Chain (in selling a house)
Encyclopedia
A chain is a sequence of linked house purchases, each of which is dependent on the preceding and succeeding purchase. The term is commonly used in the UK.
Each member of the chain is a house sale, which depends both upon the buyers receiving the money from selling their houses and on the sellers successfully buying the houses that they intend to move into.
For example, in a four-household
chain, A buys B's house, B uses the money from that sale to buy C's house, and C uses the money from that sale to buy D's house. (A chain can be circular. This example becomes circular if D buys A's house.) All sales in a chain close
on the same day. On that day, all the households involved in the chain leave their former homes and move to their new homes.
This situation is notorious for being liable to "break" if one of the transactions fails, for example due to financial difficulties, a change of heart, or the practice of gazumping
. The failure of one member of the chain fouls the whole set of transactions. The remaining chain fragments must find new buyers and sellers to form new chains.
A chain begins with a household buying a house without selling their current house. Examples:
A chain ends with a house being sold and not depending on existing owners buying a house to move into. Examples:
Each member of the chain is a house sale, which depends both upon the buyers receiving the money from selling their houses and on the sellers successfully buying the houses that they intend to move into.
For example, in a four-household
Household
The household is "the basic residential unit in which economic production, consumption, inheritance, child rearing, and shelter are organized and carried out"; [the household] "may or may not be synonymous with family"....
chain, A buys B's house, B uses the money from that sale to buy C's house, and C uses the money from that sale to buy D's house. (A chain can be circular. This example becomes circular if D buys A's house.) All sales in a chain close
Closing (real estate)
Closing is the final step in executing a real estate transaction.The closing date is set during the negotiation phase, and is usually several weeks after the offer is formally accepted. On the closing date, the parties consummate the purchase contract, and ownership of the property is transferred...
on the same day. On that day, all the households involved in the chain leave their former homes and move to their new homes.
This situation is notorious for being liable to "break" if one of the transactions fails, for example due to financial difficulties, a change of heart, or the practice of gazumping
Gazumping
Gazumping is a term used in the UK and Australia when a seller accepts a verbal offer of the asking price from one potential buyer, but then accepts a higher offer from someone else. It can also refer to the seller raising the asking price at the last minute, after previously verbally agreeing to...
. The failure of one member of the chain fouls the whole set of transactions. The remaining chain fragments must find new buyers and sellers to form new chains.
A chain begins with a household buying a house without selling their current house. Examples:
- A household that does not currently own a house. This may be a first time buyerFirst time buyerA first-time buyer is a term used in the British and Irish property markets, and in other countries, for a potential house buyer who has not previously owned a property....
, such as a household moving out of rentRentingRenting is an agreement where a payment is made for the temporary use of a good, service or property owned by another. A gross lease is when the tenant pays a flat rental amount and the landlord pays for all property charges regularly incurred by the ownership from landowners...
ed accommodation. It may also be the result of a household splitting, for example a grown child leaving home. - A household retaining ownership of their old house after moving out. For example, they may wish to rent it out, demolish it, or merely leave it vacant and keep it on the market.
A chain ends with a house being sold and not depending on existing owners buying a house to move into. Examples:
- A household moving into a vacant house. It may be a newly-built houseHome constructionHome construction is the process of constructing a home. Beginning with simple pre-historic shelters, home construction techniques have evolved to produce the vast multitude of living accommodations available today. Different levels of wealth and power have warranted various sizes, luxuries, and...
or a house rendered vacant due to the death of its occupant or occupants or the departure of former tenants. - A household moving to join an existing household.
- A household moving to temporary accommodation until they can buy a new house.
- A household moving into rentRentingRenting is an agreement where a payment is made for the temporary use of a good, service or property owned by another. A gross lease is when the tenant pays a flat rental amount and the landlord pays for all property charges regularly incurred by the ownership from landowners...
ed accommodation or a nursing homeNursing homeA nursing home, convalescent home, skilled nursing unit , care home, rest home, or old people's home provides a type of care of residents: it is a place of residence for people who require constant nursing care and have significant deficiencies with activities of daily living...
.