Have you heard about house buying insurance against gazumping and are wondering what it is and how it works?
Well, fear not as we are about to give you the full lowdown on this little-known, yet potentially vital insurance policy.
House buying insurance protects you against the practice of gazumping.
Gazumping is when you have had an offer accepted on a property and then the seller accepts another offer, potentially after you have already started spending money on things like solicitors and surveyors.
It is one of the most feared things to happen to you when buying a property, not just because of the money but also because of the emotional attachment you get to a property once you feel it’s actually going to be yours.
Your House Purchase Has A 3 In 10 Chance Of Falling Through
And it’s not just gazumping that’s a problem either. A Which? report in 2016 found that 3 in 10 agreed property sales fall through.
Although 21% of these were down to gazumping, other reasons included the seller having a change of heart (27%), and the seller feeling the process was taking too long (13%).
Worse yet, of the people surveyed, only 16% who had a property purchase fall through managed not to lose money.
The average loss due to an agreed purchase falling through was an eye-watering £2,899.
That’s why house buying insurance against gazumping is so important, yet it doesn’t just cover gazumping.
House buying insurance against gazumping is actually called Home Buyers Protection Insurance and covers a number of things…
What Does Home Buyers Protection Insurance Cover?
Each home buyers protection insurance policy is different and will cover you for different things.
However, most commonly you’ll get the following covered as standard:
- The seller decides to take the property off the market
- Your offer is gazumped by another buyer
- The seller not being legally entitled to sell the property
- The property being subject to a compulsory purchase order (CPO)
- Changes in personal circumstances such as redundancy or the death of one of the purchasing parties
Some policies will also cover the following:
- The property valuation is less than 90% of the accepted offer
- The mortgage lender applies a retention on the loan which is more than 10% of your accepted offer
- Ratification work is required by the mortgage lender
- The property is damaged during the period of cover and it costs more than 10% of the property value to repair
As you can see, getting house buyers insurance against gazumping actually means you are covering yourself for many possible eventualities.
With the ever-increasing cost of moving home, insurance policies like this are becoming more and more popular.
How Much Does Home Buyers Protection Insurance Cost?
Naturally, the cost of a home buyers protection insurance policy varies depending on which insurance provider you use, and exactly what you want it to cover.
However, it’s probably not as expensive as you think as most people will be able to secure a basic policy for around £50.
When you consider there’s a 3 in 10 chance of your property purchase falling through and an average estimated loss of £2,899, that seems like a small price to pay for the protection and peace of mind it provides.
Is Home Buyers Protection Insurance Worth It?
So, is it worth taking out house buying insurance against gazumping and all the other potential pitfalls waiting to strike your property purchase?
Well, much of that depends on your attitude to risk.
If you are happy to take your chances that your purchase will be one of the 7 out of 10 that complete successfully, you could save yourself £50.
However, at the same time, £50 seems like a small price to pay for the level of protection it affords and the reduction in stress it will save you if your purchase does fall through.
Ultimately though, no insurance policy will protect you from the amount of heartbreak you’ll get if you lose out on buying your dream home.
If your motivation is driven more by fear of losing the property rather than fear of losing money, no amount of insurance will help you.
But, if you hate the thought of potentially losing hundreds or thousands of pounds as well as your dream home, a £50 policy could be money well spent.
Who Offers The Best Home Buyers Insurance?
That’s a good question! House buying insurance against gazumping and other pitfalls is still a relatively new thing.
That means there is still only a relatively small number of insurance providers offering it.
So, when looking for the best home buyers insurance policy, much of it will simply come down to cost and what is included.
However, there is one company we have heard good things about who offer home buyers protection insurance policies from just £49.