How property chains collapse and how auctions can be the answer to avoiding deals falling through
Property chains collapsing is an unfortunately common occurrence in the traditional property market, with every chain at the mercy of any number of potential pitfalls. You could be right on the verge of sealing the deal when it all falls apart, leaving you out of pocket having wasted a whole lot of time.
The chains occur frequently because a lot of property transactions are interlinked with other property transactions, creating a domino effect where each purchase depends on the successful sale of another property. The chains can be long too, the longer they are the greater chance that a collapse will happen.
The only way to eliminate the potential for a property chain collapse is to buy and sell property via a method that isn’t reliant on other deals going through. This is where auctions create an advantage.
Here Auction House London explains why an Livestream property auction can be the answer to avoiding deals falling through, but first it’s important to understand exactly how property chains collapse in the first place.
Why property chains collapse
A property chain is essentially a sequence of buyers and sellers linked together by their property transactions. For example, a first-time buyer at the start of the chain might purchase a flat from a seller who is moving into a bigger house. The seller of the bigger house might, in turn, be buying from someone relocating to another city, and so forth. Each transaction in the chain depends on the others completing smoothly.
Since each link in the chain is dependent on the others, a single problem can have a ripple effect. Several factors can cause a property chain to collapse, with one of the main ones being financing issues. If a buyer in the chain fails to secure a mortgage or their loan falls through, the entire chain can come to a standstill.
There may be issues with the property revealed by the survey, causing a buyer to pull out altogether. Delays in obtaining necessary documentation or resolving legal issues can also stall the chain, and sometimes it can be as simple as a change of heart. People often get cold feet, or find another property they prefer, or their circumstances change as the process can take so long.
Such uncertainties make property chains notoriously precarious. The longer the chain, the higher the risk of collapse, which means increased stress, potential financial loss, and the frustration of a home move falling through after months of preparation. The average time for a property chain to fully complete in the UK in 2024 in between twelve and sixteen weeks.
Why auctions are the best alternative to property chains
Property auctions present a stable alternative to the traditional property chain model. Auctions provide certainty and speed, significantly reducing the chances of a deal falling through. This is particularly true for both Livestream and Timed property auctions, which have gained popularity for their convenience and accessibility.
For example, once the hammer falls in an auction, the sale is legally binding. The buyer is required to pay a deposit immediately, usually 10% of the purchase price, and complete the transaction within a set period. This certainty means there is no risk of the buyer pulling out at the last minute, unlike in a property chain where buyers and sellers can back out without severe penalties.
Auctions are also a much faster route to sale than the traditional market. The entire process, from listing to sale completion, can be completed in a few weeks, compared to several months for a conventional sale. For sellers, this speed reduces the time their property is on the market, lowering costs and reducing the stress of an extended sale period.
By selling or buying at auction, you effectively remove yourself from the property chain. Sellers do not have to worry about waiting for buyers who are dependent on selling their own property. Likewise, buyers at auction are often cash buyers or have their financing already arranged, which means there are finance related delays or uncertainties and the contract is legally binding at the fall of the gavel.
The rise of property auctions
Property auctions have emerged as a modern solution to real eastate chain issues, combining the benefits of traditional auctions with the convenience of digital platforms. This new method whether it is Livestream or Timed Online has several advantages, to include broadening the pool of potential buyers which leads to more competitive bidding. This can be particularly advantageous for sellers, as it increases the likelihood of achieving a sale price that meets or exceeds their expectations.
Another driver behind the rise of online auctions is that they provide a transparent process where all bids are visible to participants, ensuring a competitive yet fair and open environment. This visibility can help build confidence among bidders and lead to more dynamic bidding.
There is also the fact that buyers and sellers can participate in auctions from the comfort of their homes, with this convenience and flexibility another big factor in the growing appeal of online auctions.
Auction House London prides itself on not just meeting but exceeding our customers’ expectations, so if you want to avoid a property chain collapsing by buying or selling via auction, please contact our team of auction professionals. If you’re looking to buy residential or commercial property, browse through the lots listed in our forthcoming auction. Or, if you have property you want to sell, why not see how much it could be worth in an auction with a free valuation by Auction House London.