Home information packs

Discussion in 'Finance, Property, Law' started by Forces_Sweetheart, Apr 10, 2006.

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  1. As from 1 June 2007, homeowners will be required to provide a Home Information Pack when marketing their homes for sale throughout England and Wales. This is designed to help reduce the estimated £1 million which is wasted each day because of failed residential property transactions.

    Part of the reason that they may have slipped off your radar is because they have changed names from 'sellers' packs' and will now be called 'Home Information Packs' or HIPs. Of course, few home owners are looking forward to HIPs because they represent more paperwork and more expense. So what does the future hold and how soon are HIPs likely to become a permanent part of the property horizon?

    What will HIPs contain?

    The pack will include a Home Condition Report, terms of sale and any search details. The Home Condition Report will be an objective report on the condition of the property that buyers, sellers and lenders will have a legal right to rely on. Home Inspectors will have to have suitable insurance that will be backed up by insurance of last resort provided by the certification scheme.

    An energy efficiency rating will be included in the report, giving consumers the choice to assess the likely running costs of a property before they buy. The proposed content of the pack includes searches and other information which is currently paid for by the buyer. Where several buyers pursue the same property, then these costs are repeated by each buyer. Under the new arrangements all prospective buyers will be able to access this information up front as supplied by the seller.

    Why are HIPs being introduced?

    Good practice at the moment is very hit-or-miss. Only 2% of buyers have a full structural survey carried out when buying a home. Incredibly, seven out of 10 people do not carry out a survey at all. Nearly 30% of transactions collapse after terms have been agreed and more than 40% of failed transactions collapse because of an unfavourable survey or valuation inspection, so property condition is a major reason for failure.

    HIPs will provide reliable information at the beginning of the homebuying process to help prevent buyers and sellers being misled by incomplete or inaccurate information when they put in or accept an offer.
    The government believes that HIPs will improve transactions by reducing the wasted costs to consumers and the industry attributable to failures caused by survey or valuation inspection findings. It says that HIPs have long been called for by consumer groups, to address the serious problems and delays homebuyers and sellers face when they can't get early reliable information about homes. It expects the condition of 'housing stock; to improve by reducing the incidence of unexpected repair bills and encouraging better maintenance of homes. Finally, it says HIPs will provide greater consumer choice by reducing the entry costs to first time buyers and creating a market of serious sellers.

    The cost?

    The packs will cost around £600 plus VAT. The government says most of this cost is not new, being met at present by sellers and buyers. The Home Condition Report is the new item and is expected to cost around £300, for an average home, plus VAT. It is similar to the homebuyer survey that some purchasers already commission.

    How will first time buyers benefit?

    As the most vulnerable and least experienced participants in the home buying process, first time buyers need the hard reliable information that HIPs will provide to inform their decisions. And because the pack is free to buyers it will help them reduce their costs.

    Is everyone happy about HIPs?

    Hmmm. Not quite. Although the industry and consumer groups have welcomed the initiative, some have reservations about the implementation.

    'No-one should under-estimate the scale of the task ahead,' says Peter Williams of the Council of Mortgage Lenders. 'It is quite clear that, even when HIPs go live, it will take some time for the market to gain experience and confidence in the new environment and only then will its full benefits to consumers be realised.' he adds.

    Professional body RICS (Royal Institution of Chartered Surveyors) works in the public interest. Spokesman William Tew says: 'RICS currently has concerns relating to the overly costly and bureaucratic assessment process for the conversion of experienced surveyors into home inspectors.'

    Consumer comparison website Moneyfacts conducted a survey which reveals there is much debate as to whether HIPs are the solution, with some participants saying it will delay people from selling their home. The fact that valuations will still have to be carried out on a property also raised concerns as to how much these packs will speed up the process. Others said the expense will mean that HIPs will initially appeal more to first time buyers.

    Where can get my HIP?

    These will be advertised by a number of providers who have put their inspectors through the required training. Only inspectors qualifying under certification schemes approved by the Secretary of State will be able to prepare Home Condition Reports. The scheme will be responsible for monitoring and auditing inspectors' work. This will be robust to ensure that standards are maintained and the reports can be trusted. If inspectors fail to maintain the correct standard or act in a way that is partial to one party contrary to the rules of the scheme, their certification will be removed, along with that their ability to produce Home Condition Reports.

    Between 5000 and 7400 full time Home Inspectors will be required to complete an estimated 1.44 million Home Condition Reports each year. More than 4000 people have begun training to gain the Home Inspector qualification.

    What happens next?

    The Association of Home Information Pack Providers will be rolling out voluntary HIPs in the regions during 2006 and 2007. From August 2006, the first certification schemes, which will ensure the work of Home Inspectors meets tough Government standards, will be approved. The approved schemes should begin to operate from October 2006, with qualified, certificated Home Inspectors able to register the Home Condition Report and deliver authorised reports to consumers. Major players are now investing heavily in Home Information Pack systems and intend to market these well in advance of packs becoming mandatory.

    Where can I find out more?
    Log onto the government's dedicated website: www.homeinformationpacks.gov.uk.
  2. You forgot that Banks and Building Societies will not accept the home information pack as it is not deemed impartial enough, thus homebuyers will still be forced to pay for independant valuations for mortgage purposes.

    The VAT is expected to give that fat and gay Gordon another 111million quid a year to give to Africa; raising (more likely reducing) their standard of education to ours by 2015. God help them: they are already better educated than 90% of comprehensive school students!
  3. Ah yes, very annoyingly, lenders will still need to make an assessment of value in every transaction. Robust Home Condition Reports that can be fully accessed electronically could, over a period of time, reduce the number of physical inspections that need to be made, with a potential knock-on reduction in costs to borrowers. But the majority of transactions will still need a valuation report that will be charged for separately by the lender.

    And yes, VAT is due. I guess we can expect a brisk upturn in houses being sold before June 2007 in order to dodge the mandatory paperwork and associated charges.
  4. But apart from anything else, they are unworkable.

    Out of date searches, conservative HCRs, Estate agents in control of the market and pack delivery, Lenders still requiring valuations, blighted housing stock (concrete and non-traditional housing), anything that requires more than £10k spent on it to get a clean HCR never to hit the market again, 25% fall in transactions (Danish statistics), no speculative sales, delay to market, and Caveat Emptor still in place.

    I could go on but it's all Utter bo**ocks.

    It'll be binned long before July 2007.
  5. BiscuitsAB

    BiscuitsAB LE Moderator

    An assessment of value otherwise known as a mortgage valuation otherwise known as a drive by! And not all lenders charge for their mortgae valuations. Some do it for free others give a contribution to cost at completion.

    As for the cost of the pack pushing up the cost of property by a comensurate amount. I dont believe it will.
  6. correctamundo - the pack will be paid for by the agent up front in return for a sole agency contract. The cost of the pack will then be recovered via the completion monies and in comparison say with Stamp Duty, it's not an issue.

    There is a risk that prices will go up by virtue of the pack though in that pre packs, there will be a huge oversupply as anyone worried about the condition of their house will sell, and then there will be a sharp fall of of supply post introduction.

    The Danish model clearly demonstrates that packs wipe out speculative sales and transactions levels have fallen by 25%. This has a diluting affect on stamp duty revenues (which is why Gordon may yet pull it), and imposes an upward pressure on values. Akin to the Lawson double stamp duty, this could be just the trigger that sets off a fragile market into a downward spiral.