Someone recently posed the following question on my weekly deal clinic:
Should I buy a property that has subsidence knowing that I can repair it and I have quotes from the builder to repair it?
The challenge is that it is quite difficult to get a mortgage with subsidence… but as long as you can get insurance on it, you will be able to get a mortgage.
If you have ever been offered a property with subsidence, normally when it is offered to you it is offered on a cash only basis and normally is offered in a way that is a lot cheaper than normal.
Now, what are the reasons for this?
The answer is dependant totally on the insurance. You can always get a mortgage for any property whether it has subsidence or not but the one condition that the mortgage company has, is that the property has to be insured.
The challenge is that no companies tend to insure a property that has already got subsidence. The only exception is that if you are buying it off somebody who has already had a claim or you can take on their insurance policy.
So if you can take on and transfer the insurance policy from whoever it is you are buying it from and they have had subsidence sorted out and is happening again, or if the subsidence has in fact been sorted out, then the insurance should be transferrable.
I’m relating this question to is a property that currently has subsidence but has not yet been repaired. Myself and one of the people on my partnership programme have recently been looking at a property with subsidence but wasn’t yet repaired.
This is what happened when we approached some insurers.
We rung four subsidence specialist insurers and this was their verdict:
“Even after subsidence work (underpinning) has been completed and signed off to the approved standard by a Structural Engineer and Building Regs, no subsidence cover will be given for at least 12 months at which point a new surveyors report will be required to check that the remedial work has resolved the issue and that there has been no further movement. Even then there are no guarantees that subsidence cover would be granted. This would be the case for any property that has had subsidence.
So in a nutshell, no mortgage would be possible for at least 12 months AFTER the underpinning has been signed off.
Without a mortgage, any buyer would have to be prepared to tie up their money with no guarantee that insurance would be possible after 12 months.”
So if you cant insure it, you can only sell it to a cash buyer, therefore, the price is going to have to be very very right.
Now I actually acquired a property that looked like it had subsidence, it had been advertised with structural issues and I actually looked at it and had it looked at by a structural engineer who put a little tube in the crack with a special epoxy resin. If the tube falls out or if the tube breaks, then movement is still happening within the structure.
There was no movement going on anymore at this particular property and what we did is that we re-rendered the front of the whole property and next door as well, applied for a mortgage on the property.
We were granted a mortgage because there was no movement.
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