Buyer pulls out before exchange - Property chain break explained

My property chain has fallen through; What do I do?

Broken property chains are an infuriating occurrence and an all too common symptom of selling a property on the open market - one in three property chains break.

If your property chain breaks, it's best to act as quickly as possible to avoid delays.

A property chain break can be frustrating after you've done hours of property preparation ahead of viewings (sacrificing time off work to do so), debate your asking price constantly, stressing over the condition of the current market and then finally, when you manage to get an offer accepted and instruct a solicitor, your buyer pulls out before exchange.

In short, if you don't find a replacement sharpish, your property sale will likely fall through.

You can move on from the sequence breaking successfully if you can make sure you have any surveys, solicitors and mortgages ready to go on your end.

Contacting your mortgage advisor and your solicitor as soon as you restart your house hunt will help you minimise the impact of a property chain break.

Another way to recover from a property chain break and protect yourself in case it happens again is to buy insurance which will pay you a set amount of money if gazumping occurs.

The pay-out will allow you to receive some cash back, but it won't stop the property chain from breaking.

Sadly, the situation when a buyer pulls out before exchange is not uncommon due to the number of unpredictable variables involved in property chains.

So, to minimise and protect you from the likelihood of your house sale falling through, we've poured everything we know about property chain breaks into this thorough guide.

Want to know something specific about the effect of breakage on property chains?

What's a property chain?

A property chain is when multiple buyers and sellers are linked through the sale or purchase of a property. Your typical property chain comes in two parts and alters depending on your position:

The upward property chain

The upward property chain relates to the property sellers, the sellers of their onward purchase, and so on.

An upward sequence with lots of potential sellers can have challenges, as the completion date will often depend on when the sellers above you complete — which is not ideal if you're after a quick sale!

The lower property chain

The lower property chain relates to the buyers of the property and the buyers of the onward purchases. The lowest person in the sequence is someone who doesn't need to move for a sale to go ahead.

This could be a first-time buyer living with parents, an empty property that's been through probate or someone selling a second home. These parties with no dependent sale also hold the upward point in property chains.

Property chains are pretty standard in the house-buying process and are typically less risky the shorter they are.

Those without conditional sales often have a more substantial hand in negotiations. A long property chain can be a significant deterrent for both buyers and sellers, as the likelihood that a buyer pulls out before exchange is higher.

An occurrence that can prove to be time-consuming, stressful, and expensive.

What Does Breaking The Property Chain Mean?

Property chains break when either a seller or buyer pulls out before exchange.

This could be a pulling out of a sale or a purchase and can easily cause sales along the entire process to fall through - unless another party replaces their position in the property chain.

In most cases, property chain breaks are perceived as a bad thing; however, in some instances, if a seller or buyer pulls out before exchange, it can be rather beneficial.

For instance, escaping a long sequence could help you move quicker, as fewer parties have to agree on a date for completion.

You could also achieve more money for your current property and (if you're a shrewd negotiator) secure a lower price on your onward purchase. The perks of being an attractive buyer and seller!

So, why does a house chain fall through?

Selling a house is never as simple as it sounds, especially when a lengthy property chain is involved.

So to help you minimise the chance of property chain breaks, here are the main reasons why a seller or buyer pulls out before an exchange:

Struggling buyers

Managing your finances responsibly is key to avoiding property chain breaks.

While financial issues are also affected by unfortunate circumstances, such as job loss, a business going under etc., being financially responsible can ease the effects significantly and prevent you or your buyer from pulling out before exchange.

However, it's worth remembering that a sudden job loss can cause a lender to decline your mortgage and decrease your chances with other lenders.

Vet every buyer who makes an offer with a fine tooth comb, and ask for proof of their mortgage in principle before they submit a request.

Take these precautions to find yourself a reliable buyer, and it'll be far less likely that your buyer will pull out before the exchange.

Exaggerating the truth

Just as we encourage you to do above, a mortgage lender vets all potential borrowers to assess their ability to make repayments.

At this point, the lender takes their research one step further to ensure that the details you provided for your mortgage-in-principle are correct.

If there's a noticeable difference – for instance, you told them you earn three times more than you do – the lender is ideally within their rights to decline your application. A move that could cost you your dream home and have you being the buyer who pulls out before exchange.

Indecisive buyers

We recommend avoiding these at all costs, as they're often why more than one buyer pulls out before exchange. Why? Here are the two main reasons:

• They're serial timewasters

  As their name suggests, indecisive buyers spend countless hours sitting with agents and viewing properties without pinning down what they're looking for. Not that this stops them from tempting you with offers and agreeing to a purchase. After all, offers are only legally binding once a sale has been exchanged, so what have they lost? If a property they were looking at previously undergoes a substantial price reduction, they can always pull out before exchange and go for that one instead. Not something you want to occur!

• They're untrustworthy

  Trust holds property chains together, so it's no surprise that indecisive buyers also cause others in the house chain to pull out before exchange. Housing sales are stressful enough without the fate of your deal resting with a hesitant buyer. For many of us, we don't want the hassle.

Sentimental value

It's worth bearing in mind that not all sellers want to sell their houses. For some, a property sale could be triggered by their circumstances. They could've lost their job, had debts to neutralise or been ordered to do so by the court. So it's worth bearing in mind that if such a situation is resolved mid-sale, they could also be 'that buyer' who pulls out before exchange.

Struggling to find a new home

Most of us are particular about what and where we live, which is not surprising. Our home says a lot about us to the outside world, not to mention the amount of time we spend in it. So as you can imagine, if you're Sold SSTC and struggling to find an onward purchase, you have two options. Either wait for the right property or pull out before the exchange of contracts.

Failed struggles

Failed surveys are another cause of property chains breaking. In the best-case scenario, your buyer and lender have the upper hand, but the sale continues. This may require you to accept a lower offer from your buyer, take out a different product from your lender, or pay a higher interest rate.

The worst-case scenario is that the buyer pulls out before the exchange, leaving you to find a replacement. You may also have to seek other mortgages if the survey results have made your property fewer houses less mortgageable. You may have to break the property chain yourself if you can't secure another mortgage.

Gazumping

A rather complex word to do with a property chain, albeit a relatively simple meaning. Gazumping is when a higher offer is made by another buyer (someone outside the process) and accepted by the seller. If you increase your bid, you can be forced out of a property chain before exchanging.

Gazzumpers are commonly cash buyers or someone with no conditional sale, with the ability to swoop in and take the stress of the process off the seller's shoulders. Think of them as a Get Out Of Jail Free Card. In doing so, Gazzumpers tear down the entire upper property chain – a severe problem if it occurs at the foot of the property chain but less so if near the top.

Gazundering

Another funny term to do with a property chain, with an equally simple meaning. If you've been gazundered, a buyer has lowered their offer on your property just before the exchange. Cheeky, we know, especially if done for no apparent reason other than to shave an extra couple of thousand off a purchase price.

However, it's worth remembering that there are some valid reasons, which could mean your buyer pulls out before the exchange. Here are two:

• A conveyancer, a solicitor or surveyor uncovers a legal problem with the property. This could be to do with the title deeds, planning, boundaries, leases etc. and typically comes to light when solicitors' raise their enquiries' - in essence, ask any questions they want to ask and look into a property's specifics in more detail.

• Surveys that come back negative can also result in you being gazundered. If a buyer pays for a specialist survey in response to information uncovered by their solicitor, this could also lead to gazundering or, if the lower offer isn't accepted, the buyer pulling out before exchange. We'd always advise getting specialist surveys if you're unsure of a property's condition or history. Getting them done quickly could make the property chain break more accessible all around.

If a buyer pulls out before exchange, what's the cost?

If a buyer pulls out before exchange, it can be expensive and a significant inconvenience. Just some of the costs that come with breaking property chains include:

*The figures above are a rough guide to the fees you may incur if a buyer pulls out before the exchange. These will differ depending on your circumstances. The total has been calculated using the MINIMUM cost for each factor. Using the upper estimate would see the cost of property chain break exceed £6,000!

Can I protect myself against property chain break?

Yes, you can. Homebuyers Protection Insurance is one of the easiest and most cost-effective ways to ensure that if a seller or buyer pulls out before exchange, you're not left to recoup the costs.

Typical policies cover costs like conveyancing fees, mortgage arrangement fees and surveys in the event of a property chain break. We found quotes for as little as £47!

Although, you could protect yourself for free and only buy a property chain-free. You can do this by finding a cash buyer or a buyer with a no-dependent sale, or both.

Spotting the signs of a property chain break

If you are part of a property chain, you should try and stay in contact with all other parties as much as possible – by staying in communication you will begin to notice if the property chain is beginning to break.

Knowing and acknowledging the signs of the sequence breaking sooner rather than later will allow you to contact another buyer in good time and may even save yourself a rather large headache further down the road.

Here are a few tricks to keep in mind:

Consistent communication with solicitors

Your solicitor will give you a much more level headed and legal point of view of the process than an estate agent. If your solicitor hasn’t been notified by the other party's solicitors progress, then it’s a good sign that the process has begun to break.

Own the process

By knowing and understanding the process of property conveyancing, you will better understand what is happening, rather than just accepting whatever your estate agent is telling you.

Stay in the loop with the buyer

If the buyer stops communicating with your party, it's a good indication that they are having problems. This may be a good stage to ask your estate agent to contact the buyer to discuss the sale.

How do you stop a house sale from falling through?

As you're now well aware, property chains can be problematic. Not only can they take a toll on your pocket if a buyer pulls out before the exchange, but they can also slow down your sale considerably.

Even those property chains which do 'go to plan' aren't lovely places to be.

With the fate of your sale depending on the other people in the sequence, you can never be 100% sure whether it's set in stone until you exchange. And even then, parties can still pull out if they wish, although very few do.

If you ask us, extended property chains are one of the most stressful ways to sell a house.

So to help you have a smooth and stress-free sale or ensure you're prepared for the worst if your buyer pulls out before exchange, here are six valuable tips to avoid property chains falling through.

1. Do your homework

Buying a property is a competitive process, so it's no surprise that some buyers elaborate the truth to look more appealing.

Take the title 'Cash Buyer', for instance. While it means a buyer who can fund a purchase with 100% cash (like us), it's also used by buyers with no conditional sale and mortgage and those Sold SSTC, despite mortgages not being cash, but a long-period loan.

Don't worry about drilling into the details of how a buyer will purchase your property.

Remember, you'll be fronting the cost if the buyer pulls out before exchanging.

2. Agent check-ups

Fail to keep your eye on your estate agent, and you risk your buyer pulling out before the exchange.

Why? Because agents aren't just dealing with your sale – they manage a large number of sales at once, so by not checking up on progress, you're giving them the green light to keep you on the back burner.

In that time, your buyer could realise their dream house that was once out of budget has now been reduced and choose to back out before you exchange contracts.

To prevent this from happening, we'd suggest weekly or fortnightly check-ins with your agent to discuss interest and what they're doing to get your property sold.

Emails don't count! Agents can ignore emails, but they can't miss you over the phone or in person. Do this, and you will not only get your money's worth out of the agent but also keep things moving.

3. Know whom you're dealing with

Another easy way to ensure no buyer pulls out before the exchange is to communicate.

Communication is the backbone of all strong property chains, so it's a good idea to get social with buyers and sellers outside your agent.

This could be grabbing their mobile number during viewing or meeting for coffee to discuss the sequence once they've offered.

However you choose to do it, building rapport is a great way to keep the sequence strong. Someone in a property chain will often find it a lot harder to let someone down (i.e. pull out of the process) if they've established a strong rapport. So go grab a coffee – you can thank us later.

4. Get papers prepared

Want to get through conveyancing quickly so that no buyer pulls out before exchange?

Then the very least you can do is keep your paperwork in order. Property chains rely on efficiency, so if you've got paperwork that should be with your solicitor under a pile of papers on the sideboard, stay up late and fill it in.

5. Agree to a lower sales price

If someone's let slip that they're considering pulling out of the process before the exchange, then agreeing to a lower sales price, although not great for you, could prove beneficial.

If you're a buyer without home buyers' protection insurance (detailed above), it's also worth considering how much a property chain break would cost, whether the costs described above or the costs of finding a new buyer.

Don't forget you're not on your own in this. In the event a buyer pulls out before exchange, the entire upper property chain would collapse, so you could potentially get others above you to contribute towards your discount or get all members of the sequence to agree to a lower price.

6. Choose a reliable buyer

As you've seen, a reliable buyer is everything to property chains. Not only do they ensure the sale goes smoothly and to schedule, but they also cost you far less hassle and money.

So, if you're on the hunt for a reliable cash buyer, who'll not only stick by you but also take the pressure of the property sales process off your shoulders, then we may be able to help.

We're one of the UK's most established cash buyers of property, with over 50 years of combined experience under our belt and an aim of making the sale of your house simple.

As you've probably twigged, being a specialist in off-market sales, we're not fans of property chains either. Rather than creating them, we'd much rather spend our time helping you survive or escape them altogether.

So, whether you're after a property chain-free sale or your buyer has pulled out before the exchange and you require a replacement, we can help make your sale a smoother experience.

And it doesn't matter what property you have - we buy any house in any condition in any location across England and Wales.

Buyer pulls out before exchange