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Mortgages. Big changes in the buying and selling of houses.
by Michael Challiner
In mid summer 2007 everyone who wants to sell a property will have to
prepare a Home Information Packs before they put it on the market. This
article explains what the Packs will have to include what they'll cost -
and whether we expect them to work!
On June 1st 2007, the law concerning the buying and selling of houses
changes. From that date onwards everyone who wants to sell a house has
firstly to prepare a Home Information Pack (HIP).
And if you don't? You're in the frame for a £200 fine! It's also
probable that estate agents will also insist on you having the Pack
ready by the time they put your home on the market. Certainly, buyers'
solicitors won't do a thing until you provide the Pack. All in all, you
don't have an option – you'll have to go along with the law.
So what has to go in the Pack?
The Government has yet to confirm the final details but at the moment,
it proposes that your Pack must include the following information:
Search results from H.M. Land Registry
Replies to anticipated initial enquiries – these are the currently
raised by the buyer's solicitor
Copies of any planning, listed building and building regulations
consents and approvals. If you don't have these, you'll need copies from
your Local Planning Authority
And for new properties, copies of building warranties, electrical test
certificates, and any other warranties or guarantees attaching to the
property.
A draft sale contract
It is also proposed that the Pack should contain two items currently
obtained by the buyer:
A professional independent survey of the property called a Home
Condition Report. This is expected to be mid-level survey like the
current Homebuyer Survey and will offer far more information than a
lender's valuation report – but the Government has yet to announce the
details. However, it seems likely that the Report will have to comment
on the property's state of repair, it's energy conservation efficiency,
the number and type of rooms and parking arrangements. Both buyers and
sellers will have a legal right to rely on this Report and there'll be
no need for buyers to obtain their own reports or surveys. We expect
lenders to make their own valuations as they do now, but they'll want to
maximise the use of the new Home Condition Report to improve their
valuations and cut costs to consumers.
Replies to searches made of the Local Authority
In addition, if the property is leasehold:
A copy of the lease
The most recent service charge accounts and receipts
Details of the building's insurance and receipts for the premiums paid.
And finally, any regulations made by the management company or landlord
And how much is all this going to cost?
The Government believes that the Pack is likely to cost sellers around
£825 including VAT. But they claim these are not additional costs.
The Government make the following points:
The HIP transfers responsibility for obtaining local searches and a home
condition report from the buyer to the seller. But since most sellers
are also buyers, the costs will usually be balanced out by corresponding
savings and benefits. We agree.
The Government also say that most sellers won't have to pay up front for
the pack. We very much doubt that. Someone is going to have to pay and
we doubt whether solicitors or estate agents will pay upfront on behalf
of the seller. The seller is going to have to fork out as soon as the
property is put up for sale. Some commentators predict that this will
act as a brake on properties coming to the market. We think that it will
dissuade all but the committed sellers – those simply wanting to test
the market will probably back off. In practice this will be a good
thing, but we agree that it will reduce the amount of property on the
market.
The Government believes that market forces will keep down the prices for
preparing Home Condition Reports and Home Information Packs. We aren't
so confident about this. It very much depends on how estate agents and
solicitors adapt the pricing within their fee structures. Expect some
very creative pricing, especially from estate agents! It's certainly
going to pay you to shop around for a good deal.
Every year around 30% of agreed house sales fall through. The cost? At
least £350 million each year! It's the Government's hope that the Home
Information Packs will greatly the numbers falling through and avoid
much of these wasted costs. We won't argue against that but the National
Association of Estate Agents disagree with us.
They think the new Packs will simply shift the existing problems from
the middle of the selling process to the beginning. Other commentators
believe that HIPs will do nothing to reduce gazumping or indeed, the
tricks employed by some of the less reputable estate agents.
Our general view is that if the packs help to identify problems before
everyone starts incurring cost and instructing solicitors, then surely
that's for the better? We say better to have problems out in the open at
the start than stumble upon them half way through the selling process.
We just hope that all these changes in the buying and selling houses
don't result in a bureaucratic nightmare. Over 7,500 inspectors will be
needed to carry out the new Home Condition Reports and getting them all
trained, qualified and registered in time may yet prove to be that fly
in the ointment!
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