Considering the purchase of a house with subsidence? Exploring the advantages and disadvantages
Subsidence, a condition where the ground beneath a building sinks, pulling the property's foundations down, can pose a challenge for homebuyers and lenders alike. However, it is possible to secure a mortgage for a house with subsidence, albeit with some additional requirements and considerations.
Andrew Boast, the CEO, executive director, and co-founder of SAM Conveyancing, with 23 years of experience in the home and conveyancing market, emphasises the importance of due diligence when purchasing a property with a history of subsidence.
In some cases, an experienced property investor or developer might consider buying a house with subsidence if they can negotiate a significant price reduction and have the expertise to manage the repair process. However, for most homebuyers, it's crucial to approach such a purchase with caution.
A home that's for sale might have suffered historic subsidence or ongoing subsidence, and it's important to distinguish between the two. Historic subsidence refers to a property that has been affected in the past, but remedial work has stopped the movement. Ongoing subsidence is still happening.
Without due diligence, the risks of ongoing movement, further financial loss, and difficulty reselling the property are too high to justify the purchase in most cases. When considering buying a house with historic subsidence, it's crucial to appoint a structural engineer to carry out an inspection. This would only be advisable if a full structural engineer's report and subsidence survey confirm that the issue can be resolved within a reasonable budget and time frame.
If the necessary remedial work was carried out and the property has remained stable over time, a house with historic subsidence can be a good purchase. Some insurance companies may offer policies at a higher premium for homes that have had subsidence in the past, but coverage is available at a reasonable cost if you check with insurers before purchasing. Any monitoring reports from surveyors or insurers can provide reassurance that there has been no further movement.
It is essential to obtain full documentation on the subsidence history, including details of the original problem, what caused it, and what work was undertaken to fix it. This information is crucial for both homebuyers and lenders.
Lenders may view properties with subsidence as higher risk due to the potential for structural damage and decreased property value. To qualify for a mortgage on a property with subsidence, you may need to take out a specialist insurance policy, increase your deposit, face caps on the maximum loan-to-value (LTV) ratio, pay potentially higher interest rates, obtain sign-off from a valuer, provide proof of warranties or guarantees, and consider professional surveys.
If you are remortgaging a property with subsidence, you may face similar challenges. It might be beneficial to stay with your current lender through a product transfer to avoid being treated as a high-risk customer.
Repairing subsidence can be extremely costly, with underpinning alone ranging from £5,000 to £80,000, and other remedial measures adding further expenses. If the property was underpinned, there should be certificates confirming the work, and in some cases, warranties may still be in place.
In conclusion, while it is possible to get a mortgage for a house with subsidence, it requires careful consideration, thorough research, and additional efforts. Homebuyers should always prioritise their safety and financial stability over the prospect of a potential bargain. Most homebuyers should avoid a house with ongoing subsidence due to the serious structural risks and financial implications.
- The CEO of SAM Conveyancing, Andrew Boast, highlights the significance of performing due diligence when purchasing a property with a history of subsidence.
- For property investors or developers with expertise, buying a house with subsidence might be an opportunity if they can negotiate a reduced price and manage the repair process effectively.
- Distinguishing between historic subsidence and ongoing subsidence is crucial when contemplating a purchase; historic subsidence refers to a property that has been affected in the past but has stopped moving, while ongoing subsidence is still happening.
- Lenders might view properties with subsidence as higher risk, potentially requiring a specialist insurance policy, increased deposit, maximum loan-to-value ratio caps, higher interest rates, valuer sign-off, proof of warranties or guarantees, and professional surveys.
