Exchange and completion confusion

Mustlovedogs

Apologies I am using this forum a lot lately and appreciate all the advice.

I'm just a bit confused about exchange and completion as although I've bought 4 properties before I've always managed to avoid a chain.

Now I have a property I'd need to sell. I was looking at a new build but they want exchange in 6 weeks. Does that mean I'd need a 10 deposit to exchange, and then my buyer would need to do the same etc. All my funds are tied up in the house, so that means I could never buy a new build? 
If everyone in the chain has funds tied up in the house, then I'm assuming it's exchange and completion on the same day? 

bobster2

On exchange your buyer pays a deposit - then you use this to pay your deposit. It travels up the chain. Ideally at the bottom of the chain is a FTB or someone who doesn't need to sell in order to buy.

Mustlovedogs

bobster2 said:

On exchange your buyer pays a deposit - then you use this to pay your deposit. It travels up the chain.

Thanks
What if the buyers are like me and all their funds are tied up 🤔

Mustlovedogs

And if not a ftb at the bottom of the chain, and whole chains funds are in houses, then presumably the chain collapses? Don't think selling and buying is worth the risk 🤯

user1977

If by newbuild you mean something which is still to be built, and you hope the whole chain’s completion date will be dictated by the vagaries of your developer’s building schedule - you might find it easier to sell first and then buy separately, leaving aside your concerns about the deposit.

EssexHebridean

You’re overthinking it - trust the fact that the system works! 

Mustlovedogs

user1977 said:

If by newbuild you mean something which is still to be built, and you hope the whole chain’s completion date will be dictated by the vagaries of your developer’s building schedule - you might find it easier to sell first and then buy separately, leaving aside your concerns about the deposit.

Yes either or really one yet to be built, one built, but not possible to move out in the meantime as two little ones, so doesn't look like a new build purchase will work for me. Still wonder what happens in chains though when funds all tied up 

Mustlovedogs

EssexHebridean said:

You’re overthinking it - trust the fact that the system works! 

Not like me to overthink 😅

bobster2

Mustlovedogs said:

And if not a ftb at the bottom of the chain, and whole chains funds are in houses, then presumably the chain collapses? Don't think selling and buying is worth the risk 🤯

Nope it doesn't collapse. A seller in somewhere in the chain agrees to exchange contracts without a deposit.

Bigphil1474

You can't have a chain where everyone has all their funds tied up in their property. There always has to be a buyer with no property to sell in the chain to fund the first seller.

saajan_12

Mustlovedogs said:

Does that mean I'd need a 10 deposit to exchange, and then my buyer would need to do the same etc. All my funds are tied up in the house, so that means I could never buy a new build? 
If everyone in the chain has funds tied up in the house, then I'm assuming it's exchange and completion on the same day? 

You'd exchange on the same day as everyone else in the chain. Bottom of chain = no house to sell, so they would need a cash deposit, in theory 10%. That money gets passed up the chain. 

In practice, 10% of the bottom house may be less than 10% of the other houses, so either the others have to top up some £ or the seller has to accept less than the standard 10% (which is fairly common). 

Then some time later, the completion dates are the same so everyone's mortgages pay out and the full purchase prices flow up the chain. 

Mustlovedogs said:

Apologies I am using this forum a lot lately and appreciate all the advice.

I'm just a bit confused about exchange and completion as although I've bought 4 properties before I've always managed to avoid a chain.

Now I have a property I'd need to sell. I was looking at a new build but they want exchange in 6 weeks. Does that mean I'd need a 10 deposit to exchange, and then my buyer would need to do the same etc. All my funds are tied up in the house, so that means I could never buy a new build? 
If everyone in the chain has funds tied up in the house, then I'm assuming it's exchange and completion on the same day? 

As above, it can and usually does work in a chain. However in your case, the bigger issue will be when your new build is ready to be moved into.. Can take several months, which is usually longer than what others in the chain are willing to wait. So often you end up finding a property that's nearly ready or breaking the chain (buy then sell if affordable or sell then buy if you can find temporary accommodation).