Introduction - in the United Kingdom in December 2007 anyone selling four
bedroom property had to by law, produce a Home Information Pack to make
available to prospective buyers of the property. The Home Information Pack (HIP)
must include a statement of the sale, copies of the land registry information, a
drainage and water search report, energy efficiency performance report, any
planning documents that are relevant and any guarantees related to the building
being sold.
What is a HIP? - the main purpose of the Home Information Pack (HIP) is
to improve the speed and efficiency of the buying and selling process and reduce
the proportion of sales that fall through before the point of exchange. The main
reason for sales falling through is that buyers withdraw their offer as the
survey or local legal searches uncovered something unexpected, which would cost
the vendor money in the future (or devalue their initial offer in their own
minds). As home buying is a two stage process in the UK, the cost of solicitors
and surveyors for home buyers can be considerable, (without any guarantee that
the offer would be accepted beyond the point of exchange of contracts).
Why Introduce HIP's? - the government's aim in trying to improve the home
buying process is linked to wider environmental policy objectives. For instance,
there is a necessity for the seller to provide information in the Home
Information Pack regarding the energy efficiency of the property they are
selling and to translate this into a running cost. The information must be
presented in a unified way. The implementation of European Union directives into
2009 has dictated the government's insistence that the energy performance
certificate remain a compulsory part of the pack. In simple terms, the global
recognition of climate change and the impact house building is now in the minds
of the European Union. House building represents a significant contribution to
the burning of fossil fuels in the construction methods as well as the ongoing
inefficiency of modern house building. In the UK, houses are 'knocked up' as
quickly as possible with nominal consideration for inclusion of new technologies
such as solar power, modern insulation, efficient gas boilers of new renewable
energy sources generally. There is no financial incentive for builders to
include the prohibitively expensive technologies in the architectural design.
Cost of HIP's - There is a controversial cost for the seller of about
£300 to £500 plus VAT of, in the preparation of the Home Information Pack. There
are no costs for the buyer and they can access the information online for free.
The cost involves paying a qualified HIP consultants or solicitors to instruct
searches and surveys required to complete the information required by law.
Unfortunately, the number of qualified HIP to surveyors mean's that only a
certain sector of the market has been compelled to provide the Home Information
Pack. By charging for the Pack, it is hoped Sellers are actually serious
about putting their homes on the market (and not just 'testing the water' to see
what they could make from a rising property market. It is a general measure of
commitment in that previously, all the up front costs/ risk related to the
buyers instruction of surveys and searches. Before the introduction of the Home
Information Pack many commentators such as estate agents expressed concern that
the upfront cost for Sellers would be another reason for them to sit on their
hands and cause further market price stagnation. In early 2008, the evidence to
support the supposition is difficult to prove because the global credit crunch
and a 10 year boom in property price rises causing the market to cool off
anyway.
English Home Buying Laws - Another underlying criticism of the Home
Information Pack is that no matter how its noble original intentions, property
buyers and property sellers are still linked to the basic legal home buying
process dating back centuries - in this process, (no matter how comprehensive
the Home Information Pack), the seller and still has the right to withdraw from
the sale at any time (up to the point of exchange), potentially leaving the
buyer short-changed if solicitors and surveyors have already been employed.
Lenders are also nervous about of of 'light' HIP versions and are beginning to
compel the buyer to carry on their own local authority search. In addition, a
seller can also withdraw his offer and simply accept a higher offer from a
different bidder. In other words, the buyer does not achieve extra confidence in
the sellers 'motivations' with the existence of a Home Information Pack, merely
that the information should be factually correct regarding the property. In
Scotland the legal process is different where it is a one stage process without
the cat and mouse of property negotiation (resulting in sales that fall
through).
The home buying process is already complicated and
confusing for first time buyers who have never experienced the volume of
administration and letters and correspondence passing between solicitors, estate
agents and mortgage brokers. Can the introduction of yet more bureaucracy and
paperwork chasing simplify the process and install greater confidence in
struggling first time buyers? Time will tell.
Guide to Home Information Packs