On gazumping - why not suggest home buyer's insurance?

jneves

Hi,


I'm at the stage where I had an offer accepted yesterday and, because of the fear of being gazumped I've bought home buyer's insurance. Is this option not on the guide (https://www.moneysavingexpert.com/mortgages/buying-a-home-timeline/) for some reason? Did I just fall for a scam?


We're still trying to get as fast as possible to the contracts exchange, but I still feel more comfortable paying £69 for the fees protection (in our case almost £2000).



Thanks in advance,
João

davidmcn

I would say the money-saving approach is to save insurance for situations where you genuinely couldn't afford the loss. Your average loss here is going to be less than £69 (otherwise the insurers wouldn't be making any money). Probably not a "scam" as such, but the terms almost certainly exclude some situations where you'd have spent money. Post a link and we'll be able to check.

ReadingTim

There's a fair degree of wriggle room in this policy wording to ensure that £69 is money for old rope as far as the insurance company is concerned, which is why it's not very moneysaving as far as you are concerned.

On a related note however, perhaps I can interest you in alien abduction insurance - protect yourself from the inevitable rectal probe and all that....

jneves

Ok, the one I got is the gold coverage for: https://www.surewise.com/home-buyers-insurance/


As it's an old house (that seems to have not been updated since the 70s), the main thing I'd like to cover is the survey (£760).



Thanks in advance!

jneves

Thanks for the analysis, I'll pass on the alien abduction insurance though.

davidmcn

Ok - it depends what circumstances you were hoping it would cover.

The fact it's an old property isn't all that relevant, as it doesn't cover you deciding you don't like something in the survey results. Though if you tried to renegotiate the price and the vendor pulled out, it might be covered provided the insurers agree that you weren't seeking "a reduction in the agreed sale price beyond what can be justified by the results of a survey or information emerging from the conveyancing or search process" (I can see scope for arguments there!).

Note it also doesn't cover you finding something adverse in the remainder of your due diligence, other than the rather narrow risks of the vendor not being entitled to sell, or there being a compulsory purchase order. Plenty of other potential problems in the title or searches which are more likely.

AnotherJoe

• Property owner withdrawing the house from the market OK thats reasonable
• Gazumping protection in these current times, unlikely
• Vendor not legally entitled to the property highly unlikely
• You, or a person you are purchasing the property with, being given a notice of redundancy low odds but perhaps worth taking out if you suspect but no doubt some clauses about that
• A local authority search revealing that the property is subject to a compulsory purchase order microscopic odds
• Your death, or the death of a person you are purchasing the property with, as a result of bodily injury occurring during the period of insurance teeny tiny odds and for anyone not retired likely covered by other policies

ReadingTim

jneves wrote: »

Thanks for the analysis, I'll pass on the alien abduction insurance though.

A fiver says you'll need it more than the insurance policy you've bought.

A tenner says it'll pay out more readily than the policy you've bought. :beer:

eddddy

.... also their site is appallingly misleading:

A recent Which? study* found that around 30% of property purchases fall through, resulting in an average cost of £2899 to each homebuyer.

They cannot be selling policies for £69, and then paying claims of £2k+ to 30% of the people that buy their policies.

They would have gone bust long ago.

jneves

Thank you very much for your analysis and advice. It will be helpful to others in the future as it was too late for me (my fault for not asking beforehand).

AdrianC

All of these insurance policies are a question of simple maths.

Money in from premiums = money out in paid claims + admin costs + marketing costs + office costs + staff costs + tax + profit...

For the policy to be worthwhile, you would have to be extraordinarily unlucky. And, simultaneously, lucky.

The only reason they sell at all is that they're so cheap (£70 is a "why not?" in the world of home buying and ownership) that you shrug and reason there's nothing to lose. Which tells you all you need to know about the likelihood of them paying out a couple of grand.

Even assuming zero costs, they'd be making a loss if they paid out on more than about 1 policy in 30. In practice, it won't be less than twice that, probably nearer three times.