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Buffer Bear

Underpinning - Will This Impact On Resale Value At A Later Date?

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An associate of mine has informed me that she is due to exchange contracts on a house over the next week or so. She went on to say that although obtaining a mortgage for the property was not difficult, she found it quite hard finding an insurance company that was prepared to offer building insurance, despite having the necessary certificates from the council, underpinning co. etc.

My alarm bells immediately went off, but am I just being over dramatic and sensitive? My concern was that in a falling market she may have difficulty selling at a later date. I suggested she get an 'expert' opinion from a structural engineer (or a least someone who knows about these things). So far, she has only had a Hombuyer's Report and she said that the individual who did the survey just "looked around."

Should she be worried and / or which persons services does she need to ensure this will not be a problem at a later date?

Any advice / info would be very much appreciated.

Edited by Buffer Bear

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I was in a similar situation a couple of years back. I decided it was worth getting a structural survey carried out. It cost a lot of money but was worth every penny. I spent about an hour on the phone with the surveyor after receiving the report. The biggest concern listed was that the property had been partially underpinned rather than fully underpinned. This is what I was expecting but the report went on to explain that this is actually a bad thing.

All properties have a tendancy to move and sometimes this causes subsidence. The insurance company will naturally want to fix it in the cheapest possible way. Often they wil insist on repairs every couple of years rather than agreeing to underpinning. When they do agree to underpinning then they will usually try to get away with only partial underpinning. The problem with this is that the foundations on one part of the house are original and the foundations on the other part are now much deeper. This can mean that while one side of the building moves in the future, the other side will not. This differential movement can be responsible for huge stresses and can often cause cracks.

Now onto the naughty part... despite the insurance company having insisted that only partial underpinning is done, sometimes the policy excludes damage caused by this differential damage. The surveyor explained that he had been involved in several loss adjustment cases where the owner was now suing the insurance company for insisting on the partial underpinning. He estimated that in properties which are only partially underpinned there would be around 10% which would have degree of differential movement as a result. It is, of course, fairly cheap to buy indemnity insurance to cover such problems but you are still left with all the stress of the situation if it does occur.

I pulled out of that property despite losing a lot of money on fees and the survey. I don't regret it and it took almost a year to sell at the peak.

So to cut a long story short, you should not be paying "market price" for a property which has been underpinned. This is for several reasons:

1) Insurance in the future will be difficult to get. Often it is only the original insurer which will cover you. Therefore the price will be high.

2) When you come to sell the property in the future the potential buyer will also ask themself whether they should pay full price. The likelihood is that they will not want to.

3) In a buyers market it seems to me that good properties are still selling for a premium. But anything with a problem is taking a long time to sell and the price often has to be reduced.

Edited by Portent

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Guest Charlie The Tramp
I was in a similar situation a couple of years back. I decided it was worth getting a structural survey carried out. It cost a lot of money but was worth every penny.

I paid £350 + vat in September 2001 for a civil engineers report and as you say worth every penny. I managed to sell with no problem my 140 year old cottage in Norfolk. The claim by a surveyor of subsidence was reported as historical settlement ( rotation of the foundations ). There was no problem with the buyer then obtaining a mortgage and building insurance.

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Portent,

Thank you for responding in such a comprehensive way. I will show my associate these comments to give her a pointer as to some avenues she may wish to pursue. Much appreciated

No problem :) I'm not saying don't buy it but just make sure she pays a fair price, has a decent survey and gets the relevant paperwork in order such as indemnities etc. Although personally I felt it wasn't worth paying to take on someone elses problem. No-one I've spoken to since was aware of the differential movement possibility so in all likelyhood this won't put a buyer off. But I am sure that underpinning in general will put people off and therefore the property should sell for less.

Edited by Portent

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No problem :) I'm not saying don't buy it but just make sure she pays a fair price, has a decent survey and gets the relevant paperwork in order such as indemnities etc. Although personally I felt it wasn't worth paying to take on someone elses problem. No-one I've spoken to since was aware of the differential movement possibility so in all likelyhood this won't put a buyer off. But I am sure that underpinning in general will put people off and therefore the property should sell for less.

Thank you.

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Last week I spent two hours searching for and printing off info / graphs, house prices on the said road, to broaden my associates knowledge. I gave her an inch thick portfolio, which when presented to her, she said it would be her homework for the weekend. During the week I saw her on a couple more occasions. Each time, she expressed suprise, anger, fear and confusion in relation to what she was learning from the material provided. She was actually speechless about the VI's manipulation in respect of the housing markets current condition. The asking price was 325k and the vendors were not prepared to accept an offer lower than 315K. By chance, I bumped into her and her husband at the weekend and had a brief chat. I saw her today and she informed they have pulled out of buying this property. This is a brave and insightful move especially as she was emotionally attached to the property.

Edited by Buffer Bear

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  • 302 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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