Should we fear home information packs?

As criticism of home information packs grows, Penny Jackson picks through the pros and cons
Click to follow
The Independent Online

In just over a year, the home information pack (HIP) will be part of every property transaction. The Government insists it will be better for the public - but criticism is mounting. Last week, the Conservative Party said it will oppose its introduction, and research by the National Association of Estate Agents shows that the public is beginning to have doubts.

What is a hip?

The home information pack contains all the legal documents relating to a property (such as the legal title and searches) plus the new home condition report (HCR), a survey of sorts. From 1 June next year, the HIP will be mandatory - and will cost about £600. Vendors may have to wait up to 14 days while it is prepared before they can sell. Try selling without it and the fine will be £200 - each time.

Why does the Government think hips will make buying and selling easier?

It claims HIPs will shorten the time it takes to sell because there will be transparency from the start, especially as to a property's condition. The Government says that failed transactions cost consumers £1m a day, and that a quarter of all sales fall through after an offer has been accepted.

Where is the criticism coming from?

The National Association of Estate Agents (NAEA) says its research shows that 95 per cent of people are unhappy about paying more than £500 for the pack and 39 per cent think it should be free. The Law Society wants to see HIPs carry a health warning to buyers; it fears that agents and sellers could misuse the status of the pack to put pressure on buyers. It warns about costs and the extra time it could take to prepare complex properties for sale, particularly leasehold ones.

Last week, the Conservatives recruited Kirstie Allsopp, presenter of the TV programme Location, Location, Location, to their anti-sellers'-pack campaign. She says: "The problem with these sellers' packs is that first-time buyers will be seriously affected. They're the ones most likely to be nervous about this huge financial commitment, and lack confidence in the survey. They'll end up having to get their own valuation done, as the Council of Mortgage Lenders has even said that lenders won't accept the survey in the sellers' pack."

Is there any evidence that sellers' packs work?

Some estate agents already encourage clients to use them and cite their success - but that is a voluntary system. The objections are to its mandatory introduction at the start of marketing - not the HIP itself. We may recall that HIPs were created to solve the problem of gazumping - and they might cut down on this as so many people have the same information to hand.

Who pays for the hip?

The seller. Officially, the "average" cost is likely to be £600-£700, but for larger houses or properties with complicated leases or titles, the bill could run to thousands of pounds. Remember: you have to pay even if your property fails to sell (although there will be insurance schemes).

How might hips affect the market?

Well, for a start, toe-dippers might well be frightened off, as will impulse buyers - and there could be a sudden drop in the supply of properties. NAEA research shows that 57 per cent of owners might try to sell before next June and 73 per cent would think twice about selling after HIPs.

Is the Government right when it says that 40 per cent of sales collapse because of a property's condition?

It arrived at the figure by lumping together failed lenders' valuations and surveys commissioned by buyers. The source is a 1998 study, which the Government admits is out of date.

What is the most contentious element?

The Home Condition Report (HCR). This is a box-ticking exercise that will mark a property from 1 to 3 - good, bad or grim - on everything from windows to energy ratings. It's similar to the current Homebuyers Survey but not as comprehensive as a Building Survey. It also turns the principle of "buyer beware" on its head. There are concerns about this one-size-fits-all approach. Older houses or those of an unusual construction require expertise beyond that of many home-inspectors, and if they get it wrong, they could scupper a sale or give false confidence to a buyer. The HCR, unlike surveys, will not offer advice on remedies or costs.

Who are these home inspectors?

Many are expected to come from the RICS (Royal Institution of Chartered Surveyors), but by no means all. It is doubtful whether enough will have been trained up by next year. A certification body has yet to be agreed. The RICS, which is broadly supportive of HIPs, has approved the format of the HCR.

Will the hcr be accepted by everyone?

Not all buyers will accept the HCR (currently 20 per cent of buyers commission their own surveys) and the question of insurance hangs heavily - otherwise costly litigation looms.

What about a dry run?

The Government says that a full dry run will take place later in 2006, allowing it to test all aspects of the process. Critics say it is far too late and fear the Government will run the trial into the launch of the mandatory scheme with no time for changes.

Could the government change its mind?

Unlikely - it is determined to introduce HIPs. It denies that the HCR is a way of delivering the EU directive on energy efficiency in our homes, which comes into force next year. But this is a new industry in the making, with big commercial opportunities. Firms are already investing heavily in all aspects of HIPs.