An unprecedented couple of years has caused significant disruption to the UK housing market with a severe shortage of stock, demand is far outstripping supply. As home buyers attempt to get an edge over the competition – sellers are focused on avoiding property chain breaks.
Property chains were left in limbo as transactions altogether stopped during the pandemic as the UK government implemented a national lockdown, which included property market restrictions. Since restrictions were lifted the property market has been directly and indirectly impacted by several factors both home and abroad.
From slow valuations and legal work due to the pandemic, a general housing stock shortage caused by the remnants of a labour shortage due to Brexit, and material issues due to global supply chain issues now exacerbated by the war in Ukraine are all at play. If that’s not enough, the UK looks set to be entering a potentially deep recession which will likely hurt the recovering economy and damage consumer confidence.
Never before have cash buyers been in more demand. There were 482,000 cash buyers in the year to March 2022 and they spent £178bn buying homes.
What is a cash buyer? A cash buyer is not reliant on mortgage finance to purchase a property but has the liquidity to hand to complete the transaction. Many buyers are now opting to use a bridge loan to finance the purchase of a new property before selling theirs as it positions them as a more attractive prospective purchaser. Secured on the existing property, bridging loans can be a great way to raise immediate funds that bridge the gap between the two financial transactions of buying a house before selling theirs.
What is a property chain? A property chain is a group of buyers and sellers linked together. If you wish to buy a house, you’re in a property chain but must first wait for the seller to buy their next home.
A property chain usually starts with someone wanting to buy and another who is only selling. If you plan on joining a property chain and you’re unaware of the typical problems that arise, we’ve listed the common ones below.
Buyers try to renegotiate the price
Buyers aim to achieve the best deal on the housing market and this means they’ll use any tactics to negotiate the price. Some of those tactics are commonplace and generally accepted as part of the normal negotiating of a house purchase. Some tactics however aren’t so welcomed or socially acceptable.
For example, where a buyer agrees a purchase at one price, with no intention on completing at that agreed price but insteads waits until just before the exchange of contracts only to gazunder the seller knowing that at the last minute of closing the sale the seller might have very little choice but to agree the new sale price to avoid their property chain collapsing..
The buyer changed their mind
Property transactions can be a long process over several months. The back and forth of buyers countering high offers and sellers putting up new ones to sustain their interests can make the process frustrating. Eventually, the only thing that seals the transaction process is a legally binding property exchange contract.
Buyers can change their minds due to unexpected situations like job loss or chronic illness. Sometimes the reason is as unfair as a buyer seeing a new home they like better after giving sellers their word.
Seller changed their mind
Sellers can also change their minds for various reasons, and they may not be obliged to inform buyers of this before contracts have been exchanged. For instance, a seller can withdraw from a sale, and buyers may have already incurred survey fees, the costs for searches or other legal work already completed.
Buyer or seller losing patience
The sales process should take about three months if everything goes as planned. Both buyers and sellers can lose patience if the sales process drags on for too long. Both parties may have a lot to lose if the deal is delayed longer than expected. Sometimes, buyers want to close the sale quickly, especially if they’re moving for work or expecting a family to settle in.
Poor survey outcomes
Surveys contain useful information that can hasten the sales process. You can expect buyers to pull out if the survey contains structural issues like subsidence, leaks, dam problems, etc. Poor survey outcomes cause buyers to rethink and pull out altogether.
Buyer and seller disputes
Negotiations are a mainstay in property transactions. It places all parties involved in the transaction on a level playing field. However, minor disputes can disrupt the process and cause the transaction to fall through.
Legal issues arising
Search results indicating new developments that can affect the entire neighbourhood or a house, in particular, can put a prospective buyer off. It can be a new road or industrial plant in the community. With this challenge, the seller has minimal control.
Buyer unable to secure a mortgage
The housing market is gradually recovering from the pandemic shocks. For this reason, many mortgage lenders have become less gracious with borrowers and the amounts they offer. This trend can affect buyers’ capacity to secure mortgages and close property sales.
Gazumping occurs when sellers open up for higher offers, shunning your initial deal struck after an agreed asking price. It happens for at least 5% of failed properties.
Generally, property buyers and sellers have a fair share of these challenges. The more you know about them, the better your chances of finding viable solutions when you find yourself in a potential property chain disaster.
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