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If you own a leasehold or freehold property that is uninsurable, this means that there’s an issue with its location, structure or another factor that means insurance companies will refuse to grant policies for the home because they worry damage is likely and they will have to pay out – this can make selling the property harder but it’s still possible to sell fast and for a good offer.
- What does it mean to own an uninsurable house?
- Finding out who is responsible for getting home insurance
- Why an uninsurable property can be harder to sell
- Getting your uninsurable home ready for selling
- Capital Gains Tax when selling your uninsurable house
- Four ways to find a buyer for an uninsurable property
- Queries and answers about selling an uninsurable home
What does it mean to own an uninsurable house?
In the UK, home insurance can be either to cover your possessions inside a property in the event they are damaged or stolen or building insurance, where you pay for a policy that would cover the cost of repairing structural damage to the home following events that are specified in the insurance documents – but typically including fires, floods, gas explosions and more.
If you own an uninsurable home then this means that no insurance company is willing to issue a policy because of some inherent problem that they have identified with the property.
For example, flooding risk is one of the leading issues that can lead an insurance company to refuse to issue a building insurance policy for a home. News reports have shown that insurers are having to pay out increasingly large amounts of money each year for flooding policies, reaching hundreds of millions, which makes these companies reluctant to continue offering such policies.
The problem is only likely to get worse as natural disasters and storms become more frequent. A recent Daily Mail article notes that up to two million homes throughout the UK could be at risk of becoming uninsurable in the next five years due to risks from flooding.
Finding out who is responsible for getting home insurance
Although there is no legal requirement for you to have any type of home insurance on your property, it can be useful to know who is responsible for getting a policy if desired – and this will depend on whether you are the freehold or leasehold owner of your flat or house.
You own a freehold property if you are the outright owner of the home and the land on which it was constructed. For freeholders that just own a single dwelling that they live in, getting insurance is discretionary, but it can be a good investment to help you cover repair costs if problems happen in the future.
By contrast, you are a leaseholder if you own the property for a set amount of time, which is usually many years, and you also pay the freeholder an annual ground rent.
There are a few situations in which leaseholder properties might need to get building insurance. The most common is when a freeholder owns a block of flats and leases out each unit, and there are conditions in the lease agreement that says the freeholder is responsible for getting insurance for the overall property. Another option might be if the leaseholders of each unit in a block of flats all contribute to paying the cost of purchasing insurance for the building.
But even once you resolve who might have the duty to get insurance, you may ultimately discover that policy providers deem the property to be uninsurable for the reasons explained earlier in the guide, which means you’ll have to try and find a buyer for the home with the problem that some potential owners may not like that they won’t be able to get insurance.
Why an uninsurable property can be harder to sell
If your house, flat or other type of home is uninsurable then you will find that there are two main reasons why it can be harder to sell the property. Understanding these possible hurdles is an important part of the selling process because it can help you adjust your strategy for selling, for example switching from trying to sell via an estate agent to selling to a quick home buyer. You can also read more about selling a house without home insurance that may be because the house is uninsurance here at Get Jerry.
Buyers might worry about the home’s stability
It’s possible that many buyers will see an uninsurable home as a problem property, meaning they think it has an inherent structural fault or risk of major damage during a flood, storm or other weather event. And this problem can be enough for them to lose interest in possibly making an offer.
Buyers typically want to have a belief that the house, flat or other property that they’re about to purchase will be structurally sound and should last for many years whilst they’re living in it. They may not feel this sense of security with an uninsurable home, making it harder to interest them.
If the property has suffered damage in the past that might reoccur, for example if it’s prone to flooding every year, then you’ll need to disclose this as part of the selling process. Although this might turn some private buyers away, there are still ways that you can sell for a fair price, for example if you contact a quick home buyer like LDN Properties. These companies are able to make competitive offers for all types of houses and flats, even those that are uninsurable.
Buyers may not be able to get mortgages
Although having home insurance is not required by law for your property, many mortgage providers will require it before issuing a loan to help someone buy a flat or house, as the website Expatica explains. Some lenders may refuse to grant a mortgage for an uninsurable property.
The reason for their reluctance is concern about what might happen in the future if the buyer were to default on their monthly mortgage payments, and the lender then attempts to try and resell the property in order to raise the funds to pay whatever is still owed to them.
Mortgage providers could worry that it will be difficult to find a buyer for the home in the future, and if they cannot sell the property then they won’t be able to recoup their costs. That means almost all lenders will reject buyers’ applications for loans to buy uninsurable homes, which effectively eliminates individual buyers who need a mortgage as a selling option.
In this situation, a quick home buying company will again be one of your best solutions because they will make a fair offer for your property despite the fact that it cannot be insured.
Getting your uninsurable home ready for selling
Even though you are not able to get an insurance policy for your property, there are still some simple and mostly zero-cost steps that you can take to hopefully make a sale easier.
Inside the home, you should clean every room and remove any clutter, because rooms that have more open space make the property look larger and more valuable. If you have pets then you should clean up any of their mess and keep them secured somewhere if potential buyers come to your house or flat on viewings where they will tour the interior and exterior.
Outside the home, look to see if there are any quick fixes that can be made to improve the first impression that prospective buyers will get on a viewing. This may include fixing any broken glass, repainting window ledges or the front door, fixing roof tiles and similar work. If you have a garden or similar green space you should also mow this and remove any weeds.
Whilst these steps are relatively simple, they can greatly impact the sale of your property because a home that looks well maintained will usually make buyers think it’s worth a higher selling price than a dirty, cluttered home that has a number of visible problems.
Just beware that you might have a more limited number of potential buyers if you are trying to sell your home without building insurance. Many people who would need to obtain a mortgage to pay for purchasing your property will likely not be able to get the loan because of the lack of insurance, as the charity Citizens Advice notes.
But don’t be concerned that just because your home doesn’t have insurance that it will be impossible to sell, and still follow the above steps of getting it prepared for selling.
That’s because you have other options – explained in more detail later in this guide – for selling your house or flat, such as contacting a quick home buyer. These companies have the financial resources available to purchase properties right away without having to get a mortgage, and they are open to buying all types of homes, including those that don’t have insurance.
Capital Gains Tax when selling your uninsurable house
Capital Gains Tax is a levy that the government can charge on the sale of a property, and it applies to the amount of profit, also called the gain, that you might make from selling.
An increasing number of property sales throughout the UK are being subject to this tax, according to a recent article by The Telegraph. Knowing your potential tax liability when selling your uninsurable home is an important part of the planning process.
Even if it appears you are liable to pay Capital Gains Tax on the sale of your home, you might want to consult with a financial professional because they could know some actions that can be taken to either reduce how much tax you owe, or eliminate this obligation altogether.
Four ways to find a buyer for an uninsurable property
When you are prepared to seek a buyer for your uninsurable freehold or leasehold home, you’ll need to pick a method for selling. The choices are selling to a quick home buyer, selling on your own, selling with an estate agent or selling at a property auction.
All of the options have distinct benefits, for example selling to a quick home buyer takes just a few short weeks. But some of the choices also have rather significant disadvantages, such as the high rate of commission that you’ll pay when using an auction or estate agent.
One way to find the most suitable method for the sale of your home is to write down your top goals, such as your preferred sale price, how long you can wait before selling and whether you can accept paying any fees on the sale. Then compare this information against the details of the four options below and this should assist in finding the best match for your situation.
Selling to a quick home buyer
Quick home buyers are companies such as LDN Properties that have the financial ability to immediately purchase all types of freehold or leasehold homes without having to first wait for many weeks or longer to get approved for a loan to cover the cost of the purchase.
This means they are usually the fastest choice for selling a property because they can finalise the transaction within weeks after you first get in touch with them, and that includes the time that it takes for the important final steps such as exchanging contracts and paying you the proceeds. The three other options below will all usually take a minimum of many months to sell a home.
And for uninsurable homes, quick buyers are a great choice because they make fair and speedy offers to buy almost any type of property no matter its age, condition, location shape or size.
LDN Properties, for example, can make fast and fair offers not just for uninsurable homes at risk of major flooding damage, but also properties that are at risk of structural problems following severe storms, houses with subsidence, flats with dry rot, properties that have septic tanks, homes with elevated levels of radon, flats that don’t comply with building regulations, and many other scenarios.
Remember also that the honest quick buying companies will never make you pay any fees to sell your property, so you can count on receiving the full sale proceeds. But selling through an auctioneer or estate agent will add to your costs because they will charge commission.
Selling on your own
This can be a very stressful and time-consuming option for selling your uninsurable home, because you’ll be required to handle every step of the lengthy selling process.
It starts with creating a listing for your home that describes it and includes photographs of the interior and exterior, then paying to advertise this listing online, in local newspapers and elsewhere, organising viewings for potential buyers to tour the property, fielding offers from serious buyers, and overseeing a genuine offer through to exchange of contracts.
Because of the workload, this method is only suggested for people with experience selling homes or that know a qualified friend or family member willing to help for free. Otherwise you might be waiting for more than entire year before you receive a serious offer.
The only benefit of selling this way is that you won’t have to pay any commission to a third party like an auctioneer or estate agent. However, this cost saving could be cancelled out by the money that you have to spend on advertising the listing and other selling costs.
As an alternative option, think about selling to a zero-fee quick buyer because this will avoid you paying commission but you’ll also complete the sale much faster, usually within a few weeks.
Selling with an estate agent
A third way to sell your uninsurable property is via an estate agent, who will handle the bulk of the work such as creating and advertising a listing, organising viewings and hearing offers.
For this effort, estate agents will usually charge commission based on of your home’s sale price. This fee will be subtracted straight away from the eventual sale proceeds, which will add to your overall costs when selling.
This can also be one of the slowest methods for selling any type of property, and you should be prepared to wait for up to a year or more before getting an offer. And even if someone makes an offer to buy your home, they can withdraw it without any penalties right up until the exchange of contracts. If this happens, you will have no choice but to begin again with the process of trying to sell your house or flat, which could add many more months to the selling timeline.
Some estate agents also might have never sold an uninsurable home before, so they could struggle with knowing how to attract any interest in your property. Ask them about their past success with selling uninsurable homes, and don’t use companies with zero experience.
Selling at a property auction
It can be a gamble when selling a home at an auction because you don’t know if anyone will place a bid on it. Should nobody bid on the property then it will go unsold and you’ll have to start over with trying to find a buyer, which can delay the overall schedule even longer.
Auctioneers will ask you to pick a reserve price, which is the lowest value at which you can accept selling your home. Select a price that will still generate a profit for you even after you have paid the auctioneer their fees, otherwise you risk possibly selling at a loss.
An auctioneer charges commission based on your property’s sale price, and this will be deducted from the sale proceeds, which will add to your expenses. You might be able to negotiate a lower rate of commission with some auctioneers or at least have the buyer pay some of your costs, so check with individual companies about this possibility.
Selling at an auction is often not a very swift process and it will take many months, starting with a lengthy wait between the day on which you list your home sale and the day on which the auction happens. If the property sells, the buyer then has an average of 28 days to sign their required paperwork and complete all of the other mandatory steps to finalise the purchase.
Beware that some auctioneers may give the buyer even more time than 28 days for these steps, whereas other companies may set shorter deadlines. It’s always worth asking individual auctioneers if they might be willing to give the buyer less time for completing their tasks.
Top queries and answers about selling an uninsurable house
If you are a homeowner thinking of selling quickly, make sure to ask us any questions you have, ranging from the types of property we can buy through to selling a mixed-use property. Here are some of the questions we’re asked about selling an uninsurable house:
Your top questions when selling an uninsurable house
Building insurance policies cover costs you might face if there is major damage to your home’s structure. A house, flat or any other type of freehold or leasehold home is deemed uninsurable if there’s some type of potential risk of physical damage to the building that insurance companies believe would be too expensive to cover should that damage eventually happen.
There are no general requirements that every homeowner in the UK must buy a building insurance policy, but it can be harder to sell a property that does not have one. Also, some leasehold properties like blocks of flats might have conditions in the lease agreement specifying that the freeholder owner is required to obtain an insurance building for the building.
One reason is that mortgage lenders will typically require building insurance for any home someone wants to buy, and they will refuse to grant a loan for the purchase if there is no such policy. Another reason is that potential buyers might be reluctant to make an offer because they worry about costs and other problems from the issue that led to the home being uninsurable.
Yes. Although the lack of an insurance policy might eliminate some potential buyers, for example those that need to get a mortgage to pay for the cost of purchasing your property, you have other options. One solution is to get in touch with a quick buying company like LDN Properties that can make a fast and fair offer even for an uninsurable home.
You might not have to pay any tax if you only break even on the sale, which means selling at a price close to what you first paid for the property, or if you sell at a loss compared to the original purchase price. If you are required to pay Capital Gains Tax, it will typically be assessed based on how much profit you make on the sale of your home compared to what you initially paid for it. Remember to obtain professional tax advice before making any decisions.
If you sell your home to a quick no-fee buying company like LDN Properties then you won’t have to pay any commission, and the same is true if you sell the home without any third party help. But if you sell your property using an estate agent or auctioneer then you will have to pay them commission and this will add to your costs as it’ll be taken out of the final sale proceeds.
The fastest option for selling any type of property is usually contacting a quick buyer such as LDN Properties because they can complete the entire process of purchasing a home within a handful of weeks. Selling on your own or through an estate agent can take more than a year, and selling at an auction may take many months for all the various steps to happen.
