Mortgage Stress
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If you’re looking to buy or sell property, then the chances are that you’ll need to contend with the dreaded property chain. A property chain describes a sequence of successive buyers and sellers, each passing a property along to the next. Each transaction is influenced, and often contingent on, the ones that come before it – and thus buyers and sellers are at the mercy of a much wider group of unknown people.

In some cases, a chain can cause significant delay and frustration. In others, it can break down entirely. In this article, we’ll explore the latter eventuality, and what can be done to guard against it!

What Does a Broken Chain Mean?

A broken chain is exactly what the term suggests: if one sale falls through, for whatever reason, then sales further up the chain will be endangered.

When a chain breaks, the result can be severely damaging. You’ll lose any money you’ve put down on solicitor’s fees and surveys, and if you’ve paid a mortgage arrangement fee you’ll be unable to get it back. Mortgage offers come with expiration dates, too, and a broken chain will inevitably delay your purchase sufficiently that time runs out. As such, they’re financially undesirable as well as annoying – and so it’s worth taking steps to guard against them and minimise their impact.

What Can I Do to Stop the Chain from Breaking?

There are several steps you might take to minimise the risk posed by a broken chain. These are preventative measures, to be used pre-emptively to avoid disaster before it strikes; while it’s possible to repair a broken chain after the fact, it’s terribly difficult – and making the attempt while staring financial ruin in the face is not very much fun. Let’s consider a few tactics.

The first and most obvious way of avoiding problems is to avoid becoming tethered to a chain in the first place. If you’re selling and you have a choice of buyers, then discriminate in favour of those who aren’t in a chain themselves. First-time buyers and well-financed investors would fall into this category. Naturally, this isn’t an all-or-nothing decision – in between buyers who are guaranteed to cause problems and those who aren’t part of a chain exist a whole spectrum of candidates. If you can’t find anyone who isn’t in a chain, then look for someone who is in a chain, but who seems financially well-equipped to deal with problems should they occur.

If you’re buying, on the other hand, then look for properties without an upward chain attached. If the property is brand new, then the developer might consider buying your existing home in a part-exchange deal. This option typically tilts the balance in favour of the developer, but it’s often worth it when it avoids the danger of a broken chain.

New builds aren’t the only properties without an upward chain. If a property’s previous owner has died, or was enjoying the home as a second residence, then they’ll be able to sell without having to find a new place to live.

Of course, being choosy will limit your options, and expose you to the risk of missing out on perfectly good properties – and so you’ll need to balance these considerations. If you’re too conservative, then you might end up never carrying out the transaction at all – which can be financially risky in and of itself. There’s no entirely risk-free way of buying and selling property, but if you’re sensible (and you’re working with good advisors like Principal Homebuyers) then the dangers can be minimised.

If, despite all your efforts, you should find yourself encumbered with a broken chain, then try not to panic; there are still options available to you. Let’s take a look.

What Should I Do if the Property Chain Breaks?

You might think that a broken property chain is a ‘game over’ scenario – and it’s a significant setback, to be sure. But it’s important to maintain perspective and get on with finding another property. Life needn’t go on hold because of a broken property chain, and it’s important to act quickly to offset the damage.

The first thing to do is to start looking for other properties in the area. Your local estate agents might be able to point you toward a property that isn’t even being advertised yet, and thus it’s worth getting in touch with them. Be prepared to haggle over price if you can’t secure a large enough mortgage – but don’t expect sellers to drop their prices enormously to accommodate your situation.

If someone in the chain has pulled out, then it might be worth finding out why – if the problem is money, then it might be worth the while of everyone in the chain agreeing to a reduced price. While this might sting a little, it may still be preferable to the considerable costs of having to deal with a broken chain. This option is particularly appealing if an asking price is close to a stamp duty threshold, in which case you’ll be able to let the exchequer lose out rather than any of the sellers involved in the chain.

As a last resort, you might consider something called a bridging loan. This is a short-term funding option used to bridge a gap between a debt being incurred and the money from a sale coming in. These are typically very high-interest, and should be viewed strictly as an emergency option.

Finally, it’s worth working with a skilled team to give yourself the best chance of emerging on the other side of your ordeal unscathed. As we’ve mentioned, having the property chain break while you’re in the middle of a transaction can be a source of considerable stress. To cope with the situation, and minimise any potential losses, you’ll want the best possible team on your side. Get in touch with us at Principal Homebuyers – will be able to provide the necessary expertise!