Buying a home is an exciting and significant milestone in anyone's life. Along with that comes a lot of industry words and mortgage jargon. For example, you may hear your solicitor talk about "the homebuying chain".
If you're not sure what this is, don't worry. We're here to break down its various stages, potential challenges, and how you can make the most of it to ensure a smooth and successful transaction.
The homebuying chain explained
The homebuying chain refers to a group of home buyers and sellers linked by their property transactions. These naturally occur when people are buying and selling homes and usually involve multiple buyers and sellers, each reliant on the other's successful completion in order to proceed with their own.
The chain can vary in length and complexity, ranging from a simple link of two buyers and sellers to a more intricate web, involving several buyers and sellers. A property chain ends with someone who is only selling their property, not buying another home.
It is your solicitor's responsibility to co-ordinate transaction dates with all other parties in your chain.
The types of homebuying chains
It can be challenging to quantify a simple chain over a complex one, as there can be so many moving parts. If we visualise a journey in our minds, we can pick out where challenges and obstruction turn a simple homebuying chain into a complex one.
The simple chain
Julia is a first-time buyer, buying a house from Shane, who plans to but a house from Rajesh, who is moving into a new build. In this scenario, Julia is not waiting to sell her previous home, Shane only needs to wait for Rajesh to move into his new build and, as Rajesh is not waiting for anyone else, he is only waiting on the developer.
If there are no building delays, this should be a relatively straightforward chain.
The complex chain
In a complex chain, there are more moving parts, usually involving several buyers.
Julia is a third-time buyer and is buying a property from Shane. Shane is buying from Rajesh, who is purchasing an existing property, which has an issue that was only discovered during conveyancing.
Following this issue, the homeowners in Rajesh's new property are struggling to buy a new house causing a delay for everyone down the chain.
Because Rajesh can't complete, neither can Shane and neither can Julia.
It's important to note that a homebuying chain can involve upwards of ten or more people, and often do, so it can get complicated quickly. The good news is that it is rare for property chains to collapse completely in Scotland, due to missives being concluded early in the process.
Chain collapses or complications cannot always be avoided, but using a reputable, experienced solicitor, and having a mortgage adviser that can help you navigate these issues, can reduce any risk.
The different stages of the homebuying chain
Once you're at a stage where you're mortgage ready, it's time to start viewing properties and taking this first step means you're stepping into the homebuying chain. Here's how this process looks for Scottish properties...
The property search
The homebuying journey usually starts with looking for a property that fits the bill. At this point, you will usually work with your solicitor (who generally acts as an estate agent as well), browse online listings and attend viewings for the desired home.
Making an offer
Scottish properties often hit the market with an 'offers over' price. This means prospective buyers have to make sealed bids of their best offer over the asking price. The winning offer is generally the one that offers the most money and attractive timescale.
Surveys and reports
Sellers must provide a home report, which includes surveys, energy reports and a completed questionnaire, which should reveal any potential issues which can be a factor in how much a potential buyer is willing to bid.
The missives
Contracts are not considered binding until the exchange of letters, called missives, has been completed between both the buyer's and seller's solicitors. Once concluded, these offers are legally binding.
Challenges in the homebuying chain
Let's assume everything went smoothly in the above steps and you encountered no challenges! This is the ideal situation and for the most part, this is what will happen. There are, however, some potential challenges to be aware of.
Breakdowns and delays
Any drawn-out process is susceptible to delays and the homebuying process is unfortunately no exception. If any involved party suddenly encounters financial difficulties, legal complications, or has a change of heart, it can disrupt the entire chain. This can cause frustration and even potential financial loss.
It's not always possible to avoid, especially if you're a little further along the chain, but it's always best to handle these issues with as much patience as possible.
Less chance of being gazumped
The Scottish market has mechanisms in place to reduce the risk of being gazumped (when a seller accepted a better offer having already accepted yours), but it's not unheard of. Solicitors cannot accept more offers, once an offer has been accepted. The seller, however, can choose to instruct a new solicitor to accept a later offer, although this is expensive and uncommon.
How to avoid getting into a chain
There are a few ways to avoid being in a chain or at least avoid being in a long one. While it's not always possible, there are steps you can take:
- Choose a chain-free buyer
- Look for a chain-free seller
- Consider new-build properties
- Agree on a date
Here are some steps for keeping a homebuying chain moving, which can help mitigate any potential problems down the line:
- Work with an experienced solicitor
- Speak to any representatives regularly
- Get your finances in place early
- File everything and document all processes
- Have copies of all documents to hand
- Sign and return your paperwork promptly
Streamlining the homebuying process
Understanding the homebuying chain is crucial for buyers and sellers navigating the property market. While knowing what to expect can certainly make the process easier and more efficient, it always helps to have a professional at your side to help you when things get a bit complicated.
Whether you've already found your dream home and have made an offer or are still browsing online listings, we recommend getting in touch with a mortgage adviser for expert advice, guidance and support.
No question is too big or small and we're always happy to help!
Important information
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.