Because usually people need the money from the property they are selling to finance the property they are buying, you are often involved in a property chain when you buy and sell your house. Unfortunately, chains can delay the process as nobody in the chain will be able to exchange contracts or complete until everybody is ready. In other words, the chain will only proceed at the speed of its slowest link. We will communicate with the solicitors on both your purchase and your sale to find out as much information as we can about how the chain is proceeding.
How can you help us? – if you receive any information regarding the situation elsewhere in the chain please let us know of possible problems. Unfortunately, when there is a chain of transactions some people in the chain may not wish to disclose their position accurately. For example, they may be having a problem with their mortgage application or their buyer or seller may be wavering as to whether to continue the transaction or they may even have lost their buyer etc. If this happens then it can be very difficult to obtain accurate information. Also, we are not able to chase anyone in the chain apart from the solicitors representing your buyer and your seller. We will often not have details of other parties in the chain or their representative and even if we did it is most unlikely that the people elsewhere in the chain, apart from the immediate transactions we are dealing with, would respond to our requests.
Sometimes if the rest of the chain is ready you may come under pressure to “break the chain”. For example, if your buyer is ready and anxious to proceed with the transaction but you or your seller are not ready on your related purchase then the buyer may press you to exchange contracts on the sale in any event. Alternatively, if you and your seller are ready on your purchase transaction but your buyer is not ready and you are in the fortunate position of being financially able to proceed on the purchase without the sale proceeds then you may be pressed to go ahead with the purchase and not the sale.
How can you help us? – in most cases, breaking the chain involves great risk. You should, therefore, only contemplate doing this after you have considered the matter in detail and taken account of the possible consequences.
Possible problems – if you exchange contracts and complete your sale without exchanging and completing on your purchase then you will on the date of completion of your sale have to move out of your property and find alternatively accommodation. You would have no guarantee at that time that your purchase would go ahead as there may be problems with the survey/mortgage or the seller may simply change their mind.
If, alternatively, you are financially able to proceed with your purchase exchange and completion but you do not co-ordinate this with your sale then the risk you run is that your buyer may have problems in completing the purchase of your existing property and you may have to start all over again thus having the financial drain of owning two properties for a considerable period.
If you are involved in a single transaction then the position is that the deposit paid on exchange of contracts is nearly always 10% of the purchase price. However, if you are buying and selling the position is a little less certain. For example, if you are selling a property at £200,000 to a first time purchaser you would expect to receive a deposit on your sale of £20,000. You may, however, be purchasing a property simultaneously at £300,000 in which case the normal expectation would be that a £30,000 deposit would be required. However, like many people you may not have the £10,000 cash available at the stage of exchange of contracts to fund the extra £10,000 deposit on your purchase over and above the £20,000 you have received on the sale.
In most cases there is flexibility and your seller and your seller’s solicitors would generally accept the £20,000 being passed on to them from your sale transaction.
How can you help us? – it would be helpful to know if you were buying a property for a price higher than you were selling whether you do have the extra cash available to fund the difference in deposits in case your seller or their solicitors insist on the full 10%.
Possible problems – some sellers or their solicitors may insist on the full 10% and if you don’t have this cash immediately available the negotiations may be delayed whilst you obtained the funds from elsewhere or on a temporary loan.
As we have explained previously, exchange of contracts on your sale and purchase needs to take place simultaneously with the same date being agreed on each transaction. We are fully familiar with the best procedures to enable this to happen at no risk to yourself and we will communicate using the appropriate agreed protocols by solicitors to ensure that exchange is simultaneous and on the same day.
How can you help us? – when we have advised you that you are ready to proceed with the transaction you should speak as soon as possible to your buyer and seller or through their estate agents to try and find a date that is agreeable to all parties in the chain.
Possible problems – if you are involved in a long chain of transactions it may be particularly difficult for all parties to agree a date that suits everybody.
We would refer you to our previous guidance on the sale and purchase guides. Our advice to you is quite simple in that if you are being pressed to agree to a simultaneous exchange and completion when you are both buying and selling – DO NOT DO IT!
Possible problems – the problems as described previously are that if you endeavour to exchange contracts and complete on the same day then you have no legally binding agreement whatsoever prior to the completion date and any party in the chain of transactions could change their mind or fail to complete for any reason whatsoever in which case you would have wasted substantial sums of money in preparation for moving including removals etc.
Sometimes when you are buying and selling you will be porting your mortgage over from your existing property to your new property. If you are moving before any early repayment penalty on the mortgage on your existing property has expired you may be able to avoid this penalty by porting the mortgage to the new property. However, this is not necessarily the case and in particular if you are borrowing a lesser sum on the new property than you have outstanding on the existing property then you may not be entitled to avoid the early repayment penalty or at least part of it.
How can you help us? – check carefully with your mortgagee or your mortgage advisor the situation with regard to any early repayment penalty.
Possible problems – if you assume you are eligible for a waiver of the early repayment penalty but that this is incorrect you will have a substantial additional charge that you have not budgeted for.
We will prepare separate financial statements on your sale and purchase transactions and a balancing statement which will state the sum due to you or due by you on completion of the transaction.