With the current rush to buy property before the increase in stamp duty starts on April 6th, many buyers are forgetting that there are many reasons a house sale may fall through.
A chain can break down, a vendor can have a change or heart, and it is not unknown for a lender to make a mistake with the paperwork. Experienced house buyers know that a new home is not theirs until they have been given the keys, and some wait until they are over the threshold and halfway down the hall before breathing a sigh of relief.
Discovering that a sale has collapsed when you are sitting outside in the van is a distressing and expensive experience. Solicitors’ fees, valuation fees and survey costs, along with mortgage arrangement fees run into thousands of pounds.
Homebuyer protection insurance will usually help cover the costs, if not the stress.
What is homebuyer protection insurance?
Homebuyers’ protection insurance could take care of your costs if your property purchase falls through because of events outside your control. It’s a surprisingly common problem. Somewhere near a third of sales fall through, and if you are at the end of a long chain, the risk of it snapping increases with every additional link.
It won’t cover you if you voluntarily pull out of the sale if you change your mind about buying at all, or if you find another property that suits you better. But it will usually cover you if the seller pulls the welcome mat from under you. This means you would not lose out if:
- The seller takes the house off the market.
- The seller accepts a higher offer of at least £1,000 from another buyer, known as gazumping.
- Your solicitor discovers that the seller is not legally entitled to sell the property.
- Searches reveal undisclosed problems
It could also cover you for events outside the sellers’ control, such as if your lender’s valuation of the property is substantially lower than the agreed sale price, meaning you can’t get the mortgage you need.
In England and Wales, you are not legally committed to the sale until contracts have been exchanged. There is nothing to stop the sale falling through before this, and even after things can potentially go wrong.
It may also reimburse you for unpredictable events, like the property is damaged during the period between offer and exchange of contracts, or if a local authority search shows the property is subject to a compulsory purchase order. Most policies would also offer cover if you were told you were going to be made redundant or were diagnosed with a terminal illness.
How much can you claim? This will depend on how much you’d already paid out on your house buying odyssey, and the level of coverage your policy offers.
Do you need homebuyer protection insurance?
There’s no obligation to buy this kind of insurance cover, but it could be a worthwhile precaution that you will congratulate yourself on choosing if the process doesn’t go to plan.
The cost can range from around £70 to £150, sometimes more, depending on the type of policy you purchase. You should probably shop around - a higher level of coverage will cost more, but it may be worth it. You should arrange cover as soon as possible soon after making the decision to purchase a property and having your offer accepted. Most insurers will need you to arrange cover within 7-14 days.
Do you need some help?
Finding the insurance cover you need is usually easier if you have an expert to call on. At Continuum we can help you find clear answers to all the financial questions connected to buying a home, from arranging the cover you need at a suitable price to find a mortgage that is appropriate for your needs rather than the lenders.
For the help you need, don’t wait until you find yourself sitting in a moving van with nowhere to go. Call us today.
What is home buyers protection insurance and why you should get it
What Percentage of House Sales Fall Through? [2022 Survey] | HomeSellingExpert
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable protection products, you should seek independent financial advice before embarking on any course of action.
Your home or property may be repossessed if you do not keep up repayments on your mortgage.
