Hip, hip hooray for home information packs?
Opponents of home information packs (Hips) were defeated in the House of Commons yesterday, and the packs now look set to become compulsory for house sellers from next month - notwithstanding a legal challenge against their introduction by the Royal Institution of Chartered Surveyors.
Opponents of home information packs (Hips) were defeated in the House of Commons yesterday, and the packs now look set to become compulsory for house sellers from next month - notwithstanding a legal challenge against their introduction by the Royal Institution of Chartered Surveyors. But what exactly is a Hip? Personal finance writer ADAM AIKEN asks the questions.
What is a Hip?
A home information pack, some-times described as a seller's pack, is intended to provide prospective buyers with all the basic information they need about a property before they buy.
Hips are due to become compulsory in England and Wales from next month, although when a property is sold privately to a friend or relative, a Hip will not be required.
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Why have Hips been introduced?
Peter Hogston, of Hip2go.com, a Norfolk-based software supplier for high-street Hip providers, said: “Government research has found that a huge amount of money is being wasted each year by homebuyers who make offers on properties, pay for surveys, searches and so on, and then discover problems which cause sales to fall through.
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“The government believes that if the seller has to provide the necessary information about the physical and legal health of the property upfront, fewer transactions will fail.”
What will a Hip contain?
An energy performance certificate will give the property a rating of A-G, which will be determined by factors such as carbon dioxide emissions, hot water, lighting, heating, insulation and double-glazing.
But prospective buyers will also be given information regarding the potential of the property - telling them, for example, that the energy performance could be improved if certain work was carried out.
A pack will contain a sale statement - containing basic information about the property such as where it is - and evidence of title. A Hip will also contain searches, looking at things such as property boundaries and planning issues.
But last year, the government abandoned its plans to include compulsory home-condition reports within Hips. These basic house inspections were to have been non-invasive - in other words, an inspector would have a look at the walls of the house but would not be able to start poking around them.
Sellers remain free to include these reports, however, although in their current form they do not negate the need for a survey to be carried out.
Mr Hogston said: “The Council of Mortgage Lenders was against home-condition reports, as was the Royal Institution of Chartered Surveyors.
“I actually don't think it was a bad thing they were made non-compulsory because they needed to be a little bit more robust. They were of about the same standard as basic valuation inspections.
“But I think the government will bring them back and make them stronger next time.”
Advocates of Hips believe a more robust form of home condition report could one day replace the need for a survey to be carried out.
What will they cost?
Chris Hall, the Norwich-based past president of the National Association of Estate Agents, said the confusion over the cost of Hips was one of the biggest problems.
“The government will tell you that they will cost between £300 and £600, but there have been all kinds of figures bandied about,” he said.
“I have heard £50 and £1,000 mentioned. The government doesn't actually know how much they will cost - it says the market will decide.”
Mr Hogston, meanwhile, said some lenders and estate agents may offer them for free, but sellers should nevertheless shop around because it would be worth comparing the overall cost of the service being provided.
“I would reckon that, in this region, a typical Hip for a freehold property will cost about £300,” he said.
How will Hips affect sellers?
There are mixed views on this. Hips will mean increased costs for sellers and it has been argued that this could discourage some people from putting properties on the market.
But the government would argue that as most sellers go on to purchase another property, their extra selling costs will be offset by lower buying costs because of the aforementioned hope that they will be able to spot problems at an earlier stage.
Mr Hall said there were two important implications for sellers.
“Having a Hip is going to cost the seller, but the other thing that is going to happen is it means there will have to be a commitment,” he said.
“Until now, people have been able to test the water and put the house on the market without it costing a penny. A far as I know, all estate agents operate on a no-sale, no-fee basis, but with a Hip they will have to pay upfront. You won't be able to put a house on the market without a Hip.”
How will Hips affect buyers?
On the positive side, the government expects Hips to speed up the house-buying process. First-time buyers,
in particular, will benefit from
lower buying costs and it is they who tend to keep the property market moving.
In other countries where Hips have been introduced, such as Denmark, they did not have a discernable impact on the market.
Critics say the cost of Hips could be passed on in selling prices, with buyers ultimately footing the bill.
But Mr Hall said: “There is an element of good in this in that when a prospective buyer makes an offer, it's an informed offer.
“Having said that, there is no home-condition report included in it, so the buyer will still have to have a survey carried out.”
The Chartered Institute of Housing said first-time buyers and the environment would be the biggest winners from Hips.
“We support any measures that make the costs and risks of home ownership more bearable,” said Sarah Webb, the institute's deputy chief executive.
“Apart from the upfront costs of surveys and searches that are difficult for first-time buyers to shoulder, there is a real need for homebuyers to know exactly what they are signing up to.
“The energy performance certificates that form part of a Hip are crucial to making sellers think more about the effective insulation and general upkeep of their property, which in turn will help meet climate change targets.
“If you were buying a fridge, you would expect to know its energy rating, so you should with a house.”
Mr Hall, however, remained sceptical.
“Buying a property is not like buying a fridge,” he said.
“It is one of the biggest things you ever do, and you don't buy it purely on the basis of how many stars it's been given for energy efficiency.”