Certus Mortgage Solutions: Home Information Pack Update August 2006

Pressure on the government to scrap the controversial home information packs (Hips) reached a peak this week as the National Association of Estate Agents (NAEA) called for them to be dropped altogether. The call follows the recent decision by ministers to make the home condition report element of packs voluntary rather than compulsory.

Peter Bolton King, chief executive of the NAEA, says he thinks the government should work with the industry to find other ways of improving the home buying and selling process. But the Association of Home Information Pack Providers (AHIPP) remains committed to their success.

What is a home information pack?

From June 1, 2007 homeowners or anyone selling on their behalf must have a HIP ready when the property goes on the market and give copies of the pack to prospective buyers who request them.

The report must contain an energy certificate indicating how expensive the home will be to run, title documents and the results of local authority searches.

For leasehold properties, it must also include a copy of the lease, the most recent service charge accounts and receipts, building insurance policy details and information about the landlord management company.

But since last month, the Hip does not contain the home condition report, a detailed survey of the property which would have been conducted by specially trained home inspector.

Why did the government change its mind its mind about making this part compulsory?

The government cited concerns that there would not have been enough inspectors to cope with demands for the home condition reports. Plans to train 7,500 inspectors are behind schedule; at the end of last month, only 232 inspectors have completed their training.

Estate agents, chartered surveyors and mortgage lenders said that the surveys would lack creditability among buyers, and that the cost of the packs would deter potential sellers, causing a slump in the property market.

The Council of Mortgage Lenders has told ministers that many lenders would not be able to rely on the reports for valuations until 2008-9, meaning sellers would still have to pay for separate mortgage valuation survey.

What state are Hips in at the moment?

From June next year, sellers will only be obliged a so-called “half-Hip” at an estimated cost of £200. This will include local searches and an energy performance certificate, which must be introduced under European law. The home condition report element will be voluntary.

What does the energy efficient part of the pack involve?

From June 2007, all homes in the UK must have an energy efficiency rating before they can be sold whether this is included in the HIP or not.

The government says this move, which is in line with European agreements, will evaluate the current and potential energy efficiency of each home, giving a rating A to G. The report will also list measures the home owner could undertake to improve the rating.

How is the introduction of Hips going to help homeowners?

These plans are designed to ensure that buyers and sellers are best prepared and have as much information as possible from the start of the process. It is supposed to help people to secure mortgages faster and reduce the delays that can lead to gazumping and problems in chains.

Will the new system speed up transactions?

The government says a typical transaction takes eight weeks from offer acceptance to exchange of contracts. It says the amount of time saved would depend on factors such as whether the transaction is part of the chain but argues there is no reason why the average time cannot be halved.

What about the cost of the packs?

The cost of preparing a full pack including a home condition report, for an average home is expected to be about £600. But the government’s decision to make home condition reports voluntary will cut the cost for those sellers who do not want to include this by at least £300. Sellers will pay for Hips but the industry says this be balanced out because the vast majority of sellers are also buyers.

What stage are we at now?

AHHIPs this week announced the first stage of its regional roll-out of the home information packs and home condition reports.

Roll-out will commence in six locations across the UK from November 6th and will involve a robust and independent testing of packs across the market. The locations are Southampton, Newcastle, Northampton, Bath, Huddersfield and Cambridge.