Finding a home that ticks all of your boxes is a rare phenomenon, especially in today’s stagnant market.
But if your move becomes one of the 530,000 housing transactions which fall through every year, it won’t just be your dream home that will be lost. You’ll probably wave goodbye to thousands of pounds, too.
There’s a myriad of costs you must fork out before you even get the keys to your new home.
You may have already spent money on conveyancing, broker fees and a survey – which will all be for nothing if the transaction falls through.
Home movers lose £560 million every year because of failed transactions.
Buyers could lose thousands of pounds in fees if a house purchase fails
Around 85 per cent of those who have had transactions fall through have lost money, with an average of £1,240 down the drain per failed transaction, according to a recent report from Santander.
However, there is a little-known insurance which means you could claw back some of your conveyancing fees, survey costs and lender fees if your house purchase falls through if the seller changes their mind or you are gazumped.
This is called homebuyer protection insurance, and we explain how it works – and what it costs – here.
What could go wrong with your house purchase?
Almost any house purchase runs the risk of falling through, and there are myriad reasons why.
One of the most infuriating issues is gazumping, which is where another buyer undercuts your offer by paying a higher price for the property.
You could also be hit by a down valuation. This means your mortgage lender’s surveyor says the house you want to buy is worth less than what you’ve agreed to pay. It can cause providers to lend a lower amount – leaving you to plug the gap – or it could pull its mortgage offer completely.
Or perhaps the survey on the home has come back with a nasty result, such as subsidence, meaning you no longer want to move forward.
With the Budget looming, sellers could pull out of sales until there is more certainty around housing policy.
Angela Kerr, of property website the HomeOwner’s Alliance, which offers this insurance, says it’s a good idea to be protected when sellers may be a little more skittish than usual.
She says: ‘In today’s market where things are a little stagnant – and where sellers may be re-evaluating in anticipation of and in the wake of the Budget – the insurance covers you if the seller changes their mind and withdraws the property from the market.’
Rumours of a new national property tax on home sales above £500,000 and an overhaul of council tax are causing sellers and buyers to sit on the sidelines until they know more.
And just because you’re not buying a £500,000-plus home, it doesn’t mean you’re in the clear. If these stumbling blocks occur to anyone else in the chain it could mean the whole thing collapses, through no fault of your own.
Some 54 per cent of home movers have been in a broken housing chain, according to specialist mortgage lender Together.
How much does homebuyer insurance cost?
Homebuyer protection insurance could cover at least a proportion of your costs if something out of your control stops the sale of the property going through.
Costs you can get back may include conveyancing fees, mortgage lender and brokers fees, survey costs, and accommodation storage costs, too.
At HomeOwner’s Alliance, the standard policy costs £74 and covers up to £750 in conveyancing fees, £500 in mortgage valuation fees, and £250 of mortgage arrangement and lender fees. You’ll be protected against gazumping, as long as the other offer is at least £1,000 higher than yours.
There is also a ‘plus’ policy for £149 and a ‘premier’ one for £199, which offer higher levels of cover. All three policies cover cases where you are gazumped, so long as the offer is at least £1,000 higher than yours.
Kerr says the average amount claimed last year was £975.
Similar protection is available at Rhino Home Protect, where basic cover is £79 and the premium policy is £154.
A typical policy may protect you for around 120 to 180 days, as the usual length of time between an offer being accepted and completion Is eight to 12 weeks, but it can be longer.
Take out a policy as soon as your offer is accepted if you want to be fully covered. You’ll need to take out the insurance once you have an accepted offer and within 14 days of formally instructing your conveyancing solicitor or submitting your mortgage application, whichever date is first.
But there are some key situations where the policy won’t cover you. It doesn’t protect you if the reason for the sale falling through was your fault, for example if you caused delays or changed your mind.
You’re also not protected if a solicitor or licensed conveyancer isn’t instructed or you can’t go through with the sale because you accepted voluntary redundancy, among other reasons.
Beware that terms can change between providers, so always read the small print before starting to pay premiums.
It’s unlikely to shield you from the emotional toll of a sale falling through or recover the time you have spent, but it can at least ease some of the financial burden.
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