When buying a home, one thing many first time buyers aren’t always aware of is the need for searches. These can take several weeks or even months, depending on where you live, to complete and with so many people rushing to get their purchases through, the need for a no search indemnity insurance policy is growing.
What Are Property Searches?
To put it simply, property searches are completed with your conveyancer working in partnership with the local council to provide you and your mortgage lender with detailed information about the land the property is on.
This could be anything from identifying floodplains to whether owners of the property would be liable for Chancel payments to the local church.
These searches are not just for the buyers, they are also a requirement of almost every mortgage lender. They want to know their investment is a good one and poor search results could lead to a smaller loan being offered or even revoked.
But don’t worry, this is rare and most lenders will be happy to lend the full amount of the principal offer once the searches are returned.
When Would You Need A No Search Indemnity Policy?
Delays are searches are the most common reason as to why a policy may be needed. COVID-19 saw huge delays at the beginning of the pandemic and during the following 2 lockdowns.
Some mortgage lenders will allow contracts to be exchanged and even completion dates fixed without searches, as long as there is a no search indemnity policy in place. This became most popular when Hackney Council had their systems hacked and their average turnaround time was over 170 days. Seeing as not just the buyer and seller could suffer from this, but also the lender, new policies were put in place.
On top of this, the surge in buyers wanting to complete before the stamp duty levy is lifted has put a strain on local authorities and many are struggling with the demand. Many buyers simply can not afford their new property if standard stamp duty must be paid and mortgage lenders do now want to risk losing out on these loans due to this. Therefore, many will accept a no search indemnity policy.
There are cases where ‘out of date’ searches are available but the buyer wants to proceed without new searches. This doesn’t just save time but also hundreds of pounds. The most common scenario of this would be for new builds.
Searches are often obtained at the beginning of the conveyancing process, however, this may not be completed for many months or even years. At this point, the searches will be considered out of date by a mortgage lender, even though it is highly unlikely there has been any change to the land.
It is important to note that all lenders have their own rules and regulations and not all of them accept a policy over searches. If you are looking for a lender and are wanting to complete within a set period, speak to them about their search policy first. It may be worth going with another provider, even if a little bit more expensive, to get the transaction through in the time you need.
If you are buying without a mortgage, there is no legal requirement to obtain searches, although advised. To save cash, many buyers will opt for a no search policy instead, covering themselves should something happen due to lack of searches.
What Does A No Search Indemnity Policy Cover?
Like all insurances, this varies between providers. However, your conveyancer will advise which is the best one for you and your property and most will arrange it on your behalf.
These policies typically provide financial cover should anything happen to the property, land and possessions as a result of adverse entries that a search would have revealed.
Remember, there is always a risk involved in not happening searches completed as even if your lender is not impacted, you as a homebuyer could have your quality of life interrupted. For example, if you find that your garden floods frequently, meaning you are unable to make use of your outdoor space for many months of the year, a flood search would have revealed this and could have led to the decision to not buy the property.
While sellers should always be open and honest about factors like this, this isn’t always the case. Overall, the best thing to do, whether you are buying with a mortgage or not, is to have searches complete. However, if extenuating circumstances mean this can not happen, you must always ensure you are covered with a policy.