Good riddance to expensive and unnecessary HIPs
With the demise of the detested packs, the onus is back on the buyers to do their research, says Laura Howard
Sunday 30 May 2010
Disagreements within the new coalition government are likely to arise. But one decision on which both the Conservatives and Liberal Democrats will have been unanimous was the recent scrapping of Home Information Packs (HIPs).
The death of the packs – which Labour controversially made law in 2007 – will see little love lost. Their purpose was to "speed up the housing market" by presenting all the information a buyer needs to know about a property upfront. But at a cost of about £400, absorbed by already cash-strapped sellers, and buyers rarely requesting to see the packs, HIPs were largely regarded as unnecessary.
"The abolition of HIPs is good news for the housing market, and particularly for sellers who have been forced to spend hundreds of pounds on a document that nobody wanted and few people bothered to read," says Andrew Hagger of Moneynet.co.uk.
But not everyone is pleased to see the back of HIPs. First-time buyers, with no homes to sell, are no longer able to access free information, says Helen Adams, the managing director of first-time buyer website FirstRungNow.co.uk. "At a time when aspiring homeowners are taking a giant leap into the unknown, a HIP was a source of information that could help reduce uncertainties," she says. "It set down estimated costs of household bills which is a vital consideration for first-timers on a budget. And, as the packs incorporated a local search already, it meant they could save on legal fees."
Cost-savings are particularly important for today's generation of first-time buyers, says Ms Adams, as they have already had to raise a minimum deposit of 10 per cent of the purchase price. According to the latest data from Halifax, this amounts to about £17,000.
With the onus back on the first-time buyer to research the property and ask its sellers the right questions, what do they need to know? The first step is always to carry out a survey on the home. Although a survey was not a legal requirement within a HIP, even if a voluntary home condition report was included, commissioning your own survey was "always a recommended strategy", says Ms Adams.
But first-timers should be aware that a lender's valuation does not constitute a survey, warns Jeremy Leaf, a spokesman for the Royal Institution of Chartered Surveyors (Rics). "A lender's valuation is carried out for the lender, by the lender to check the home is adequate security for the loan. And the smaller the mortgage against the value of the property, the less detailed it tends to be," he says.
In most cases, a homebuyer's report is robust enough to check the condition of the bricks and mortar before buying. The cost of the report will vary according the location, value and size of the property, but you should budget for up to £500.
This may still not give first-time buyers the full picture, however. While the information in a survey must be correct, there will be several caveats, says Tracy Kellet, the managing director of BDI Homefinders. "Surveyors will usually specify they are not plumbers or electricians and will only make cursory checks – for instance, looking at the roof with binoculars and not lifting up carpets," she says.
If buyers want to be 100 per cent certain of the condition of the property they should call out experts to assess the major potential problems, such as the plumbing and electrics, says Ms Kellet – the cost of which should only amount to a fraction of the overall homebuying fees.
A more thorough alternative is a full structural survey. Although this is usually necessary only when the property is old, listed or just in poor condition, it could also be sensible when buying a flat within a large block, says Mr Leaf. "You may only be buying a small studio flat but could still be jointly and severally liable for the cost of mending or replacing a very large roof," he says.
Learning as much as possible about the property is also key. While sellers don't have to offer any damning information, they are legally obliged to tell the truth when a question is put to them. The most common questions are set down on a seller's property information form (Spif), which is passed from the seller's to the buyer's solicitor. The Spif sets down legally worded potential issues, such as boundary features, flooding and past disputes with the neighbours. "If a seller gives an inaccurate answer to one of these questions and the buyer loses out as a result, they can take action for misrepresentation," says Paul Marsh, a property lawyer and past president of the Law Society.
If you have any specific questions that are not featured in the Spif, they will have to be presented through your solicitor, and the answers recorded in writing, to be legally binding. "Potential questions will depend on what is important to you. For example, are there restrictions on what colour I can paint the outside of the property or can I keep my bike on the balcony?" says Mr Marsh.
First-timers should not rely entirely on the local search. This is related to the specific property, so permission for even major building work taking place around the corner won't be shown. Talking to neighbours will probably be more enlightening.
The internet has made it easier than ever for buyers to research a property's history. Zoopla.co.uk, for example, will give an estimated value for a specific address based on house price movements and what the home last sold for. Upmystreet.com offers information on everything from crime and transport to schools. You can check the likelihood of the property flooding at the Environment Agency's website at environment-agency. gov.uk/flood.
Many experts believe that these measures should be put into place regardless of HIPs. "The information in a HIP didn't count for anything and only bemused first-time buyers anyway," says Mr Marsh. "Many buy leasehold property, and the lease within the pack averaged 46 pages long, which is completely bewildering."
In some ways, new buyers may have even benefited from the scrapping of HIPs, says Mr Leaf at Rics. "Now sellers at the cheaper end don't have to fork out for packs, they will be more inclined to put their properties up for sale. This means more starter homes on the market." However, some agents suggest that the cost of the packs deterred people from putting their properties on the market just to see what it would fetch. The end of HIPs may lead to more sales collapsing early.
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