Help! Indemnity Policy & waiver

SINDYGIRL

I’m in the process of buying a house which was bought in Nov 18 below market value but now newly refurbished and selling for £90000 more - I’m ok with this as I’m buying it at market value but my solicitor asked his solicitor to provide indemnity for undervalue bankruptcy search and declaration of solvency for previous owner. The response was pathetic with them saying he bought it from someone in a rush to emigrate and refurbished it. Because my buyer is putting pressure on me to exchange my solicitor says I need to sign a waiver and buy indemnity policy incase seller goes bankrupt within 5 yrs.
Will the indemnity totally protect me from losing the house if he goes bankrupt in the future?

eddddy

SINDYGIRL wrote: »

Will the indemnity totally protect me from losing the house if he goes bankrupt in the future?

You need to check the details of the policy you would be getting.

Some policies just protect your mortgage lender - others might protect you (assuming you are now buying at full market value).

Ask your solicitor to confirm that - and maybe double check the policy wording yourself.



Was the transaction in Nov 18 really at under market value? i.e. Was it sold cheaply to a friend or family member?

Or was it sold on the open market (e.g. using an EA) to somebody unconnected with the seller? And the seller accepted the 'best' offer?

SINDYGIRL

The seller bought from a guy he didn’t know who was emigrating to Australia and house was in a real state
Same estate agents who acted for him and for me
I’m buying with proceeds of selling my house so no mortgage needed
Just didn’t know why I needed to sign a waiver absolving solicitors from any come back when I had indemnity policy
...And of course I don’t want to lose the house if he becomes bankrupt within 5 yrs.

eddddy

SINDYGIRL wrote: »

The seller bought from a guy he didn’t know who was emigrating to Australia and house was in a real state
Same estate agents who acted for him and for me

So it doesn't sound like it was a transaction at under market value anyway.

(If you're buying, the EA isn't acting for you, they're acting for the seller.)

SINDYGIRL wrote: »

Just didn’t know why I needed to sign a waiver absolving solicitors from any come back when I had indemnity policy
...And of course I don’t want to lose the house if he becomes bankrupt within 5 yrs.

The risk would be roughly as follows:

• The guy that sold in Nov 18 was insolvent (i.e. he had big debts)

• So the correct thing for that guy to do was sell the property at market value (say £120k) and use the money to pay his creditors.

• But instead, that guy sold to a 'friend' for £90k

• So essentially his 'friend' gets a £30k gift, and the seller's creditors get less money.

• Then the seller goes bankrupt, and the Bankruptcy Trustee can ask the court to reverse the sale at £90k. (So you could lose the house.)

• But if you offer to pay the Bankruptcy Trustee back the £30k shortfall, the Trustee will probably let you keep the house.

So you need to make sure that the indemnity insurance you buy would pay you £30k in those circumstances. (Not all policies would.)

I guess your solicitor wants you to sign a waiver saying you understand all that. (But check all these facts with your solicitor first.)

SINDYGIRL

Thanks...do you think I should give the house a miss and look elsewhere?
Am I buying potential trouble?

davidmcn

The risk is tiny, which is why you can get cheap insurance against it. The insurance covers you for the risk. It's not a reason to avoid this property.

There may of course be other reasons (e.g. does the value really stack up, depending on what the seller has actually done to the property - these things are sometimes done to look superficially shiny and they've hidden the more awkward problems). But I presume you're happy with survey etc.

SINDYGIRL

Yes the survey was good - just the solicitor put the wind up me...the indemnity policy is £300 so I’ll just have to pay...my solicitor asked sellers solicitors to provide bankruptcy search indemnity for undervalue and declaration of solvency but they’ve only responded by saying house was bought undervalue for quick sale and seller refurbished
I thought it was normal for seller to have paid for indemnity but it’s unlikely so I’ll have to pay.

davidmcn

If I were making a cash purchase and didn't have a lender's solicitor insisting on it, I doubt I'd pay £300 to insure against something which almost certainly won't happen. Pretty sure it could be insured against for less than that - maybe see what the seller thinks it would cost them, as it's possible your solicitor isn't looking for a cheap option.

SINDYGIRL

Doh!!! I’m dense and just twigged- the problem is the first seller who emigrated to Australia not my seller who bought cheap. Am I right??
Now I’m wondering why first seller ran off quickly to Australia? Am I becoming paranoid?

SINDYGIRL

...or is the problem with the guy I’m buying from?