Home buyers insurance, often referred to as Gazumping Insurance, is a policy designed to protect you from financial losses during the home-buying process. If your purchase falls through, it covers expenses like legal fees, survey costs, and mortgage fees, offering peace of mind on your path to homeownership.
Standard cover costs around £74, while premium protection is about £144.
This article covers what you need to know about home buyers protection insurance, why it matters, and how it provides peace of mind during your home-buying journey.
Why Would a House Sale Fall Through?
Over a third (35%) of UK property sales fell through in 2023, according to Quick Move Now. Transactions often collapse due to reasons like sellers backing out or issues found during surveys.
Quick Move Now identified key causes, with the most common being buyers withdrawing, changing their minds, or trying to renegotiate the price (49%). The second biggest reason was a break in the property chain (19%).
Here are the main factors that can cause a property purchase to fall through:
Gazumping
Home buyers insurance is often reffered to as Gazumping Insurance. Gazumping is when a seller initially accepts a buyer’s offer, but then later accepts another from a different buyer. This is typically due to the second offer being higher than the initial. While considered unethical, Gazumping is legal across all of the UK.
A Break in the Property Chain
A property chain is a line, or “chain” of buyers and sellers linked together. Their property transactions depend on each other to complete the house-buying process. Delays in the chain are common and can impact the entire chain, especially when it comes to completion day. A break or sale falling through in one part of the chain can also cause other sales to fall through and collapse the chain.
Seller or Buyer Changes Their Mind
Sometimes a seller can change their mind about selling the property and withdraw from the sale. This leaves potential buyers back at square one often with money lost depending on how far they were into the process.
In addition to this, a buyer may decide that the property purchase is no longer something they are interested in. Other reasons, such as a change in job or a family bereavement could cause a person to pull out of the sale.
Issues Found in Survey Report
Survey reports are an important part of the house-buying process. They help to highlight any areas of concern with the internal and external areas of your property. If a serious or costly issue is highlighted in the report, a buyer may pull out of buying a house. The sale will then collapse. Common reasons include subsidence.
Difficulty Securing a Mortgage
Having a mortgage agreed and secured by a lender is an essential part of the house-buying process. A prospective buyer can be denied a mortgage even if they have a Mortgage in Principle. This is why it’s important to seek assistance from a mortgage adviser. A buyer needs to have a mortgage arrangement in place for the house sale to complete unless the home is being purchased outright.
Price Negotiation Failures
Many buyers will try to renegotiate a house price after a bad survey. While this can be accepted, the buyer can choose to decline the price negotiation. In this instance, the sale will then fall through.
Delays in the Conveyancing Process
The conveyancing process takes roughly between 8 to 12 weeks. However, if the property is complex, or there are delays with conveyancing searches and survey results, the process can take longer.
While pressure can be placed on your solicitor to speed up the process, this is not always possible. If the process is taking too long, a buyer may decide to pull out of the sale.
Read more on: How long does conveyancing take?
Save money on your conveyancing costs
Accredited property conveyancers
Used by over 1 million people
What Is the Cost of a Property Purchase Falling Through?
If your property transaction falls through, sellers can expect to pay an average of £1,315 in conveyancing fees, while buyers typically face slightly higher costs at around £1,655.
Some conveyancing solicitors will have a No Sale No Fee guarantee. This means you won’t have to pay any solicitor’s fees if the sale falls through. However, you will still be required to pay conveyancing disbursements. This can include conveyancing searches and land registry fees.
What Does Home Buyers Protection Insurance Cover?
Standard cover will protect your funds up to a certain amount. Premium or comprehensive coverage is more expensive but will protect you for a larger sum of money. Please note that the insurance may not cover the total amount you have spent. Prices will also vary between insurance companies.
What the Home Buyers Protection Insurance includes will depend on the provider. They will likely cover the following:
Conveyancing fees
Survey fees
Mortgage valuation fees
Mortgage arrangement fees
Legal fees
Home Buyers protection insurance is a one-off premium. This means you pay for the insurance in one payment which will cover you for the duration of the policy.
How Much Does Home Buyers Protection Insurance Cost?
You can expect to pay in the region of £74 standard cover according to Rhino Home Protect. Premium protection costs around £144. The buyer is eligible to purchase Home Buyers Protection insurance. It’s important to note that Home Buyers Protection Insurance is not the same as Indemnity Insurance (also known as Conveyancing Insurance).
This insurance will help to prevent you from financial loss if your purchase falls through. It’s useful to know in this instance that you can claim part or all of your money back. Please note that there may be limits on the amount you can claim back.
Save money on your conveyancing costs
Accredited property conveyancers
Used by over 1 million people
Home Buyers Protection Insurance Restrictions
Policies vary between insurance providers, but typically, Home Buyers Protection Insurance does not cover any expenses incurred before the policy begins.
Additionally, you won’t be covered if you simply decide not to proceed with the purchase.
Here are some important points to consider before taking out this insurance:
Property survey must not be conducted before the policy starts
Policy won’t cover you if you withdraw from the sale due to second thoughts
You must have engaged a solicitor or licensed conveyancer
The purchase must not be part of a contract race or sealed bids
Policy is void if you knew the purchase wouldn’t be completed prior to taking the insurance
You cannot voluntarily accept redundancy during the coverage
Save money on your conveyancing costs
Accredited property conveyancers
Used by over 1 million people
Are There Limits to the Amount I Can Claim Back?
Yes, there are some limitations on the amount of money you can claim back. According to Zoopla you can claim legal fees of up to £750, mortgage arrangement fees up to £250 and valuation fees up to £500. This applies to a standard policy with the premium policies allowing claims of more.
How to Buy Home Buyers Protection Insurance
The best way to purchase Home Buyers Protection Insurance is to contact the insurance companies directly. They will then be able to provide you with a quote and what their insurance covers specifically. You can also use comparison websites to find the best quote for your specific needs.
Frequently Asked Questions
When can I take out HBP insurance?
You can take out Home Buyers Protection Insurance after your house offer has been accepted. This is the best time to take out the insurance as most companies will have a cut-off date of when they will accept your insurance coverage request. However, companies will backdate your insurance policy to when you had your offer accepted.
Can I purchase HBP insurance after a survey?
No. One of the conditions of Home Buyers Protection Insurance is that you haven’t yet had a survey carried out on the property you are looking to purchase.
Does HBP insurance cover properties abroad?
Typically Home Buyers Protection Insurance only covers properties that are being purchased in the UK. You will need to speak to individual companies about insurance coverage when purchasing a property abroad.
How long does HBP insurance last?
Typically the insurance policy will last from 120 - 180 days from the day you buy the policy. You would want to complete your purchase before the end of the policy to ensure you are covered for the duration of the buying process. This time scale can differ between insurance providers.
Can I extend the policy?
No, you cannot extend the policy. If you need home buyers insurance for another property transaction you will need to take out a new policy.
How do I receive my policy documents?
The majority of insurance companies will digitally send you your policy documents. This is typically via email or through their apps. Every insurance company differs. You should always ask the individual companies what their protocols are before purchasing. This ensures you will have clear access to your policy documents if needed during a claims process.
Is HBP insurance the same as homeowners insurance?
While these two insurance terms sound similar, they cover very different things. The Home Buyers Protection Insurance covers your fees when purchasing a house. Homeowners Insurance covers your property and your personal belongings.
Both insurance types are needed at different stages of purchasing and owning a home. You won’t need to take out Homeowners Insurance until the exchange of contracts and have completed your house sale.
Find a Conveyancer
If you’re looking to hire a conveyancing solicitor to assist you with your house purchase, we can help. Here at Compare My Move, we can connect you with up to 6 conveyancers in your local area. Simply fill out our online comparison form to compare quotes and save today.
Need a Surveyor?
Once you've found a conveyancer, you soon might need the help of a RICS property surveyor. Simply fill in our integrated conveyancing and surveying comparison form to get connected today. We will then connect you with local conveyancers and surveyors to save on the whole process.
