Are Lots Of Chains About To Break

[bertie]

My friends are in a chain of eight movers. They're in the upper third of the chain. It's been about two months since they jumped in and others may have been in the chain longer. Here's the some things I think make the existing chains very vulnerable:

1. If they're progressing slowly you might need to reapply for you mortgage offer as they do eventually expire. Poorer terms on new application.

2. Your bank may choose to re-evaluate their in-principle offer and decline you before the point of no return for the sale.

3. At least one person in the chain may read the headlines and run for the exit, writing off the sunk costs!

This hasn't happened to my friends, but I see it as a real possibility. While it will frustrate them terribly it just might work out in their favour if the predictions come to fruition!

Anybody else think chain breakdown is also going to slow the market more rapidly than you'd expect as one buyer pulling out scuppers five or more other transactions?

[uro_who]

My friends are in a chain of eight movers. They're in the upper third of the chain. It's been about two months since they jumped in and others may have been in the chain longer. Here's the some things I think make the existing chains very vulnerable:

1. If they're progressing slowly you might need to reapply for you mortgage offer as they do eventually expire. Poorer terms on new application.

2. Your bank may choose to re-evaluate their in-principle offer and decline you before the point of no return for the sale.

3. At least one person in the chain may read the headlines and run for the exit, writing off the sunk costs!

This hasn't happened to my friends, but I see it as a real possibility. While it will frustrate them terribly it just might work out in their favour if the predictions come to fruition!

Anybody else think chain breakdown is also going to slow the market more rapidly than you'd expect as one buyer pulling out scuppers five or more other transactions?

I actually think the opposite is more common. I'm in a similar situation and despite being a fully paid up bear for the last 4 years still find myself thinking, I hope it all works out before the shit hits the fan! Once you've got yourself into the position that you're moving, cerebration stops and heart takes over. You've already made the conscious decision to get on with it and therefore the hassle and emotional re-adjustment of not moving is more real than a theoretical benefit in 2 years time when prices might have dropped by 20% on their way down by 50% eventually. It fits into the it'll all work out in the end category.

My outlook might be tainted by the fact that I'm not a FTB'er. If I was I would run for the hills!

[bertie]

I actually think the opposite is more common. I'm in a similar situation and despite being a fully paid up bear for the last 4 years still find myself thinking, I hope it all works out before the shit hits the fan! Once you've got yourself into the position that you're moving, cerebration stops and heart takes over. You've already made the conscious decision to get on with it and therefore the hassle and emotional re-adjustment of not moving is more real than a theoretical benefit in 2 years time when prices might have dropped by 20% on their way down by 50% eventually. It fits into the it'll all work out in the end category.

My outlook might be tainted by the fact that I'm not a FTB'er. If I was I would run for the hills!

You make a good point. I can see this being the case for many people, especially if the house has taken a long time to find.

On the flipside, the risk is always that if just one of the chain is not emotionally involved in the purchase, perhaps a BTL person the whole chain security is lowered to this denominator.

Edited September 16, 2007 by bertie

[refusnik]

Most of the chains will not break but will be torn down from below. It is the bottom that will fail first.

There are simply no buyers at the bottom:

No FTBs (for a long time now.)

No BTLs (no financing and stampede selling instead.)

[DTMark]

I've seen property sitting on the market for four years, where the asking price might not have been pie in the sky originally, but was on the high side, and now it looks ridiculously overpriced. I put this down to the vendors "needing" that money to move up to the next property, without it, it can't happen, and so they can't reduce the price, ergo, they can't actually sell their home.

I've also seen recently a 3 bed flat come on at 199k, then 189k, then 179k, then "offers over 170k".

In a flash the otherwise identical 2 bed which was SOLD is back on sale again and the 3 bed one is SOLD.

Price of the 2 bed one: 169k. You can see why the buyer decided to go for the 3 bed instead (major assumption but the timing fits nicely and you'd be mad not to pull out). And so it begins