Just over a year from now, the process of buying and selling a home will be transformed. The introduction of compulsory Home Information Packs (HIPs) from 1 June 2007 is expected to make the homebuying process much simpler, and ensure that fewer sales fall through when surveys reveal unexpected snags.
Around £1 million per day is wasted on deals that fail, says the government, as buyers shell out for valuations, searches and legal help and then see the sale fall through when problems come to light, or worse they are gazumped. Over a quarter of sales now fall through once an offer is accepted, and half of those do so because of a survey. Sellers pay, not buyers
Making sellers stump up for a HIP will make more information available upfront and reduce costs for first-time buyers, say industry commentators. The survey will be done before an offer is made, and the cost will be borne by the seller, not the buyer or several buyers, in cases where several people have surveys done on the same property.
The government says that HIPs will cost around £600 plus VAT, though industry insiders disagree. Prices could well rise as high as £1,000, says Karen Babington, sales and marketing director at online conveyancers E2M, who already use the packs. That cost will make vendors more wary if they are not serious about selling, she adds.
Whats a HIP?
HIPs will include a Home Condition Report, which is a mid-range survey covering the condition of the property and its energy efficiency. Searches, deeds proving ownership, guarantees for building work and a form detailing fixtures and fittings will be included too, as well as details of the lease for leasehold properties.
And since just one in five of us currently gets a survey done, the packs are expected to make the homebuying process easier, say commentators.
They will bring regulation and transparency to an industry that currently has very little, says a spokeswoman for the Royal Institute of Chartered Surveyors (RICS). It is hoped the HIPs will speed up the process of buying and selling, eliminate sellers testing the market, and buyers being outbid at the last minute.
HIPs should reduce the number of aborted sales, where vendors put their property on the market almost at a whim because it doesnt cost them anything, agrees Brian Murphy, lender manager at the Mortgage Advice Bureau.
Newbuild, new headache?
Yet even new homes will throw up nasty surprises for the unwary, says Catriona Bright, founder and MD of New Build Inspections, who says that Britain is amongst the worst countries in the EU in which to buy new property. In Ireland, she says, the process is much easier, as it is normal custom and practice for newbuild buyers to instruct a professional snagger to create a snag (or problem) list for a newbuild property after all, you wouldnt buy a car without a test drive.
Tried and tested
Some firms have already been using HIPs, as part of the governments early adopter scheme, and say they work brilliantly. At Open Book, which has used HIPs for nine years, director of surveying Tom Littler says that starting with a Home Condition Report simply means giving earlier attention to problems which will arise later and finding a strategic way to address them.
The existing process means that structural problems, from rising damp to problems with cavity wall ties, may not come to light till way down the selling process, he points out. In a typical case, the vendor gets an offer and is absolutely delighted. Then the estate agent gets a call from the buyer to say that hes found problems, and wants £5,000 off the price. Naturally the vendor is unhappy.
A Home Condition Report can change all that, Littler argues, and should mean problems can be dealt with upfront rather than letting them scupper the house buying process. In some cases, vendors may take properties off the market and talk to insurers about underpinning. And a HIP can really help, says Babington, for vendors with a cosmetically unappealing but structurally sound home, or on an estate of identical houses, because a HIP offers a head start.
However, many buyers still fail to get their own property survey and rely instead on a mortgage valuation. However, Littler says that far from being a tick box system, like a valuation,with a HP, vendors will have to provide a thorough survey of their property.
HIPs also have major implications for energy efficiency, he says, in a country which is now committed to improving levels of thermal insulation. You go to homes where the owners are quite well off, and theyre simply pouring pound notes through the roof because they have failed to insulate the roof spaces, he says. Having other pitfalls like a footpath nearby come to light early in the process will also mean that buyers can make an informed decision on whether or not to view.
The price is right
HIPs also mean that the property is marketed at a realistic price from the start, adds Littler.
Estate agents and vendors have to commit to a realistic asking price, which means the property wont just sit on the market. Having all the information upfront also means the sale process is faster.
In practice many buyers simply flick through to the conclusions to see whether they should buy a property or not, says Keith Gould, MD of HIP providers Stratify Associates, which was part of the government HIP consultation process. But HIPs can also help buyers budget for a new boiler, say, and they also provide invaluable information for lenders and solicitors.
Shock to the system?
Are we ready for total change? There is general industry concern that the 7,000 home inspectors needed to create the packs may not all be qualified in time.
Stephen Foden, chairman of property information pack provider Spring Move, believes buyers will not trust reports unless they are independently prepared. He also wants them to include a valuation to prevent estate agents over-valuing properties and then reducing the price.
But HIPs should be good guides, argues Brian Murphy, lender manager at the Mortgage Advice Bureau, because all the information will be there upfront, so buyers who spot potential problems with a property will either have their worries confirmed or put to rest. HIPs will be authoritative, he adds: HIP providers will be professional organisations, and the home inspectors will be RICS chartered surveyors with professional indemnity and years of experience and training. Most pack providers will be large legal and conveyancing firms with reputations to keep intact, he adds.
Huge changes are afoot, adds Gould, who expects fewer properties to be on the market next summer because those just testing the market will have disappeared. Instead buyers will see a clearer system that will speed the homebuying process and cut down on that £ 1 million going to waste every day.
