Chains and Mortgages

Mr_Matey

Hi all,
I've only been in the UK for 6 months, and think I finally understand what a housing chain is (though correct me if I'm wrong). Basically if I'm looking to buy a house and it's in a chain, that means the seller is also looking to buy a house, and if their purchase falls through, my purchase can too.

Also, it seems that being a "cash buyer" or "mortgage ready" gets you preferential treatment by those selling.

Having lived in Australia all my life I find these concepts highly unusual. I know things work differently here, but back home if you're selling you're selling, and if you want to buy a place you get a mortgage first.

If someone were to make an offer on a house I owned without having a mortgage set up (i.e. not sure they can even get the money they're suggesting), then I would consider them a time-waster.

Similarly those who aren't committed to sell because they're in a chain and can't go through with the deal are wasting my time as a buyer (and possibly money if I do a survey).

What do you all think, and would you either accept an offer from someone who hadn't even been bothered going to the bank first or make an offer to someone who isn't sure they can sell?

poppysarah

Have you got a mortgage lined up?

Mr_Matey

haha, no I don't, but I'm not in the market to buy or sell right now.

poppysarah

People who've not sold, not got their house on the market and don't have another mortgage or pile of cash aren't in a position to buy.

That doesn't stop people viewing houses and falling in love. During the last crash bridging loans were really popular and very bad as an idea. this time more people seem to be thinking of renting out their house rather than selling it.

If you're not from the UK you'd have to have cash as you can't get a mortgage for a while (2 years I think) - so with an aussi accent you might get questioned a bit more if you're planning some weekend viewings as a hobby.

Cash ready doesn't help in a surging market if you only want to buy one place and the EAs deal with property developers who buy many houses off them. I'm not suggesting they're all been taking backhanders during the boom years but I've noticed the way things have been over the last few years.

Mr_Matey

Hi again poppy and thanks for taking the time to reply.

Although, I think you've missed the point of my post. I'm not looking to get a mortgage or buy a house. If I was to look in earnest, the bank would be the first place I go.

I understand that people may not be able to buy a house until they have sold theirs, in which case why not sell *first* before buying? Chains sound over-complicated and a way to heartbreak, time-wasting and unnecessary costs.

Agreed, people can fall in love with places, although I don't understand why they would make an offer without visiting a bank first and knowing what they can afford.

Knowing they haven't why would a vendor take their offer seriously? Aside from the fact that a vendor these days may be very happy to get *any* offer that is.

JoolzS

Most people who go to view houses do know exactly how much they can borrow and what they can realistically afford (I'm excluding the lookie-loos and the people who are persuaded by an estate agent to view something they can't afford).

Chains work because they work The majority of house buying chains only involve 3 or 4 transactions. For example you get a first-time-buyer couple who know they can borrow £120,000 and they only view properties on the market for around that price. The second link of the chain is, say, a single man who wants to sell his first-time-buyer flat and move into a two-bed house - he knows his budget is £160,000. The third link of the chain is the person selling the two-bed house - he/she/they knows their budget is around £200,000 and that's what they look for. We don't need to know about the person who sells to link number 3 because, for whatever reason, they aren't part of the chain. (All the monetary figures mentioned above are just arbitrary.)

Solicitors in this country are completely used to dealing with chains such as this and it is all in a day's work. It only seems strange to someone who is used to a different system. I used to work as a conveyancing secretary and the worst chain I ever dealt with had *nine* links! For me and my boss it was a logistical nightmare. The buyers and sellers possibly had a few sleepless nights, but in the end everyone moved into their new homes.

I will admit that a few years ago DH and I put an offer in on a house when we hadn't had an offer on our flat. They accepted the offer with the caveat that they would keep it on the market - we had no problem with that. As it was, we couldn't get a buyer for our place, so had to withdraw our offer. I'm sure it was disappointing for them, but completely within the norm of the UK housing market.

People don't "sell first" before buying because that would essentially make them homeless. It is very difficult in the UK to rent for less than six months and even more difficult to rent an unfurnished property. So if a family sold their house immediately they would then have to rent a, probably, furnished house for a minimum of six months and put most of their possessions in storage while they look for a new home. This can be a huge expense. The chain means they avoid all that.

Out of curiosity, how do families deal with this in Australia?

Julie

Mr_Matey

Hi Joolz,
Fair enough, chains work because they work. Except when they don't :rolleyes:. The time you saw 9 links in a chain kind of proves my point. Logistical nightmare.

I wonder in this market how often such a chain would fall apart, for example if someone lower down the chain got gazundered. Although the reduction could be shared by all 9.

I don't really understand your point on it being expensive to move out, perhaps this is more of a psychological thing and comes back to people's misconception that "rent money is dead money".

Surely if you've got 120k in your bank account from the sale of a property, the interest should pretty much cover the rent of a similar property. Or if you have a mortgage you'd be used to paying "rent" in the interest-only portion of your loan. Short term storage might cost you a bit extra, but the point is it's short term.

I'm not sure how it's dealt with in Aus, but I've never heard of chains and properties are normally rented unfurnished. You also have a period between exchanging documents/money and actually moving in.