What are Home Information Packs (HIPs)?
The Government wants HIPs to bring together, at the start of the home buying and selling process, important information which, at present, is collected piecemeal in the weeks and months after an offer has been accepted.
The planned launch date of these packs is June 2007.
Sellers of residential property in England and Wales, or their agents, will have to make a HIP available before a home is marketed, and make a copy of the pack available to prospective buyers on request.
Similar packs are used in other countries, notably Denmark and New South Wales in Australia, and work well.
There are also several voluntary schemes operating successfully in England and Wales, with estate agents and surveyors providing seller's packs to their clients.
Benefits of the Home Information Pack
Home information packs should help improve the home buying and selling process. They will:
- provide key information needed by home buyers and sellers at the start of the process, enabling people to be better prepared before they make decisions and negotiate terms
- supply information in an understandable, user friendly format
- reduce frustration and stress
- cut wasted costs by reducing the high rates of failed transactions
When They Will Be Used ?
Home information packs will apply to most residential property sales of homes marketed for owner occupation.
A home information pack will not apply to:
- Non-residential property
- Mixed commercial and residential property
- Sales of tenanted properties
- Leases of less than 21 years
Key Documents
The contents of the home information pack will be set out in regulations. The Government is consulting with consumer representatives and key industry stakeholders on the final detail, but the pack is likely to contain the following documents and information:
- terms of sale
- evidence of title
- replies to standard searches
- planning consents, agreements and directions, and building control certificates
- seller's property information form
- warranties and guarantees
- a report on the physical condition of the property - a home condition report - including an energy efficiency assessment
- the lease
- recent service charge accounts and receipts
- current and planned future works
- insurance for the building and receipts for premiums
- regulations made by the landlord or management company
- memorandum and articles of the landlord or management company
Reducing Time
It is hoped that the introduction of HIPs will reduce transaction time. It currently takes about 8 weeks between acceptance of offer and exchange of contracts in England and Wales compared to an overseas average of 4 weeks. They should:
- shorten the period of uncertainty between offer acceptance and exchange of contracts
- reduce the risk of terms being renegotiated due to late disclosure of information
- help the parties commit more quickly to the transaction
- bring transaction time more into line with the overseas average
Reducing Transaction Failures and Costs
It is also hoped that HIPs will cut the number of transaction failures and wasted costs.
The current process of buying and selling homes currently costs consumers and industry at least £1 million a day in wasted costs. Currently, more than one in four transactions fail (28%). Of these, 43% are because of survey or valuation findings (source: ODPM research). HIPs will substantially reduce the number of failed transactions because the information which usually causes transactions to slow down or fail will be known at the outset, not halfway through.
The average cost of producing a HIP will be about £635, but this is not an additional cost. Most of the items in the pack already have to be provided at some stage under the present system. In many cases people will be able to defer these costs until later, as is usually the case with estate agents' fees now.
Increasing Consumer Satisfaction Up to 9 out of 10 consumers are dissatisfied with the current system of buying and selling homes (based upon Government figures).
HIPs should increase customer satisfaction because they will reduce:
- costs
- transaction failures
- the time it takes to buy and sell a home and the stress involved in the home buying and selling process
As a home buyer and seller you should take note of the arrival of HIPs and be careful about the supplier you choose to provide your pack.
If your line of business is in residential property, then now is the time to talk with us about being prepared for the countdown to HIPs and the effect they will have on your business.
