Why does the UK have property chains?

[mjf981]

For full transparency, I lived in the UK for most of childhood, but I moved after school and have never bought property there.

I have however bought in Australia. It's very straightforward (though horrendously expensive). You offer privately, or buy at auction. To seal the deal, you put down a 5-10% non refundable deposit, and 6 weeks later you exchange. If you pull out for any reason, you lose your deposit. There is no such thing as a chain here - if people have nowhere to move to they move in with family, rent short term etc.

I was talking to my cousin who is selling and buying in England at the minute. It's been a nightmare with 2 collapsed chains and has been ongoing for almost a year now. She is tearing her hair out and has vowed never to move again when this is all over.

Why is it so complicated in the UK? Why do chains exist? What is the advantage to them? How can other countries manage without them and yet the UK does not? It sounds ever so stressful to have it set up this way.

Money or family

but I guess this also also heavily tied up with crazy house and rent costs

ig neither were so high then short term renting for example wouldn’t seem so costly and therefore so off putting

Short term renting is not how our system is set up.

And as a landlord, would you rather have a series of families renting for two months apiece, moving furniture etc in and out again? Or would you rather let to one household for 6-12 months minimum?

You don’t necessarily go to sealed bids in Scotland. Usually this only occurs these days when there is a lot of interest in a property.

Furniture into storage and given how may landlords cope with people coming in for is a weekend on a holiday let think they can make a couple of months

seem to recall it was a holiday let my mother had one time between homes - and the landlord there was very happy because it was over the winter when income usually dropped

It's only sealed bids if it gets to that stage (IYSWIM). More than often an offer is made and negotiated on with the seller.

The Home Seller's pack is brilliant. It's independently obtained. Not met anyone who doesn't think it's a very good tool for all concerned.

I've sold three times in Scotland. Very smooth and painless. No stress.

Have bought once in England. No mortgage required and no chain our end but hugely stressful.

It would be better if the initial offer was binding, the fact it only becomes binding late in the proceedings leads to the collapsed chains. I believe in Scotland once an offer is accepted it is very difficult to renege on the deal.

Selling first and then buying could mean you end up buying after prices have risen or the houses you fancied have all sold, then everything in your house has to go into storage for the duration and you and your family have to find somewhere else to live which could be difficult and expensive.

I’m in Australia. I don’t think it is that common that people have to do a double move.

in my experience what happens is this. You decide you want to move and find a house. You put in an offer, subject to conditions. These include building inspection and other searches. You have 2 weeks to complete those searches. That time can be extended by agreement But 2 weeks is enough time generally to get all searches and inspections completed. I find it amazing when people on here talk about it taking months.

Then the contract is unconditional. Which means if you don’t complete then you forfeit your deposit and have to pay interest plus the difference between what your contract was for and what the house is sold for, if that is less.

If you need to sell your house, you either get bridging finance and do pay 2 mortgages until your house sells (risky and expensive but people do it) or there is a condition in the contract which says that it is conditional upon the sale of your house. But there is also a 48 hour clause which says that the seller can give you 48 hours to go unconditional or end the contract. So you have to hustle to get your house sold in case you lose the house you want to purchase. Then once you sell you line up the 2 settlements to be on the same day and move from one the other.

The major difference to me in the 2 systems is the agreed timings. The buyer has deadlines they have to meet or the house goes back on the market. So no one is waiting round for months.

Also you can pay a small deposit of $1000 but if you default you are on the hook for 10 percent of the purchase price. So you usually have to get a deposit bond from your bank to prove you have that money available and if you default it is either paid out from your account or added to your existing mortgage. It’s very rare for anyone to default though

They timed the settlement so they could move into their new house.

Yeah it's hard to believe because it isn't most Australians needing to do this.

I'm in NZ and I know few people who have rented or moved in with family. Normally if people are selling then they already have another property in mind, or they start looking straight away, and then align the transfer dates so they move from their old place to the new one at the same time.

I've never come across another country that has chains, so it doesn't seem like it's a very efficient system for selling properties or it would be more widespread.
I have bought and sold twice in a European country. Once we needed bridging finance, which meant we had to sell within two years. We did worry about not being able to sell in time and having to lower the asking price, but in the end we sold within 4 months.
The second time was similar, however we had to wait for building work to finish in our new property and we ended up in short-term rental in a friend's flat for 6 months, which effectively meant moving twice. Not fun but it was our choice to buy a doer-upper.

Exactly. If it were the best way to buy and sell, why wouldn't more countries have this system?

France certainly does, if by a chain you mean most people have to sell their house in order to buy another one. It can take literally years….

I've bought and sold two houses in France. We bought without borrowing (second home) from a divorce sale ( so enforced with time limit) and a widow who was moving into care. Sold to a couple with an inheritance ( so keeping Paris home) and couple with a work arranged and financed mortgage ( keeping and hopefully renting their own home). We wouldn’t have waited for people who had to sell, as the property market outside cities is very very slow ( or at least it was for the sixteen years we were there)

No chains in Scotland. In the UK

I've bought in England, Scotland and France. France is by far the best.

The Scottish system is good once you're part way in, but the whole offers over/bids/home report valuation can make it a nightmare to know what to offer, especially in a bid situation.

The French system is so simple, you're tied in early and only one solicitor (unless you want your own in addition) so none of the adversarial nonsense you get in England.

I think I would find it more stressful having to put all our stuff in storage and move into a rental than to be in a chain.

I agree it is a crazy system. But I don't think chains are the root of the issue. Anyone can break a chain by moving into rented, or in with family, like in Oz, in order to make the chain shorter.

The issue is that we allow people to screw each other over with no financial penalty. In Australia, you make an offer and if accepted it is legally binding. Pay a non refundable deposit. This would make a difference. And the seller too should put an equal amount of money into bond, which they pay the buyer as a penalty if they pull out after the buyer has spent money on surveys etc.

Here you can make or accept an offer and pull out days before exchange. It is chaotic and unfair. It makes people play games over something that should be taken seriously.

Totally agree with you, OP.

When people say this I suspect they’re talking about the (relatively small) expense and inconvenience of having a buyer pull out of your sale.

The flip side of this though, it is the advantage it provides if huge life event hits- it allows you to walk away with reasonable consequences

I listened to a podcast about tulisa (x factor) recently - many years ago she exchanged on a property to complete a week later. During that week a tabloid did a fake expose saying she was a drug dealer.
Overnight she lost her income. She had to pull out of the house- she couldn’t reasonably pay the mortgage on it- and lost her deposit. She lost £500k.

now that’s obviously an expensive house but a 10% deposit is relative and would be life changing for anyone to lose.
Is that really a fair penalty for losing your job? And she’s doing the sensible thing, pulling out rather than lying to the mortgage company or waiting to be repossessed.

It doesn’t seem a reasonable penalty for something as objectively minor as pulling out of a house sale.
Why should the seller get 10% AND keep the house to resell to someone else?

I haven't rtft but how do people in Australia manage to have 5 to 10% of the price of a house just sitting in the bank? In the UK, and particularly so at the moment, most people live more hand to mouth than that.

You essentially get a promise note from your bank for the 5-10%. You don’t personally come up with a cash deposit.

Because there is certainty of contract very early in a transaction it’s not such a big deal as here.

The banking system in Australia supports buying and selling. Houses transact more often than in the UK because moving home is quicker and easier.

The UK is the slowest market to transact globally - it is very very inefficient.

You’ve lived in both countries but don’t understand the differences in the age of properties, the difference in legislation, buying setups, fiscal regime (no mortgage porting in AU) or historical properties or ownership setups? None of those differences occurred to you?

Also a few years ago I sold my house and bought another and couldn’t get the sale and purchase to align. I ended up selling my house (which I loved and was only selling because I was moving to a house I lived even more) and waiting a few weeks before we could complete on the new house.

i found those few weeks really worrying. If I’d lost the house I was buying it’d have been awful but even worse it would have been compounded by the fact I wouldn’t still have had my original house.

It’s a terrible system that must have been designed by a demon prince from hell.
There are no advantages to it at all.

Oh do get off your high horse.

As I said in the initial thread which you obviously missed, I moved overseas when I finished school so never bought in the UK. So it is of course not surprising I don't know any of what you listed about the UK property buying process, having moved when I was 18.