If you are looking at purchasing a property in the coming months, you may hear the term ‘chain-free property’ or that a property is in a ‘chain’. And for anyone that’s new to the property market, it can be quite confusing. What does it mean? How will it affect your purchase?

Here, We Buy Any House look at what a chain-free property is and how it should affect your purchasing decisions.

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What does chain-free property mean?

A chain-free property effectively means that you as the buyer do not need to wait for the seller to find another house to move into. If you consider each seller of a property, it’s likely that they are waiting on a sale going through themselves, the person that’s selling that property is likely waiting on a sale too, and so on.

If one link in that chain breaks, it can spell disaster for you as a buyer, as it may cause your sale to fall through. A chain-property means that there’s no reliance on another sale.

What does it mean for renting?

Although property chains usually involve sellers and buyers there are instances that you’d find a renter within the chain. There are typically two scenarios in which you’d find renters within a property chain. We’ll look at both these scenarios here and what it could mean for a landlord.

Scenario 1 – Selling your house and then renting another until you find a house to purchase

Selling your house chain-free has some real benefits. As the sale of your house is not determined on whether you can find or buy a new house first (a common issue in the chain), your house may be a more attractive option to those who need a house fast or are in a position whereby they’ve sold their house and are actively looking to purchase.

As buying your house would prevent them from getting in a long chain and means less chance of delays with paperwork, you may even receive a higher offer. Once you have sold your house and you find a different house that you want to buy, you have an advantage over other buyers who may still be stuck in various chains themselves. According to the Financial Times, chain-free buyers can also receive a 1.3% greater discount on average than buyers still stuck in chains. Many sellers are willing to sacrifice some money for the sake of certainty and speed. Renting during this time (between selling and buying a new house) can be more economical.

The Financial Times states that renting can be as much as 20% cheaper than buying a house as the latter involves paying a deposit, mortgage fees, stamp duty and estate agent fees, among other charges. Finding and renting a house is also a much quicker process than outright purchasing a house, and when you do find a property that you want to buy, being in rented accommodation makes this process easier and faster. Also, when renting, it is the landlord that must pay for repairs and renovations rather than yourself if a buyer requests these after a Home Survey. Other benefits of renting first include rental payments being unlikely to change and no risk of loss if property prices decrease.

Renting will however mean having to move twice, which can be costly, depending on how far away your two most recent locations are from one another, as well as how many belongings you have. Still, it puts you in a much better position for buying your next house and potentially saves you time and money in the long run.

Scenario 2 – Buying the house you want and then renting out your old one

Though this scenario may initially appear expensive and a lot of hassle, the money you gain from acquiring renters can help to cover your new house’s mortgage repayments and the costs associated with owning two houses. It does, however, mean you become a landlord and you must inform your mortgage lender. The Money Advice Service provides detailed information concerning the financial responsibilities a landlord should consider. Your responsibilities as a landlord include:

• Keep your house free from safety hazards

• Ensure electrical and gas appliances are maintained

• Find out whether potential tenants have the right to rent property (in England)

Disadvantages include being responsible for all emergencies, repairs and costs such as property taxes and insurance. Becoming a landlord is not really recommended unless it is a long-term option. Whether you’re thinking of renting until you find your dream house or becoming a landlord to cover costs, ensure you think carefully about both decisions, researching all relevant and related information. You want to be in the best possible position and your choice could determine this.

Common property chain problems and how you can solve them-

Estate agent issues

Whether you believe they are overcharging you, not providing the specified service or are advertising your house inappropriately, your estate agent could be slowing your part of the chain down by unnecessarily prolonging the process. Though it is true that changing estate agents may mean having to pay your original agents’ expenses, if you can prove they have broken the agreements you have both signed, you may not have to.

All estate agents belong to a complaints redress scheme, and if you are worried you can complain to their scheme. The three government-approved schemes are The Property Ombudsman, The Ombudsman Services, Property and The Property Redress Scheme. It is not uncommon for estate agents to be sued for negligence and misrepresentation if they fail to comply afterwards. It is advised you discuss any issues with your estate agent first, to hopefully come to a resolution together.

The offer to buy your house is withdrawn

This is the most stressful thing that can happen and unfortunately, if it occurs before contracts are exchanged, it’s perfectly legal. The potential buyer also has no obligation to pay for any costs you may have incurred, though you can ask them for a contribution.

If an offer is withdrawn after contracts have been exchanged, the buyer will still have to pay earnest money (a deposit paid to confirm a contract) and may be taken to court and asked to provide just cause for backing out. You may receive compensation, helping you to put your house back on the market.

The price offered to buy your house is reduced

This is known as gazundering and can be both frustrating yet beneficial. It usually occurs when there’s a fall in the housing market, and unfortunately for sellers, it is legal. If a potential buyer reduces their offer before contracts are transferred, you can decide whether you want to accept it or not. If you weren’t happy with the offer in the first place, you could reject it and put your house back on the market.

The buyer cannot lower their offer after contracts have been signed and agreed to, and you do not have to accept a lower price if they try to persuade you otherwise.

The seller gets offered a higher price for a house you want to buy

This is known as gazumping. You could try to counter-offer with an even higher price, but you could again be gazumped. The seller is within their right to reject any offers before contracts are exchanged and all they may have to do is cover your costs such as survey fees. To avoid this happening, you could create an agreement with the seller.

This would state that during the period between making an offer they accepted and contract exchange they won’t consider other offers. However, the seller does not have to agree to this. If they do agree, and you are gazumped, then you can sue for breach of contract. The property chain can be a turbulent time. From deals going wrong to problems with chain members, nothing is set in stone until contracts are signed, and even then, issues can arise.

Following the advice above or selling your house fast ensures a buyer can’t back out and avoids estate agent issues causing you less hassle, time and money. Always ensure you have researched every aspect of the chain before you considering entering one. Contact us today at We Buy Any House for a free offer on your property and see how much you could get for your house today.

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