Watch Out – Best Mortgages But With a Catch!

Hi John

You would probably have had the same experience whichever mortgage lender you had used.

The value that somebody will pay for a property can often be a lot lower that it would cost to rebuild in the event of a fire. It can go the other way too though.

For example, if your property is an old terraced house, it it was to burn down it may well take out the neighbouring properties too, hence the funds needed to rebuild might be far greater than the value of the property. On the flipside, if you were to own a bungalow on a large plot then you might find the insurance value for rebuild is in fact lower than the value of the property because the risk of damage to neighbouring properties is lower and because the land value will also be taken into consideration and that cannot burn down.

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Not particularly unusual, on our home rebuild value is over 3.5x the purchase price (only 14 months ago) probably only 2.5x market value now we've done the renovation work though. It's just a reality of the property market and costs to build, reflected in the market by how little house you actually get in a new build compare to an older property of the same "value".

Also rebuild costs usually include an element for demolition on a worst case basis, and rebuiling a terrace or semi would cost more than starting from scratch, even with a detached property there would be costly difficulties at rebuild compared the initial green field build.

Insurance has to cover the full preparation of the site. So take down the old burnt house for example and start again. Terraces are way more expensive to rebuild than detached (of a similar comparable size).

I have a large stone 5 bed terrace valued at £140k, but the rebuild cost is £357k.

Reply to the comment left by "Mark Alexander" at "16/02/2015 - 11:28":

Someone is welcome to correct me if I am wrong however as I understood it, you (And your insurer) is not liable for damage to neighbouring properties even if a fire started in your house. Is it not up to them to have their own insurance cover?

there is no correlation between rebuild values and open market resell values!!!!
i thought your post was going to be about how valuers exaggerate rebuild costs to cover their a****. that would have been more interesting.

It should have been noted on your valuation reports for each property before you signed on the dotted line, however have a look at the BCIS website (The Building Cost Information Service of RICS), which gives a range of rebuild values corresponding to the information you put into the online calculator for each property.

If the mortgage lenders are still miles out then I would challenge them and ask which method of calculation they use because it would be unusual to stray too far from RICS advice.

Insurance is a bit of a minefield.

If the fire at your house was a matter of negligence than the neighbours might well have a cause of action against you and your insurance company.

You make an assumption that all properties are insured. There is no legal obligation to do so but it can be required by the ,mortgage lender. If your neighbour has no mortgage then there may be no insurance. In the event his property burns down and damages yours you can sue but normally the reason that that are uninsured is that they can't afford it so your insurer will have to foot the bill. Hence premiums contain an element for uninsured neighbours - much like car insurance.

On the matter of calculation of insurance we (surveyors that is) simply use the BCIS tables - we have no reason to cover our a**es if we do the calculation correctly. In some cases we are actually below the figure which would come upon the website as we adjust for many factors affecting costs.

Reply to the comment left by "Nick Pope" at "21/02/2015 - 10:11":

negligence is very hard to prove, i.e.:
http://www.lexology.com/library/detail.aspx?g=12befc3a-5cbe-4446-83a1-6196f03433cd

in my experience surveyors invariably add a margin of error when calculating fire insurance valuations. what adjustment/s have you ever made to bring it below bcis rates?

Hi there.
I've got a few questions which I'm hoping someone can help me with (and today if possible, as I've got to answer my insurance company):
1. Does anyone know what the cost of 'shoring up' a neighbouring house is? - and what is involved? I have had to present a hypothetical quote to my insurance company - covering demolition, disposal of the whole building - because they don't agree with my rebuild value. I sent in a quote suggesting my rebuild value was sufficient, but my builder missed out the crucial 'shoring up' of the neighbouring terraced house.
2.While we're at it, any ideas about the cost of putting on a new roof as my builder's estimate is £6,900 (yes, I know it's on the low side, but is it possible at that price (it is end of terrace...)
3. My builder has put in 'All services, gas, electric, water, BT - £10,000.' Isn't that way too much for the reconnection of services to a house in the middle of the city, where all the services are already there? (he also put in £3,800 for capping off all services to the property)
4. Any idea what professional fees would be involved in this? I would imagine an architect's fee wouldn't be high as they just have to replicate what was there, with a mirror image of next door, more or less. And what about structural engineers and building regs?
I'm hoping to be able to prove my rebuild value is legitimate or I'm only going to receive a proportion of the claim.
I would appreciate any help on one or all of my questions by my learned friends here present.
Thanks in advance.
Ros.

Reply to the comment left by "Ros ." at "10/03/2015 - 09:37":

Hi Ros

You may well get a better response if you were to post the same question on this thread >>> http://www.property118.com/i-am-a-property-developer-ask-me-anything/44690/
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