, Property
Your buyer's buyer's mortgage was declined on a Tuesday. You have never met them, you do not know their name, and by Friday you have lost the house you were buying, the £1,400 you spent on searches and survey, and the removal firm's deposit. Nobody behaved badly. The chain simply did what chains do.
Everybody in the chain is exposed, and nobody is committed
In England and Wales, a sale becomes binding at exchange of contracts, usually minutes or days before completion. Before that point, an accepted offer is an agreement to try. The seller can accept a better offer. The buyer can withdraw. Neither owes the other anything, whatever the memorandum of sale says, and "subject to contract" on the correspondence is doing exactly what it says.
In a chain, every link has to reach exchange at the same moment, because each party needs the money from their sale to fund their purchase. Four transactions in a row means four mortgage offers, four sets of searches, four solicitors, four surveys and four sets of personal circumstances, all of which must hold simultaneously. The probability of the whole chain completing is the product of the individual probabilities, which is why long chains fail so often and why a chain of six is a materially worse proposition than a chain of three at the same price.
Scotland is a different system. Once missives are concluded the contract is binding, which happens much earlier in the process, so Scottish chains behave differently and fall apart less. If you operate on both sides of the border, do not carry English assumptions north.
The failure points are a short and repetitive list
Chains break in predictable ways.
- A down-valuation. The lender's valuer prices the property below the agreed figure, the buyer cannot make up the difference, and the sale is renegotiated or lost. This is the single most common cause.
- A survey finding. Structural movement, Japanese knotweed, a roof at the end of its life, or a lease with too few years left for a lender. Any of these can turn a proceedable buyer into one who wants £20,000 off.
- A mortgage declined at full application, having been fine at agreement in principle stage, usually because of a credit commitment or a change of employment.
- A conveyancing problem: a missing building regulations completion certificate for a long-finished extension, an unresolved boundary, an indemnity policy the other side's lender will not accept, or a local authority search that takes eleven weeks because that particular council is slow.
- A person changing their mind, separating, being made redundant or dying. Chains are made of households, and households have events.
Notice that most of these happen to somebody you have no contact with, in a transaction you cannot see, and you find out about them through two intermediaries.
Gazumping and gazundering are legal, which is the point
Gazumping is the seller accepting a higher offer after having accepted yours. It is lawful in England and Wales, and it is the direct consequence of nothing being binding before exchange. It is most common in a rising market and most painful when you are weeks and thousands into the process.
Gazundering is the reverse, and it is nastier. The buyer reduces their offer shortly before exchange, when the seller is committed to their onward purchase, has booked removals, and has the least capacity to refuse. It is also lawful. A seller facing a gazunder on the morning of exchange has to weigh a real reduction against losing an onward purchase and starting again.
Two partial defences exist. A seller can ask for the property to be taken off the market and put it in writing, which is unenforceable but does change behaviour, and the agent has a duty under the Estate Agents Act 1979 to pass on all offers regardless. Some transactions use a reservation agreement with a lock-out period and a deposit at risk, which is enforceable, and which remains rare in ordinary residential sales because nobody wants to be the first to suggest it.
Chain-free is a negotiating asset with a cash value
If you are buying without a related sale, you are worth more to a seller than a buyer at the same price who has a house to sell. You are shorter, simpler and less likely to fail. Sellers routinely accept a lower offer from a chain-free buyer, particularly where the seller has already agreed an onward purchase and is exposed if you collapse.
That is the mechanism behind cash buying, bridging finance and part-exchange schemes. A landlord buying a tenanted flat with cash is not paying for the property alone, they are buying negotiating position. It is also why buying before selling, funded by a bridge, can be rational despite the cost of the bridge: the discount you obtain as a chain-free buyer can exceed a few months of interest. It can also go badly, if your own sale then fails and the bridge has nothing to repay it. That is a real risk and it should be priced, not ignored.
At exchange, the buyer normally pays a deposit, conventionally 10% of the price, which is at risk if they fail to complete. This is the first moment anybody has money genuinely on the line. It is also why the standard advice to exchange as early as you reasonably can is right: the period between agreement and exchange is where all the danger is, and shortening it is the most effective thing you can do.
What actually shortens a chain
Choose a conveyancer on responsiveness rather than on being £150 cheaper, because the transaction moves at the speed of the slowest solicitor in the chain. Order searches on day one rather than after the mortgage offer, and pay for a personal search where the council is known to be slow. Complete the TA6 and TA10 property information forms fully and early if you are selling, because incomplete forms generate enquiries and enquiries generate weeks. Get a full copy of the lease and the management pack for a flat at the outset, since these are a notorious source of delay. And ask the agent directly how long the chain is and where each link has got to, then ask again every week. The answer is often vaguer than it should be, and vagueness is information.
Where this shows up in the game
Estate agency and property arrive in Business Baron with the Property & Construction Track, an add-on to the full game. Listings carry a hidden reserve and a reason for selling, the agent exaggerates the rival bidders, and being chain-free is one of the things worth money off. Deciding when that advantage is worth paying for is a large part of buying well.