The English chain system - who benefits?

[Cruddles]

Having completed on a house move last week I'm absolutely baffled as to why the system in England exists. We were in a seven property chain, my sale and purchase were properties 2 & 3 in the chain. We sold our old house and offered on our new one in February. And yet here we are in June stressing about it going through. Delays were caused by solicitor issues on the first and last properties in the chain, causing it to be 4 hours from collapsing after taking 6 months to get to that point.

What i don't understand is who actually benefits from the chain system? Why should i be affected by property one or seven in my chain? If a chain falls apart then stamp duty is not paid, estate agents are not paid, solicitors can miss out on some or all of their potential earnings, movers don't get booked etc etc. The only party that seems to exist is a buyer or seller who wants to dick around by blackmailing others into price adjustments, or pulling out altogether, with no cost to themselves.

I'm originally from Australia and there if your offer is accepted then that's it, you're locked in. There's no chain, and it's all complete in a few weeks. My understanding is pretty much every other country has something similar. Why can't we in England? Seems like an easy goal for a political party to change.

It’s an awful process I completely agree. But without a chain system, how do you pay for your purchase? Do you use bridging loans?

How do you sell one and buy the next without a chain?? Sounds great though

Where does all the money come from? If you sell then how do you commit to buy without a chain? Agree the system needs an overhaul. Escrow perhaps?

I completely agree. I asked about this on another thread and someone said in the American system bridging loans are used a lot more as they're cheap.

I work in finance and with clients who offer bridging loans and they are eyewatering fees and interest rates! Mostly they are for commercial properties, but some are for residential properties and I just think wow people must be really desperate.

Do people 'break the chain' and rent? Are short term rentals an easier solution in other countries? What about mortgages and early redemption charges?

It's all very well people criticising the English chain system (I do too) but please can we have specific examples of how other countries do it!

There are chains in America. The difference is the offer is a legal agreement, and there's a skip heddle when you get an inspection (survey), mortgage etc. There may be contingencies, like a bad survey or what gave you, but you pretty much have the completion timeline as part of the offer. So you accept an offer on your house and its pretty much certain that's it really is sold and you know the timescale.

Part of the problem relates to how houses are paid for.
If you were bound contractually to buy the house when your offer was accepted how would you pay for it without a mortgage.
Remember, the mortgage is secured on the property you are buying, not you as an individual.
The purchase process gives time for the lender to establish, through your solicitor, that the property is good security for the mortgage loan.
If they don't accept that it is good security they won't lend, fine if you haven't exchanged yet, massive problem if you were tied into the purchase.
You couldn't wait to make an offer until after the due diligence was completed unless the burden is placed on the seller to have all the relevant information available at the point you make the offer.

And more simply you could only go chain free if you can afford to own two houses at the same time, just in case one didn't sell before you bought the other.

I agree our system is bonkers.

But I'm confused as to how you can buy a house without selling yours. As if you're locked in you're effectively buying a second property? Or not? As if you'd already sold where would you be living? Could you explain how it works op?

Feb to June in a 7 property chain sounds good to me, although we started the process last September and still not close to completion!

What’s the alternative? I’m confused.

The purchase process gives time for the lender to establish, through your solicitor, that the property is good security for the mortgage loan.

Lenders in other countries also need to ascertain the property is worth lending against. England doesn’t have a monopoly on this!

Binding offers are made subject to securing finance and acceptable building surveys. In slower markets you can add discretionary conditions such as subject to selling your house.

You can’t however back out after an offer is accepted (on either side) because you can’t find a new house, decided not to get divorced after all, you’re too busy, you’ve just decided you don’t want to go ahead etc etc etc which appears to be the bulk of the problems in England.

Bridging finance is also extremely cheap when there’s certainty of execution. The binding offers system is fast, it’s quite common to go from offer to completed in 28 days.

The other issue in England is the frankly pathetic return times for searches. They should be digitised and self service.

HATE our system, I don't think chains are the problem perse but that there isn't any legal commitment required early enough in the process. I understand nobody wants to be legally tied before throughly carrying out searches etc, but the Scottish system (if I'm
understanding it correctly?) of having a search pack carried out prior to offers and earlier legal commitment seems much more preferable to me, but not the silly offers thing, I don't like that!*

*note, my "knowledge" comes from location, location, location so may be extremely flawed

And as mentioned above I think also we just have a very inefficient process, solicitors taking on huge amounts of cases and many parts of the process not utilising the digital age we're in generally slowing everything down.

Completely agree. I know there are some rationale for the process in England but it's awfully long. Pretty much everyone coming from other countries are shocked when I tell them my purchase will take at least 3 months !

I also never heard of leasehold until coming here. Some argue that you need a freeholder to maintain the building, but I grew up in apartment buildings with the land below being devided among flat owners, and everything was fine

Sorry but none of that has actually explained in simple terms how I go from owning house A (with mortgage) to buying house B (with mortgage) without getting into a chain unless you rent in between or getting expensive bridging finance.

I'm a simple minded person , this is mumsnet so a diagram is always welcome

Just had an explanation from a friend in Canada. Their example used the case where you have a house worth $1m, the mortgage left on it is $300k. You want to buy somewhere up to $1.5m. You approach your bank and they provide your the $1.5m up front as a bridging loan. You are now a cash buyer. Once you have found a place you then sell yours, the difference between the bridging loan and the sale then becomes your mortgage.

I think as others mention, the issue also lies in the legal process. Why can other countries do searches etc in a short period, in England they seem to take weeks. My first job back in the mid 90s in Sydney was working in the conveyancing department of a large bank. I used to go and get the searches. This was a 24 hour process in person at the Lands Titles Office, put in your request, pick it up the next day. And this was before the internet and online possibilities.

@Thisisanartattack Feb to June in a 7 property chain sounds good to me, although we started the process last September and still not close to completion!

It's sad that our expectations are so low

Thank you @Cruddles, that makes sense. If bridging finance is comparable to a standard mortgage, fine. If it's like in the UK where it's extortionately expensive, it's less of an option.

And totally agree about the searches btw!

Oh ok so it all works with bridging finance then?

How does that work when credit is difficult to come by and you have little equity in your home?

I think you also have to think about population size/density. Both Australia and Canada have considerably lower populations therefore less people trying to buy and sell houses at once. So less people to provide bridging loans to.

Just wonder how the finance would be created for that? As we'd be looking at 3 times the size of the Australian amount needed.

But then I don't know how money for this kind of lending is created. I just feel like if its hard to get a mortgage banks are unlikely to find the billions needed to change to this finance system.

I’m in Australia and I have known people to sell their house and the sale contract be conditional on the settlement (completion) of their purchase.
But it is really standard here to view a property, have an offer accepted, deposit paid, contract signed with a 30 day clause for the buyer to get building and pest inspections, do the searches and sort finance. Until the end of that 30 day period the buyer can pull out of the sale if they can’t get finance or are unhappy with the building and pest inspection or searches. After that the contract is unconditional and the seller forfeits their deposit if they pull out. A title search can be done online in minutes if you have an account set up with citec confirm.

Can anyone explain why the English system is so slow and there doesn’t seem to be any legal commitment until the very end?

But it is really standard here to view a property, have an offer accepted, deposit paid, contract signed with a 30 day clause for the buyer to get building and pest inspections, do the searches and sort finance.

That's exactly how it should be, and most countries have a similar system! US does, and in Europe it's even quicker in many countries.
The system her is HORRENDOUS, talking as a seller who's been messed around by the buyer for 6 months plus and still n ot exchanged. It's the searches that take 5 weeks, then slow drip feed enquiries, bank survey then a long assessment for the particular house - just why is it so long? Mortgage in principle given yet it's over a month since survey.

Add to that that a buyer (or a seller) can lie endlessly giving promises and lying, and there is no way to check that. The timescale of a month should be standard. Then you can find a place to buy first, then look for a buyer for yours - or the other way round if yours is unusual / hard to sell. Being so quick you can have carious option, icluding easy short term rent.

*various options, in last sentence.

It's so stressful on the UK! Also everyone completing on the same day and moving that same day. Madness. No one in the Netherlands does this, most people spend some time doing their new property up.

In the U.S. you have mortgage pre-approval when you make an offer which basically says that the bank has checked and yes you can afford to buy the house. Then once the offer is accepted, the structural survey and an appraisal happen. Both relatively quickly.

From the appraisal: At that point the bank can scuttle the deal by saying that the house is not worth the agreed price. It’s rare, but it does happen. The sellers can agree to sell for the price set by the bank or the whole offer dies. The buyer effectively gets no say.

From the survey: if there are problems found, the seller and buyer negotiate. Sometimes the seller adjusts price, sometimes they fix the problem. Sometimes every one agrees it’s just something to live with. At this point in the process either side can kill the deal, but it generally transpires over the course of a few days quite early on in the process.

The exchange date is firmly set. Aside from those two outs above, the house is sold or someone risks a huge financial fallout.

You can make a home offer contingent on your home selling, but sometimes people just end up with two houses for a bit and they deal with it. You have to include that as a possibility when you are deciding if you can afford to move. If you can’t take that risk, you can rent briefly in between.