From 1st August 2007, HIPs will become a compulsory part of the property buying process and are being introduced by the government in an effort to make the buying process less stressful and easier.
Government research claims that nine out of ten homebuyers, when surveyed, were unhappy with the purchasing process. And, when it comes to the buying and selling process, the UK takes twice as long as the European average to reach completion; 28 per cent of all property sales fall through.
This high level of failure, while frustrating for the individuals involved, does have wider implications too. As much as 60 per cent of all property sales form part of a chain, therefore a delay or failure in one can have a serious knock-on effect along the chain.
One of the major gripes about buying property in the UK is the fact that buyers often feel as if they are in the dark over the true condition of a property. It is only after splashing out money on legal fees, searches and surveys that the true details of a property come to be known.
What are HIPs?
HIPs are designed to offer upfront information so that the buying process becomes more transparent.
Every pack will include Energy Performance Certificates that grade the energy efficiency of a home, as well as searches and other legal documents. A Home Condition Report giving details on the condition of a property can also be included on a voluntary basis, but will not be a required document.
The Home Condition Report was initially intended to be compulsory, but the government has now made it a voluntary inclusion.Those in favour of their introduction argue that HIPs will drastically improve consumer confidence in the property buying process and, as first time buyers will receive Home Information Packs for free, they argue, will make it easier for young people to get a foot on the property ladder.
For too many people, buying or selling their home is still a real nightmare, with long delays and duplication. People should be entitled to proper information at the beginning of the process, says Yvette Cooper, Minister for Housing and Planning.
We know there are still vested interests who make money out of the current system and who are opposed to reform, but this is about getting a better deal for the consumer.
Costs
The cost for putting together a HIP will largely depend on the value, type and location of the property, as well as which provider a seller uses to put the pack together. Estimated costs range from £400 to well over £1,000, but supporters of the scheme argue that for the majority of sellers, who will be looking to buy a new property, the HIP will be cost-less as they will not be faced with extra charges for searches and surveys on their new property.
Should the sale of a property fall through however, it is worth noting that the seller will still be liable to pay for the HIP relating to the property. Other issues such as who owns the HIP the seller or the agent selling the property – are also worth bearing in mind too, otherwise it could mean that a seller would need to commission a new HIP just to switch estate agents; read contract small prints.
Criticism
Perhaps the most important thing to know about HIPs is that the responsibility for putting together the packs will not rest with the seller, but with the person responsible for marketing the property, usually an estate agent. The aim is to make estate agents more responsible and protect consumers from rogue elements.
Estate agents play a key role in the housing market. It is vital that people buying and selling property are adequately protected against rogue agents and unfair practices. We are committed to put in place approved redress schemes for consumers, comments Consumer Affairs Minister Ian McCartney about HIPs. Those who refuse will be prohibited from acting as estate agents.Needless to say this move has drawn severe criticism from estate agents themselves. There is currently a petition on the Prime Ministers website seeking to abolish HIPs before they even launch and the National Association of Estate Agents has also launched its own e-petition, receiving 2,500 signatures on its first day alone, no doubt many of which were from disgruntled estate agents.
In January, Trevor Kent, the former President of the National Association of Estate Agents slammed the introduction of HIPs as the most ill-conceived, ill-researched and ill-tested change to property sales law and practice that England and Wales has ever experienced.
While estate agents such as Kent are against information packs in principal, others believe that the concessions the government has made to their initial plans such as the removal of the Home Condition Report from the mandatory list of content to be included in HIPs could lead to confusion.
We are predicting that the take-up of optional items within the packs will vary greatly across the country. This may lead to consumer confusion and will not have the desired effect of combating the common delays and failures in the home buying and selling process, says Stephen Smith, Director of Housing at Legal & General.
The Home Condition Report (HCR) was seen by many as a crucial element of the HIPs because buyers had the chance to see, up front, the state of the property before they made an offer, rather than finding out further down the track and potentially withdrawing or stalling. Now that this report will be optional, it will be interesting to see how many sellers are prepared to pay for one.
While some packs will have an HCR in them because the seller believes that it will make the sale of their property go more smoothly, cost will be an important factor.
Some people, particularly in areas of low house prices, may want to get away with the bare minimum expenditure, continues Smith. From a buyers point of view, house-hunters may feel that a pack without an HCR is incomplete or that the seller has something to hide.
Smith pointed out that the increased use by lenders of Automatic Valuation Models, which give an indication of property value without actually having to send a valuer to assess the property, may also prompt buyers to seek independent advice for their own peace of mind.
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