Chains

[marchella]

I've asked before but still don't get it. What are the real estate "chains" in the UK?
I have a relative who may be moving and buying in England soon but none of us know what chains are. It seems that one person sells and the next person buys their property and sells theirs to someone else etc. So theoretically it could go on forever. Who declares the chain is ended?
Where I live you put your house on the market and when it sells you have 6 weeks until settlement ( unless agreed a longer or shorter length between the buyer and seller).
That's it - no chains.
I don't think it exists anywhere else. Is it just a quirky English thing?
And why? What is the point? Ta

The line of people buying and selling.

Starts with a buyer who has no property to sell. Ends with a seller who has no reason to buy.

For example a first time buyer buys a house from a couple who buy a house from a person who is moving into their partners home so no need to buy.

That's three in a chain.

So the chain ends when you reach a house where there is nobody waiting for a new house or nobody needing to sell (whichever side you see as the end).

I've never been in a chain yet (only bought one house and no onward chain) but I can imagine I would be petrified the whole time!!

Oh my goodness. That is such a weird system. OK Thanks for your replies.

Not weird if the deposit being used to buy a new house is tied up in equity in the house you are selling! You need the money from the house sale to buy the next house and not everyone has that readily in additional cash. I think it's weird to expect someone to have that cash ready in 6 weeks in addition to selling a house tbh!

There were 3 in our chain - they're not always long.

I agree OP. It seems unnecessarily stressful to me.

Where I'm from, banks offer 'bridging loans' to cover the period between buying and selling. It's usually up to 12 months and is closed when the previous property is sold. The size of the loan is calculated on the equity of the property.

Presumably more expensive while paying two mortgages but at least each sale is independent from each other.

It is possible to have no chain, property is sometimes advertised as this. Usually it is a rental property being sold or an elderly person who has sadly died or is going into a home. We are about to hopefully buy having sold our house and moved somewhere temporarily. The house we are buying is due to an elderly person having died so there is no chain. The limiting factor is probate as takes a long time to go through at the moment . Really people should wait till they have probate but they often don’t.

Our last house had a split chain. It was a couple moving in with her parents. We had no onwards purchase at that time so we were top of the chain. There were two properties below is. The couples house sold to a first time buyer. Their parents house sold to another lady who had sold to a first time buyer so there were 4 properties involved split over 2 chains linking up to us at the top. It had the capacity to go wrong but didn’t and we completed in 9.5 weeks from the offer. It did however take 3 very stressful days to exchange as for 2 days there were problems with availability of one of the solicitors involved.

Here you can get a deposit bond. Very cheap and covers the amount of your deposit against the equity in your house. No need to have a separate deposit. Chains seem to be only a UK thing. Just trying to wrap my head around it before my relative tries to buy as they are not used anywhere else to my knowledge.

It means, in essence, that you don't end up still owning your old house when you've already bought your new one, which I have to say is an idea that sounds terrifying to me - what if you didn't manage to sell it or the property market shifted suddenly and you couldn't get the price you needed for it?

Being in a chain is stressful, certainly, but they aren't all terribly long because at the bottom there's someone buying who has nothing to sell, and at the top there's someone selling but not buying, both of which are relatively common scenarios. My last home I bought after living in a rented property, and it had been rented out itself so no need for the vendor to find an onward purchase - no chain at all. When I moved, I sold it to a first time buyer (bottom of the chain) and bought from people whose on onward purchase was already empty (I think it had been vacated by an elderly person going into a care home, or something like that), so a chain of three. It does mean that moving day is a bit fraught because you have to be out of your old place and in to the new one and can't have the keys until the transaction has been completed and the last owner has finished getting their stuff out.

The more problematic stuff about the property market here (England, specifically; FYI Scotland is quite different) is that the transaction isn't legally binding until you exchange contracts, which is usually just a couple of weeks before you complete; and that the onus to have the property surveyed and legally checked out is all on the purchasers rather than something the vendor has to put together in advance. So there's a iris of time when you're spending money on surveys and solicitors, and either you or the vendor could still change their mind about the whole thing.

Or a period of time, even!

It does make moving quite stressful. Usually everyone in the chain moves on the same day and the money moves from the bottom sale to the top. If you are at the top you might not complete on your purchase and get the keys until very late in the day. (This happened to us and our removal people had been threatening to go with all our stuff for a while when we finally got in. Very stressful.)

If I was making changes to the house buying system in England, chains would not be top of my list of things to get rid of.
No commitment until exchange would be the first thing I'd change.

What happens if you haven't sold your house before the deposit bond time is up? Or you have to sell you house for much less than you thought and then the bank won't lend you enough money?

That sounds an expensive way to do things, to take a loan out to cover equity you already have (even if it's cheap, it's still another loan), but more straightforward I suppose.

I agree with previous posters though - the riskiest most stressful bit is spending money on surveys and solicitors before contractual exchange without any guarantee that the sale will still go through - you could lose loads if the chain collapses or your seller pulls out late.

Good luck to your relative!

I think exchange is the commitment - the only thing I would change is have all the information ready to go by the sellers (searches, surveys etc) so you can actually know what you’re buying when you make an offer.

Thanks!