Picture the scene.
You’re ready to put in an offer on a home and have paid for the associated legal fees, such as solicitor and surveyor costs. Out of the blue – the house purchase falls apart and you’ve wasted your money.
This has been the case for many buyers!
But – there is a safety net out there. It’s known as Home Buyers’ Protection Insurance. Here’s a closer look at what it is and what it does.
What is Home Buyers’ Insurance?
Many of us underestimate the costs involved with buying a house. From conveyancing fees to surveys, it’s not just the property itself you end up paying for.
While these extra costs are essential for a smooth sale, you can still find yourself paying even if it falls through. For example, the property chain could collapse, the seller could change their mind – or you could be gazumped. This means hopeful homeowners can end up paying a lot of money for no reason.
Home Buyers’ Protection will allow you to claim back some of the money you’ve already spent. While you may not get it all back, it’s better than losing the full cost of the survey and valuation fees.
There are many types of insurance needed when buying a house – but protection is one that’s often overlooked.
Why do you need it?
How likely is it that things will go wrong?
Buying a home often goes wrong between exchange and completion. In fact, around 300,000 property purchases fall through every year – which works out to about 3 in 10! These numbers have been steadily rising since 2016.
Many buyers wrongly assume once your offer is accepted, it’s all plain sailing. Before you buy the property, you usually have 14 days to complete. However, this is where the purchase is most likely to fall apart – a fact that some are still unaware of.
Why do property transactions fail?
There are a number of reasons why house sales go wrong, caused by bother buyers and sellers. Some of the most common include:
- A contract race
- A sealed bid scenario
- Another buyer putting in a higher offer
- One party changing their mind
- Mortgage lenders withdrawing their offer
- Serious issues revealed in the property survey
- Outside circumstances e.g. job, family
These can not only result in disappointment and heartbreak, but can also be costly.
What are the benefits of Purchase Protection Insurance?
House purchase protection can protect you in a variety of different ways, including:
- Gazumping insurance
- Conveyancing insurance
- Survey fees protection
- Mortgage arrangement fees protection
- Mortgage lender fees protection
There are different levels. The higher up the levels you go, the more cover you’ll receive – but the more expensive it will get. Remember, it’s not the same as indemnity insurance.
When will you be covered?
Of course, there are terms and conditions involved with insurance of this nature.
Bear in mind that differences occur, but there are some common circumstances that usually apply.
If the seller changes their mind
In most situations, you’ll be covered if the seller backs out of the sale and withdraws their property from the market.
You’ll also be protected if it turns out they weren’t the legal owner of the building.
If the property is damaged
If the property gets damaged after you’ve taken out Home Buyers’ Insurance, you’ll be covered if it costs more than 10% of the sale price to repair.
If you’re made redundant
Unless the redundancy is voluntary, you may be covered in this situation.
When won’t you be covered?
Of course, there are times when you won’t be covered, including:
If you cause a delay
If you drag your heels, change your mind or cause a deliberate delay after your offer has been accepted and the sale falls through, you may find your insurance is invalid.
If you changed your mind
You can’t simply withdraw from the house sale just because you feel like it – it’s likely your Buyers’ Protection Insurance won’t cover you.
If you fail to get a licensed solicitor
If you fail to instruct a licensed conveyancing solicitor to deal with legal matters, you might find your premium invalid.
If you get a survey before you get cover
You must get a survey on the property after you take out insurance. If you fail to do so and the purchase of the property fails, it’s likely you’ll still pay the full amount for both.
If you get a refund on your fees
Obtained a refund on the extra legal costs you’ve paid? You may have unnecessarily taken out home buyers’ protection – but will still have to pay for it.
Helping property purchases go smoothly
Deciding whether or not this type of insurance is right for you can be tough. Ensure you’ve weighed up all the risks to help you make your choice.
Of course, this won’t stop a house sale going wrong – but can provide a safety net! Property exchange systems like Gazeal can reduce the time it takes to complete, making a sale more likely.
Where house purchases are concerned, knowledge is power. Arm yourself with the facts to help you every step of the way.
Also – the right legal guidance is essential. We can connect you with expert property solicitors, who work on a no win no fee basis. Get your free conveyancing quote below.