A broken housebuying chain – what to do?
Of all the things that can go wrong, a break in the chain is the one you have least control over.
The chain comprises a string of individual deals, downwards from the person who’s buying your house and upwards from the person that you’re buying from.
The longer this chain is, the greater the chance of trouble occurring with one of these deals somewhere along the line.
A typical chain might comprise about 3 or 4 linked transactions, but in some cases there could be as many as ten. At the bottom there will often be a first-time buyer or a buy-to-let investor, perhaps purchasing a flat.
First-time buyers commonly require very large mortgages as they may have relatively low incomes and minimal savings to cover deposits and fees. So there’s a greater risk of problems with funding. For example, mortgage calculations can be totally wrecked in the event of the surveyor ‘downvaluing’ the property.
On the plus side, the person buying at the bottom of your chain isn’t, by definition, dependent on selling a property.
Estate agents know that the chance of things going wrong is far greater where buyers haven’t yet sold their own properties, and will be wary of advising their clients to accept offers from such buyers.
Obviously, it’s very much in the interest of all the estate agents involved to nurture all the individual transactions along the chain, since a fracture in any individual link could cause the whole thing to fall apart, with their commission sucked down the plughole.
Of course, some agents are better than others at ‘sales progressing’ and if things go wrong should be able to help pinpoint where the problem lies. As with your own transaction, fixing a problem elsewhere in the chain is often a matter of negotiating financial compromises.
In an ideal world everyone in the chain would be willing to club together to help pay to fix a breakage further down – because it’s ultimately cheaper to do this than having to start all over again.
In slow market conditions there is more chance of your move being jeopardised because of problems at the bottom of the chain.
Some sellers have solved the problem by taking direct action – stepping in and actually buying the (relatively low priced) property that’s causing the problem.
Once the logjam is busted, it should allow the sale of your house to proceed as planned, which in turn should leave you free to buy. But taking such heroic action would probably mean having to arrange a buy-to-let mortgage with a 25 per cent or larger cash deposit.
And becoming a landlord will mean taking a long-term view on owning property as an investment. Of course, your noble act will also benefit everyone else in the chain by preventing the whole thing collapsing.
So if time permits, the various estate agents involved may be willing to show their appreciation by drumming up contributions to alleviate your financial pain.
But naturally the more people involved the more complex and slow this process becomes.
Our next blog – coming soon …….
Disaster Scenario 3: Gazumping & gazundering
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