What does chain free mean?
So what does chain free actually mean when buying a property? The term "chain free" is a ray of hope for many prospective home buyers. When browsing our properties and you encounter a property labelled as chain free, this signifies that the seller does not need to purchase a new home before selling their current one. Opting for a chain free home can transform your property buying experience. Here are a few scenarios that often lead to a property being marketed as chain free:
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Pre-Purchase of New Home: The seller has already secured and moved into their new home, eliminating the need to wait on their end.
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Inheritance or Second Home: These properties are often sold off by those who have inherited them or by owners who no longer need a secondary residence.
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New Builds: Many newly constructed homes are sold directly by developers, hence they come without the baggage of an existing owner needing to sell.
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Repossession or Corporate Sale: Properties that are repossessed or being sold by a company often come without a chain.
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Transition to Rental: Sellers moving into rental accommodation are typically ready to sell without buying simultaneously.
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Relocation or Retirement: Whether moving abroad or transitioning into retirement living, these sellers are often looking to sell their existing property without delay.
Chain-free buyers are becoming an increasingly potent force in the property market, as stock levels continue to slide. They are posing stiff competition to other purchasers and fast becoming the top choice of sellers.
Since the middle of the year, buyers who are in a chain have increasingly found themselves coming up against chain-free buyers. This latter group tends to include first-time buyers and investors who are house hunting without having a home to sell. In September 2021, 65% of buyers in a chain faced a counteroffer from a chain-free buyer, up from 57% in January this year and 52% in September 2020.
Regionally, buyers in Scotland are most likely to face competition from chain-free buyers, with 78% of purchasers in chains here coming up against those with no property to sell. It should be noted, however, that the Scottish process for buying and selling properties means there are fewer chains in the market generally.
In London, 67% of buyers in a chain have come up against a chain-free buyer when trying to purchase a property this year, while in Yorkshire & Humber and in the North West of England, the figures are 64% and 62% respectively. Purchasers in the South East are least likely to come up against a chain-free buyer – here, 53% of buyers face competition from those with nothing to sell.
With a severe shortage of properties for sale – there are a third fewer homes coming onto the market currently than there were last year – sellers are increasingly choosing chain-free buyers over those in chains. Last month, only 34% of buyers in a chain had an offer accepted over someone without a home to sell, down from 40% in September 2020. By contrast, in April 2020, when the housing market was in the grip of the first coronavirus lockdown, 52% of vendors chose a buyer in a chain over one not in a chain, although it is important to point out that transactions that month fell to a record low.
Right now, vendors in the North East of England, one of the countries weakest markets, are most likely to sell to someone in a chain – this year, half of the offers accepted by sellers were from buyers in chains. At the other end of the scale is London, where only 35% of sellers this year have chosen a buyer in a chain over someone without a property to sell.
The shortage of stock means chains have become increasingly difficult and more time consuming to complete. Many sellers are looking to avoid situations where someone further up or down the chain struggles to find their next purchase while everyone else looking to move waits for them.
With sales that are chain dependant taking longer to complete, those that can afford it, have been breaking the chain. Refunds of the 3% stamp duty surcharge have steadily picked up as those who can afford to purchase before selling their own home have increasingly chosen to do so. This year close to 45% of receipts generated by the 3% surcharge have been refunded to buyers. This figure seems set to continue rising until stock levels start to stabilise.
The Benefits of Chain Free Home Buying
Advantages:
Smoother Transactions:
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Less Waiting, More Progress: By removing the dependency on the seller’s purchase of a new property, chain free transactions avoid common delays. This means you’re less likely to experience pauses that can extend the buying process by weeks or even months.
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Decreased Stress: Knowing that your purchase isn’t contingent on another buyer’s situation alleviates a great deal of uncertainty and stress, making the buying process smoother and more straightforward.
Increased Certainty:
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Higher Deal Security: Chain free purchases reduce the risk of transactions falling through. Without the complications of an upper chain, the deal is less prone to collapse due to issues out of your control.
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Valuable in Fast Markets: In fast-paced real estate markets, timing can be critical. The increased certainty of a chain free deal ensures you can close on your schedule, not someone else's.
Quicker Move-In:
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Rapid Transition: Chain free properties are typically ready for quicker occupancy. This is especially important if you need to relocate for work or personal reasons on a strict timeline.
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Ideal for Immediate Needs: Whether you’re moving a family, starting a new job, or simply eager to settle into a new community, the prompt availability of a chain free home is highly beneficial.
Additional Perks of Chain Free Buying
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Straightforward Financing: With fewer variables at play, securing financing for a chain free home can be more straightforward. Lenders often view these transactions as lower risk, potentially leading to smoother approval processes.
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Better Negotiating Position: As a buyer, you might find yourself in a better position to negotiate when there are no onward chains involved. Sellers who are not under pressure to secure their next home may be more flexible on price and terms.
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Long-Term Satisfaction: Purchasing a chain free property often leads to higher long-term satisfaction, as the initial simplicity and speed of the transaction can set a positive tone for your entire homeownership experience.
Chain Free vs. Freehold
Understanding the distinctions between "chain free" and "freehold" is crucial for buyers navigating the real estate market, ensuring that these terms are not confused as they relate to very different aspects of property transactions. Here's a focused comparison to highlight their differences and the importance of each:
Nature of the Terms:
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Chain Free: This term refers specifically to the state of the transaction. A chain free property is one where the seller does not need to wait for their own purchase of another property to complete the sale, streamlining the process for the buyer.
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Freehold: This term relates to the type of ownership. Buying a freehold property means acquiring full ownership of both the building and the land it stands on, giving the owner control over it indefinitely.
Impact on the Buying Process:
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Chain Free: The primary impact is on the immediacy and efficiency of the buying process. It eliminates the complications that arise from being part of a chain of sales, potentially reducing waiting times and the risk of transaction failures.
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Freehold: The impact here is on the scope of authority and future obligations. Owners are not subject to the limitations that come with leasehold properties, such as paying ground rent or seeking lease extensions.
Buyer’s Focus:
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Chain Free: Buyers should focus on the transactional benefits of a chain free property, such as reduced risk and a potentially faster move-in time, which can be critical in time-sensitive situations.
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Freehold: Buyers need to consider the long-term benefits and responsibilities of owning the land outright, such as the freedom to make modifications without landlord consent and the absence of leasehold fees.
Importance of Distinguishing:
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Avoiding Confusion: It's important for buyers not to conflate these terms. Understanding that "chain free" enhances the transaction process, while "freehold" enriches property rights and ownership, ensures informed decision-making.
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Informed Decisions: By recognizing these distinctions, buyers can better align their property searches with their immediate needs and long-term goals, leading to more satisfactory outcomes in their real estate investments.