No Onward Chain Meaning
A property with no onward chain is one which is ready to be sold straight away.
The seller will not need the funds (or proceeds of sale) from an existing sale to purchase the next property or move on.
For buyers, it’s is an advantageous position to be in as, by and large, it simplifies the sales process.
The problem with house sale chains…
When there’s a property chain, the transactions become interdependent and one ‘break’ potentially means the same for all involved.
For example, let’s say Mr A agrees to sell to Ms B. Mr A plans to use the proceeds of sale to buy a property from Mr C who also needs to sell to be able to buy a property from Mr and Mrs D.
In the diagram below, the flow of money is represented by the green arrow and the exchange of property by the pink arrow.
Effectively, this means that if any of these sales collapse, all of the buyers could potentially be at square one.
With no onward chain, the buyer is safe in the knowledge that the seller does not have any further commitments. In most cases, the house sale gets done with no hitches.
After completion, the seller can usually take any proceeds of sale and buy another property whenever suits. Or, he/she may keep the money as savings and then use it for another purpose.
One better than being in a ‘no onward chain’ is where both the buyer and seller do not have any dependent sales (the buyer is using cash, for example). In reality, however, this often isn’t the case.
Will your buyer move forward if there is an onward chain?
If your property is under offer or sold subject to contract and you need the funds to buy another property, you may be worried about whether things will go ahead.
Although no onward chains are preferable, there are several reasons as to why a buyer will not pull out…
- The property being sold is perfect for them and they don’t want to lose it;
- Similarly, economic risks such as Brexit or the implications of the coronavirus have not put the buyer off;
- It’s a hot market and the buyer wants to get on or stay on the property ladder (i.e. they’re not concerned that you’re buying another house);
- Conversely, it’s a cold market, the buyer is fully aware of the fact and still wishes to move forward;
- You may have a personal connection and have a mutual understanding to proceed with the chain, despite the potential complications;
- All parties are confident in their conveyancer’s ability to execute the sales efficiently (without the risk of the sales collapsing);
- The buyer is proactive and has prepared all parties are being from the start – i.e. delivering proof of mortgage decision in principle, quickly instructing conveyancers, booking survey etc.
No Onward Chain Property
Typically, a property with no onward chain is advertised in the estate agency or auction house marketing material.
The agent or auctioneer will usually also inform potential buyers as it often makes the property more sellable.
If you’re lucky, you’ll find out that the seller is not in an onward chain.
This may be because they want to sell, keep the proceeds and rent for a short time. Others have work commitments, plan to move abroad or want to wait to see how the market changes before buying again.
With the money in the bank (and their mortgage finances organised), when it comes to house hunting again, their offers are likely to be taken more seriously too.
Here are some other examples of no onward chain property you may come across:
People who have inherited a property or are currently going through probate often do not reside within it.
This means that they simply wish to get the house sold and release any equity (which will not go towards the purchase of another).
Although selling a rented property with a tenant in situ has its own complications, most sellers are simply looking to receive the money locked into the value of the house.
When the money goes into their bank account, it often stays there (for at least a little while), rather than straight into another property.
Property Investor / Professional Buyer Sales
Professional investors who are accustomed to selling property regularly often have enough money in circulation. They will usually keep the funds from the sale and put it back to use when the time is right.
This often means that there are no chain-related holdups (one sale does not depend on another).
Our We Buy Any House service, for example, would not interconnect property sales and put our 28-day guarantee at risk for any of our clients.
As auction sales are effectively guaranteed at the point of exchange, the buyer is at major risk of losing the deposit if the completion doesn’t happen.
The fact that there is an onward chain is irrelevant, as the buyer has a legal obligation to buy the property within the agreed timeline.
There are also many professional homebuyers that head to auctions. In the same vein as above, they are often well-capitalised and do not need the proceeds to purchase their next property.
Repossessed Property Sales
After a mortgage lender has taken back possession of a property (i.e. repossession cannot be stopped), they are legally obliged to sell the property on the open market.
There are no other ties other than to sell to the best buyer. The money will go towards clearing the mortgage loan debt and other liabilities, rather than towards buying another property.
Properties that have been taken on by a developer due to the owner buying a new build property are unlikely to have any kind of involvement in a chain.
Whilst they will want to sell as quickly as possible, the money will go back into their coffers (rather than to purchase another property).
Those With a Back Up Plan
We sometimes also come across people that would ideally like to sell their property first and use the proceeds to buy but have savings as well. In the worst-case scenario, these sellers can use this money to progress things.
This gives the other parties in the chain reassurance that the sale should go ahead, regardless of what happens.
One issue that could emerge from this is the initial dual liability for Stamp Duty. However, in most cases, you can claim back the extra tax paid post-completion.
No Onwards Chains That Break
It’s worth remembering that even sales with no onward chain can still break and are not 100% secure.
Some of the reasons why these transactions could collapse include:
- The buyer or seller delays providing information to the estate agent. This ends up frustrating either or both parties and things fall apart;
- Details within the Memorandum of Sale reveal that one or more of the preceding sales cannot proceed;
- The buyer’s mortgage offer is declined due to financial issues;
- The conveyancers are slow to progress things that cause delays and, eventually, one or more of the sales falls apart;
- Slow interactions between the estate agent and the buyer’s or seller’s conveyancers, again, causing obstructions / delays;
- Practical issues are revealed once the mortgage (homebuyer) / structural survey is completed. This can either halt the sale completely or cause negotiation-related delays that eventually bring the sale to an end;
- An independent buyer ‘gazumps’ the sale – i.e. offers a higher value than the existing buyer. This, in turn, causes the seller to pull out and the whole chain to collapse;
- An independent buyer gazunders the sale – i.e. decides to drop the price (often at the last minute). The seller then pulls out and, again, the entire chain is broken;
- One of the buyers or sellers has a change of mind and decides not to proceed;
- One of the buyers in the chain has an issue with getting the deposit funds together in time;
- Buyers involved in the chain have issues with the final mortgage offer. Even if these can be resolved, unexpected delays can cause a misalignment of sales…
To keep things simple, and avoid the potential problems highlighted above, selling up first or having reserve funds to buy your next property is usually the safest bet.
The problem, however, is that most people are moving from one owner-occupied house to another and avoiding chains (no onwards or otherwise) is hard to avoid.
For this reason, it’s sometimes worth considering:
- Could you temporarily rent somewhere once your house is sold? Then you can look for your new home safe in the knowledge you have the money ready?
- Although not always practically feasible, especially if you have a family, but could you stay with family or friends?
- Do you own any other properties you could stay in?