Keeping the property chain on track

BUYING OR SELLING A HOME is often claimed to be among the most stressful of life experiences.

The process can be lengthy, uncertain and carry unexpected costs, especially if the sale collapses.

There are a number of reasons why a property sale may fall through. A total of 306,198 property transactions fell through in 2020, a 12.26% rise from 2019 when there were 272,768 fall-throughs, according to the residential property data agency TwentyCi.

There are many reasons why some transactions do not proceed. Difficulties in a long chain, where all transactions are dependent on one another; sellers changing their mind or having a change in circumstances; legal stumbling blocks arising, such as access issues, breaches of covenants or lack of planning or building regulations; buyers being unable to secure mortgage finance; or an adverse survey, are all common causes of failed transactions.

WHAT IS A PROPERTY CHAIN?

A property chain is where a connected group of people are buying and selling their properties simultaneously. Each needs the other to enable them to move. The more people that are in a chain, the more likely it is that a problem or delay will crop up.

When you are a homeowner and wish to move house you need a buyer for your home so that your equity is released over the the house you are buying. This all needs to happen on the same day.

It is possible to have a chain-free property, where there are no other linked property sales or purchases. Some examples are:

  • Buying a vacant property
  • Buying a new build and part-exchanging your home to the developer
  • Moving to rented accommodation once you have sold your home
  • First time buyer purchasing a vacant property or new build

 

WHAT YOU NEED TO CONSIDER

Be prepared to relist your property for sale in the event that the deal falls through.

Many things can happen between the time the offer is accepted and the time the deal completes. It’s often wise to accept backup offers in case the deal doesn’t make it to completion.

So what can you do to prevent your purchase or sale of a property from falling through? Here are some of the main causes of failed sales and some ways to potentially remedy them.

WHAT CAUSES A TRANSACTION TO FALL THROUGH?

The top cause for a sale falling through is the buyer changing their mind or finding another property. Other causes include another sale falling through in the chain, the buyer withdrawing based on survey results, or the buyer reducing their offer just before exchanging contracts (which is known as ‘gazundering’).

While these causes can’t be avoided entirely, there are steps you can take to reduce the likelihood.

SO HOW CAN YOU HELP TO KEEP YOUR TRANSACTION ON COURSE?

Here are 5 tips for keeping your transaction moving

Since many transactions fall through because of the buyer withdrawing or reducing their offer, or because of problems in the chain, many of these issues can be avoided by choosing the right buyer. The main thing to consider when you have received offers is the position of your buyer – are they ready to proceed immediately? There is no point in having a very high offer if the buyer does not have the funds available!

A mortgage application can be declined for all sorts of reasons. The buyer may have a poor credit history or too much debt, or the mortgage valuation on the property itself may come back lower than the price agreed by the buyer.

Instead of simply accepting the highest offer, ideally you need to prioritise chain-free buyers (such as first-time buyers) and those with evidence of their budget, in the form of a mortgage Agreement in Principle. Buyers without this may be offering more than they’re able to borrow, and so might suddenly reduce their offer based on a lender’s assessment.

Equally, you should seek to fulfil your responsibilities as a buyer. Make sure that you’re clear on what your budget is and don’t make an offer that you’re not sure you can afford. It’s usually very quick and easy to get a mortgage Agreement in Principle, which many lenders offer immediately after you’ve completed a short online form.

If possible (but it rarely is), you should sell before you buy. Your purchase is more likely to go ahead without problems if you can keep the chain moving.

Another way to to this is via a bridging loan where you gain access to some of the equity in your home so you can break out of the property chain. A regulated bridging loan is required if the security is, or will be, your main residence.

You should look for a solicitor at the same time as you start looking at properties, to make sure you can move quickly once you’ve found the home you want to buy. The registration process can take a little time, so get this out of the way early.

A good solicitor can help you to keep the conveyancing process on track and moving swiftly. Make sure that your appointed solicitor is on the panel of the bank or building society you’re using for your mortgage. If they’re not, ask them to register with that lender.

Check what previous clients have to say about them as a conveyancer. If a conveyancer has outstanding reviews from people that they have taken through the process you’re likely to be in safe hands. Also having a family-recommended solicitor gives you a good idea of what expectations you should have.

A reputable conveyancer should always provide a full breakdown of costs so you’re in no doubt about the services you’re paying for, and hiring someone from your local area puts them at an advantage because they specialise in that location.

The property-buying process can be convoluted and confusing, especially if you’re a first-time buyer. The faster you can exchange contracts, the less opportunity there is for gazumping (when the seller accepts a higher offer) or gazundering, both of which can derail your transaction.

A conveyancer that communicates with you as the process unfolds is definitely one you should seek out. Chasing solicitors as well as all of the other hassles that come along with buying a property is additional and unneeded stress.

So, communicate regularly with your solicitor, return required paperwork quickly and ask for clarification if you’re not sure what is needed from you at any point.

Rather than waiting until you’ve exchanged contracts (the point at which a property transaction is legally binding and neither party may withdraw without a financial penalty), you can ask your solicitor to draw up a pre-sale contract that locks in both parties as soon as an offer is made.

Bear in mind that this will come at an additional cost, and will also prevent you from backing out of the transaction.

INSURING AGAINST ABORTIVE COSTS

You can take out Failed Residential Transaction Insurance against abortive costs for residential property purchases. This usually covers up to around £1,500 for the costs associated with a failed transaction, such as legal fees and search costs.

Some policies may also cover mortgage and survey fees. It is important to check the fine print to see whether it is appropriate for you, and the terms under which you can claim.

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