If you thought Home Information Packs were a pipe dream, think again as they're about to become a reality. Are you prepared?
Home Information Packs (HIP) were first mentioned just over three years ago, as a way of speeding up the home buying and selling process in the UK.
At present, buyers have to make a serious offer on a property before they can effectively find out what state the property is in, by commissioning a survey and carrying out searches etc. If they subsequently discover the property is not what they'd hoped, they may end up having to pull out of the deal, only to do the same thing with another property -- which can work out to be expensive and time consuming, both for the buyer and seller.
The idea behind the HIP was to instead have the seller create a pack filled with most of this information before the property goes onto the market. Buyers could then simply view the pack, obtain a clear view of the property and make a serious, informed offer. As around one in four transactions currently collapses before contracts are exchanged, costing consumers and the industry an estimated £350m each year, according to the government, this should make the whole process cheaper, easier and faster. Or would it?
Of course, things are never this cut and dried, and when you consider this is dealing with the hideously complicated subject of buying and selling properties, you can see how it would never be a smooth road.
After all, we wanted to know why the seller should have to foot the bill for a report that would cost between an estimated £500 and £1200? What happens if the property stays on the market for more than six months and the surveys become out of date? Would the home condition report (its term for a survey) be good enough for mortgage lenders, or would further surveys be required anyway? And why should the buyer trust the seller's report? What happens if you sell your home privately -- will you still need to pay for a HIP? Aarrgghh!
And suddenly, as quickly as it started, talk of HIPs seemed to quieten down. First, we heard that home condition reports would be optional. Then talk seemed to disappear altogether -- so much so that when I mentioned HIPs in the office this week, I found that some Fools thought the idea had been dropped altogether.
Well, it hasn't. In fact, this couldn't be further from the truth as, come 1 June 2007, HIPs will become a compulsory requirement for anyone selling their home in England and Wales.
So what does this mean for potential sellers? Well, no one really knows for sure. Although it beggars belief, the consultation is still going on, and the final regulations won't be released until the end of March!
However, according to the government's Home Information Packs website, required documents will include:
- An index (i.e. a list of the contents of the Pack)
- A sale statement (summarising terms of sale)
- Evidence of title
- Standard searches (i.e. local authority enquiries and a drainage and water search)
- An Energy Performance Certificate
- Where appropriate, commonhold information (including a copy of the commonhold community statement)
- Where appropriate, leasehold information (including a copy of the lease, information on service charges and insurance)
- Where appropriate, a New Homes Warranty
- Where appropriate, a report on a home that is not physically complete
So far the government has said that the Home Condition report will be optional, although it has stated that it believes the reports will "prove valuable to both sellers and buyers, and is working with the industry to ensure there is active take up". Not having to include the report will obviously reduce the potential cost for sellers, and it's been estimated that packs will cost between £400-£500. What's more, it has even been suggested that some estate agents may offer to foot the bill for the HIP, as part of their selling package.
It has also been intimated that although surveys will need to be repeated, should the property remain on the market for more than 12 months, this is the only part of the pack that would be affected, and so the cost to update the HIP should be relatively low.
If you're hoping to find a loophole to get out of having a HIP, you may be unlucky. Even if you don't use an estate agent, marketing your property in any way (i.e. putting a sign up outside, advertising it on the internet) will mean you still have to have one, although selling your home privately may be exempt. We'll just have to wait until the end of the month to find out more.