are able to move in, without having to wait for the seller to do anything.
An example property chain
You are selling your house to somebody, and they are selling their house to a first-time buyer.
You are buying an empty property.
The person below you can’t move into your house until you are out, but because you are buying an empty property, you don’t have to wait for anyone else to move out. You have no upward chain.
Once you’ve moved out, the person below you can move into your house. This leaves their house empty, meaning the first-time buyer can move in.
There are three people involved in this chain.
Other property chain considerations
While it’s good to reduce the amount of dependence on you in the chain, the priority is choosing the right property within your price range. This reduces the potential for financial delays and means that even if there are hold-ups you will be on track to move into the right home.
If you have questions about property chains, give us a shout!