House Chain Collapsed? All Is Not Lost if You Use an Auction!

Has your house chain collapsed? You’re not alone. As many as 1 in 3 property chains fall apart – and sometimes at the very last minute before you were due to exchange contracts. We know how upsetting and frustrating this can be, particularly when your plans, or subsequent property purchase, are dependent on completing your sale within a finite time frame.

The positive is that there are solutions out there, and an auction may be the ideal option. Let’s look at why house chains frequently collapse, what you can do next, and ways to manage the stress of finding out your plans have been derailed.

Why Do House Chains Break?

House chains are common and mean that each person in the chain needs to sell their home to finance the purchase of the next. This collective of buyers is typical where the homeowners are each selling a residential home to buy their new property.

The issue is that, depending on the size and complexity of the chain, any problem at any part can create a domino effect on all the other buyers and sellers. While there are countless reasons a buyer or seller could back out, decide not to move, or simply change their mind, the most common examples include:

• Financing issues: if a buyer has a mortgage agreement in principle but is turned down following a final application or cannot access the funding they need.
• Gazumping: a seller has agreed to an offer, and the buyer is waiting to move forward, but the seller withdraws the agreement because they have received a higher proposal.
• Survey problems: structural surveys might flag issues such as subsidence, invasive plant species or other repair work, which means a buyer wants to reduce their offer or does not wish to proceed.
• Life events: where buyers or sellers in a chain experience a significant change in circumstances such as redundancy, divorce or bereavement, this may impact their plans.

If you have house buyers insurance, you may be able to recover any costs you have already paid if the chain breaks due to gazumping – this cover can extend to surveys, conveyancing and mortgage application costs. However, the bigger picture is that you may find your plans completely stalled or be unable to move into your dream home altogether.

Managing a Collapsed House Chain

There are several ways to respond to the news that your property chain has fallen through, but much depends on how serious the problem is and whether it is recoverable. Some sellers might, for example, be happy to negotiate on price to avoid delays.

Buyers could potentially decide to withdraw their offer in favour of looking for an alternative home or a property that is chain-free to avoid exposure to the same level of stress again.

Alternatively, you could put your home back on the market if your original buyer is not still invested in completing the transaction or simply wait for as long as is necessary for another seller in the chain to find a replacement buyer.

While these are all possible responses, the unavoidable difficulty is that it could take several months for things to get moving, which could have a detrimental impact on your ability to secure the property you are hoping to buy. It could also mean other plans related to your finances are disrupted if you are selling as part of a separation or have alternative investment, expenditure or debt repayment plans linked to the funds arising from the sale.