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Underpinning: The kiss of death

kiss of deathI’ve found a property I really like.  The figures really stack up and if I could get the funding I could make the deal happen.  But there’s just one problem – it has been underpinned.  That’s right it doesn’t have subsidence.  It did have it, but it’s been sorted out, it’s been underpinned so that’s ok now isn’t it?  No!  It’s the kiss of death.

Why you might think?  Well it’s all down to the great almighty all powerful valuer.  If he/she says that the under-pinning seems to have done the trick and there are no signs of recent movement then some lenders would deem the property acceptable as security for a loan.  But this is where the system can be a little self defeating.  How many valuers would put their neck on the line – and indeed their indemnity insurance – and give an underpinned property a clean bill of health?  They would almost certainly suggest a report by a structural surveyor.  But would he/she put their neck on the line?

Of course the next challenge is trying to get the property insured.  How many insurers would provide standard buildings insurance with standard subsidence cover?  Very few according to broker, Hamilton Fraser.  They would require a structural survey and then it’s down to the underwriter.  You now have to ask yourself how many lenders will lend on a property that does not have subsidence cover?  Not impossible according to my favourite broker, NLA Mortgages, but they’d need to call a few lenders and check.  And one commercial lender told me today that even if there were no signs of recent movement, selling the property might require an extended marketing period and that would be fatal to a mortgage application…..    Argh, this bargain is slipping through my fingers.  I want to morph into a cash buyer.  I need to put that into my business plan.  Build up enough cash to become a cash buyer.   I could solve all subsidence issues and re-finance it.  Hopefully.

So if you thought underpinning would solve a property’s subsidence problem, think again.  You may not get it insured, which means you can’t borrow against it and then you might not be able to sell it, because the underpinning will well and truly scare buyers away.  Eek.

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