If youve had an offer accepted on your ideal home, finding out that the property youve set your heart on is subsiding or the roof is about to cave in can shatter the dream pretty quickly. The problem is that you dont usually find this out until youve put in your offer, paid for a survey and more or less decided where you are going to hang your pictures.
Government figures show that nearly a third of sales fall through before completion because the buyer finds out key information about the state of a property after an offer has been accepted.
Its research claims that nine out of ten consumers are dissatisfied with the current home buying and selling process. The fact that the process allows buyers to make an offer purely on the cosmetic appearance of a property is one of the main reasons for sales falling through. However, it is hoped that the new home information packs (HIPs), set to become mandatory in January 2007, will change all that.
What is a HIP?
HIPs will be paid for by the property seller and include information required by a potential buyer to make an informed decision. The packs are expected to contain: a home condition report (HCR which will be more robust than the average valuation report that all mortgage lenders demand), evidence of the title and deeds of the property, warranties and guarantees for building work, and forms the seller can use to give more information about the propertys fixtures and fittings.
Instead of buyers having to fork out for the searches, the seller will have to provide them in the pack estimated to cost £600£700 in total before the property is put on the market.
Why do I need one?
The aim is to make the homebuying process quicker, cheaper and less prone to collapse. Consumer association Which? welcomes the packs, as a way of resolving many of the stressful delays connected with buying and selling. Louise Hanson, a spokesperson for Which?, says: The HIPs flip the process on its head. Buyers can find out straightaway what state the roof is in, for example, or how much it may cost to repair the damage from damp in a kitchen. This means they can make a realistic offer, based on all the information. It also gives sellers a chance to put problems right before they sell.
There has been criticism in the industry about passing on the costs to the seller rather than the buyer. Which? points out that this is good news for first-time buyers, and as most people buy and sell at the same time, they will benefit from their buyers pack as well as paying out as a seller.
Will HIPs work?
The system will get a dry run across the country in 2006, with the aim of ironing out problems before the packs become mandatory. However, some agents already use the packs and claim they add value to their sales process.
Maria Coleman, CEO of Openbook, has used a pack, similar to the governments proposed version, for over a decade. Without the packs, as many as 26 per cent of sales used to fall through. Now its more like 1.6 per cent. She says: Its great for buyers to get more transparency. Its also better for sellers. They can see the report, and if they go a step further, for example, and price up the cost of repair work, they can show they have taken this into account, so the buyer shouldnt reduce their offer at the last minute.
Clive Tattersall, owner of Joules Estate Agency in Manchester, has also been using the packs for some time. Buyers love them, he says: One of the main advantages is that they save all the usual delays, such as waiting for searches. Also, it means only serious sellers will put their home on the market, so a buyer knows they really do want to sell.
Money can be tight enough when youre moving home, so the packs have been criticised for squeezing sellers yet further. There are also fears that providers may take advantage when the packs become mandatory and hike their prices. However, the government claims that competition between pack providers is likely to keep costs down.
Sellers may also not have to pay the costs straightaway, says Patsy Cusworth, from the Office of the Deputy Prime Minister. It may be that mortgage lenders will offer to pay for the pack, as part of a special deal, or they may add the cost of the pack to the mortgage, she says.
So whats new?
- Currently: a buyer pays for a survey on the property. This can be a valuation report, demanded by the mortgage lender, or a more comprehensive home buyers report.
From 2007: the seller pays for a survey as part of the Home information pack. The Home Condition Report will be a mid-range report, more extensive than a valuation report but less comprehensive than the more expensive home buyers report.
- Currently: once an offer has been accepted, a buyer pays for the searches, including the local authority searches.
From 2007: the seller will pay for the searches up front as part of the pack.
- Currently: fittings and fixtures are usually discussed near to exchange.
From 2007: the HIP will provide forms which the seller can use to give more information about the property, fixtures and fittings.
- Currently: the buyer only has the estate agents information on the property when househunting
From 2007: the seller provides a sale statement describing the property
- Currently: the buyers solicitor usually asks for details about warranties for building work
From 2007: the seller will have to provide these details to interested parties as part of the pack. If the property is leasehold, the pack will also include: the lease, details of the landlord or managing company, and details of service charges.
