Home Buyers Protection Insurance: Protect Your Property Purchase

Buying a home is stressful enough, but it becomes financially devastating if you are unfortunate enough to have a sale fall through - for example, by being gazumped by a higher offer at the last minute.

You can remove this financial worry by taking out a Home Buyers Protection Insurance policy, which helps you recover your legal, survey, and mortgage lending costs if you are unable to complete your purchase through no fault of your own.

It is not just gazumping that can cause your attempted purchase to fall through. The transaction may also collapse because:

• The seller simply changes their mind and withdraws the property from the market.
• The mortgage lender's valuation is lower than your accepted offer.
• The mortgage lender insists on extensive structural rectification work.
• The RICS survey identifies severe, costly repair work.
• You are forced to withdraw due to a sudden change in circumstances (such as job relocation or redundancy).

While SAM Conveyancing offers a strict No Sale, No Fee guarantee to cover your solicitor's legal fees if a sale collapses, this does not refund the money you have already paid to third parties for your mortgage product, home buyer survey, and local authority conveyancing searches.

This is exactly why Home Buyers Protection Insurance is essential. Below, we break down how a typical policy works, what it covers, and the critical timeframes you need to be aware of.

What is normally covered in a Home Buyers Protection Insurance policy?

Necessary qualifying conditions

At the start date of the insurance policy, you will invariably need to satisfy the following conditions to be eligible for cover:

• You are over 18 years old.
• Your property purchase is not subject to a contract race or sealed bids.
• You are using a qualified solicitor or licensed conveyancer to conduct the legal work.
• You have not already had a survey carried out on the property.

What are the insured events covered?

Once you have started paying your premium, the policy covers you for the following "insured events" that cause a sale to fall through:

• The vendor withdraws the property from sale for reasons beyond your control.
• The vendor receives and accepts an offer from a third party which is a minimum of £1,000 greater than your accepted offer (Gazumping).
• A Local Authority Search highlights that the property is the subject of a Compulsory Purchase Order (CPO).
• The vendor is not legally entitled to sell the property.
• The initial mortgage lender's valuation of the property is less than 90% of your accepted offer.
• The mortgage lender insists on rectification work being carried out, the cost of which exceeds 10% of the property value.
• The mortgage lender applies a retention on the loan exceeding 10% of the accepted offer.
• The property sustains unexpected damage during the period of insurance, where the rectification costs exceed 10% of the property value.
• You (or your purchasing partner) die, are diagnosed with a terminal illness, or are given notice of redundancy or mandatory relocation, rendering you unable to proceed.

What costs and expenses are refunded?

If your purchase collapses due to one of the insured events above, the policy will typically reimburse you for the following out-of-pocket expenses:

• Conveyancing fees and local authority search costs
• Mortgage arrangement fees and lender valuation fees
• RICS property survey fees

What is not covered (Exclusions)?

Like all insurance products, there are specific limits and exclusions. You will not be covered for costs and expenses if:

• The costs were incurred before the start date of the policy.
• You voluntarily withdraw from purchasing the property for reasons not listed in the insured events (e.g., you simply changed your mind).
• You were aware of circumstances that could lead to the sale collapsing before the policy started.
• You deliberately and knowingly behave in a manner that causes a delay or results in the failed purchase.
• The costs can be reimbursed by your employer.
• You are self-employed, a company director, or taking voluntary redundancy (in the event of a redundancy claim).

Why is timing so important?

Timing is the most critical element of Home Buyers Protection Insurance. The policy is instantly invalidated if you possessed any information prior to taking it out that suggested the property sale was likely to fall through.

Crucially, there is a strict blanket ban on carrying out a survey before the policy starts. If you receive a bad survey report and then try to buy the insurance to cover the loss, your claim will be rejected as fraudulent.

Furthermore, you cannot backdate the policy. If you have already paid your solicitor £300 for conveyancing searches before the start date of the policy, you cannot claim those specific expenses back if the sale collapses.