A row over the role of valuations is threatening to undermine the planned shake-up of the property market through home information packs. The Government wants to introduce the HIPs in June 2007 but lenders are digging in their heels against the proposals.
HIPs, or sellers' packs, have been designed to ease the burden on buyers, particularly first-timers, by shifting the responsibility for initiating and paying for surveys and searches on to sellers. The Government's argument is that this will speed up the house-buying process and make chains run more smoothly.
At the moment, any structural problems with a property emerge after the buyer has shelled out for a survey and other fees; if the deal falls through, everybody's time, and the buyer's money, has been wasted.
By speeding up the process, it is also hoped the packs will eradicate gazumping - where you can spend thousands on surveys and searches, say, only to find that another buyer has come forward in the meantime.
It is expected that HIPs will cost between £600 and £1,000 to compile and, as things stand, they will include evidence of titles, local authority searches, guarantees for any work carried out on the property and a Home Condition Report. The HCR is intended to highlight any potential flaws in the property.
But critically, a property valuation is not required for the proposed packs.
The Office of the Deputy Prime Minister (ODPM), the government department behind the plans, insists they won't be needed. "Lenders are telling us that, in the majority of cases, they would use the HCR as the basis of their valuations - reducing the need for expensive on-site inspections," says an ODPM spokeswoman.
But the Council of Mortgage Lenders (CML), the trade body, counters this, warning that many homebuyers won't be able to rely on the HIP - and will still have to pay for a separate valuation to satisfy themselves and their lenders.
"The HCR doesn't contain a valuation or important information needed to determine a valuation, such as if the property is on a busy road," says a CML spokesman.
Separate inspections will still be required by lenders where they are advancing at least 80 per cent of the property's price. Figures from the CML show that 40 per cent of all mortgages fall into this category - most notably among first-timer buyers.
"Many people will also want to commission their own valuations or surveys before proceeding - which will make the packs partly redundant," says Nick Gardner of broker Chase de Vere Mortgage Management.
At its most basic, banks and building societies need to conduct valuations to give some assurance that they aren't lending too much. "They want to ensure they will get their money back, and that if a borrower defaults on the mortgage, [they] will be able to sell the property and recoup their losses that way," says Melanie Bien of broker Savills Private Finance.
The CML believes that, at least initially, the HIP and HCR will not be enough for this purpose.
Elsewhere, the National Association of Estate Agents has voiced concerns over the "almost total lack of knowledge and understanding" among consumers about HIPs.
It is also worried that some of the information will have a limited shelf life. "Unless a buyer is found within a set period, the seller might have to pay to update parts of the pack," says chief executive Peter Bolton King.
There are also worries over whether the packs will be ready for the "go-live" date of 1 June next year, although the ODPM says a timeline will be published "shortly". A dry run for the packs was originally scheduled for July, but this is now being postponed until later in the year.
'The packs are a good idea'
Melanie Hibbert, 42, from Greenford, west London, is using an HIP to sell a two-bedroom flat she bought in Liverpool during her student years - in the hope it will speed up the sales process.
"I moved to London five years ago but kept the property and let it out," says Melanie, a GP. "The time has now come to sell."
Her estate agent suggested she take part in a trial of the new packs being run independently of the Government by Easier2Move, an online conveyancing company.
"The estate agent was prepared to put the pack together for me," she says. "He was also happy to waive the fee as part of the trial."
Melanie's property has been on the market for a week - at £125,000 - and she says that if she finds a buyer in a week, this will be a "good result".
"I'm hoping that if people are looking at flats and see something comparable to my flat, then the fact that the work has been done and the pack has been compiled could tip their decision," she says.
"I think the packs are a good idea and worth the cost."Reuse content