Can I insure a house bought in a mortgagee sale?

In most cases insurers won’t provide cover for houses that were sold under a mortgagee sale.  This is because of the increased and known risk associated with this type of property sale.  However, we know that all mortgagee sales are different so can consider cover on a case by case basis if some requirements are met. We can only consider cover from the settlement date of the property, not from the fall of the hammer/purchase date.

Mortgagee Sales are typically purchased on an “as is where is” condition, and often purchased without being inspected. The property is either left unoccupied which can add to the overall risk of the property, or the defaulting owner is still living in the property, which adds another level of complexity.  

A major issue with the insurance of mortgagee sales houses is that the buyer can be required to insure the property before they are the legal owner.  A condition is often applied to the sales agreement requiring insurance of the property from the “fall of the hammer”, i.e the date you agree to purchase the dwelling and not from the settlement date.  It can be very difficult to get insurance cover from “fall of hammer”.  Fall of the hammer cover, if you can get it, is normally for a short period only (up to 3 months), is provided by a offshore insurer, and will cost at least $3,000.  The cover will also be limited to loss from weather damage, natural disaster, water damage and will not include cover for malicious damage.

Minimum requirements for insurers to consider cover

Insurance providers like Initio will generally only consider mortgagee sale cover for existing clients, and will provide cover from the settlement date not fall of the hammer.  You will need to provide  information on the following:

  • Purchase date
  • Settlement date
  • Are you required to insure the home prior to the settlement date?
  • Overall condition of the home
  • Whether the current or previous owner lives in the house, if it is a rental, or empty
  • Your intentions after settlement (e.g. moving in immediately, or putting tenants in after renovations etc.)
  • Have the locks been changed? If not, when will they be changed?

Send your details to [email protected] and our team will get back to you.