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HIPS - the dabate rages on

publication date: May 26, 2006
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GOVERNMENT: 24th May 2006

Is Government getting pushy?

“Property businesses are being encouraged to sign up to take part in a dry run for Home Information Packs (HIPs) to speed up the benefits for consumers” - Housing Minister Yvette Cooper said on 24th May.

The Minister warned that some estate agents and other professionals were in danger of being left behind as innovative organisations take the lead in transforming home buying and selling to provide a better service for consumers.

Yvette Cooper said, “Over 150 organisations have said they are interested in joining the next stage of the dry run this autumn and 49 have already signed up. It’s an invaluable opportunity to test and improve the service they can offer to consumers.”

So far, so predictable but do we detect an element of government ‘bullying’ in Ms Cooper’s next comment:

“The level of positive interest and involvement we are receiving so early on in the HIP initiative should worry those who are dragging their feet. Miss this moment and they risk being left behind by a fast changing market.

The cost of a HIP will be set by the market - not Government. Adding up what the market is currently charging for existing products similar to the components of a Pack suggests a cost of around £600-700 plus VAT, but market watchers are predicting that costs will be driven down by competition.

Competition will have a big impact on the market - ASDA, for example have just announced they are entering the estate agency market and their offer includes a free Pack. As we move towards the dry run, consumers will demand competitive offers from their suppliers - industry must rise to this challenge.”

OPPOSITION:

23rd May 2006 The Tories are concerned…

Shadow Housing Minister, Michael Gove, has tabled an Early Day Motion in Parliament expressing concerns about Home Information Packs. MP’s are invited to sign up to the EDM if they support the content of it.

EDM 2240: Introduction of HomeI nformation Packs 23.05.2006

“That this House expresses concern over the introduction of home information packs from 2007; notes that industry experts have advised that home information packs will add up to £1,000 to the cost of buying an average home and duplicate the ongoing need for a valuation or structural survey; believes that they will discourage potential sellers from putting their homes on the market; notes that smaller solicitors and estate agents may be adversely affected; observes that the Government will benefit from a potential £110 million VAT windfall from the packs and that the Home Condition Register could be used to conduct a council tax revaluation by stealth; questions the lack of a proper dry run and whether sufficient home inspectors will be properly trained by 2007; and calls on the Chancellor of the Exchequer to push for their implementation to be delayed or cancelled in order to protect the stability of the housing market.”

THE NAEA:

25th May 2006

New NAEA President, Charles Smailes, comments: “There is no doubt that making information available about a property up front to a potential buyer is a good thing. The existing ‘HIP’ trials, or pre-sellers surveys, are proving successful in many cases because they provide a small amount of uncomplicated information, which is easy for potential buyers to digest. This gives the buyer the confidence to make an informed offer and means the sale is less likely to fall through.

“In reality, however, HIPs will be long documents that hold around 100 pages of complex, technical information which is presently translated by solicitors during the sale process. This level of information is not required at the beginning of the transaction and to delay putting a home on the market until the HIP is put together simply does not make sense.

“Furthermore, where HIPs introduction may initially help firsttime buyers, it will hinder first-time sellers. If first-time sellers are deterred from moving because of the extra cost of the HIP, there will be a shortage of first-time buyer properties and this could lead to inflated prices. The consequence of HIPs in the longer term is that they will hinder, rather than help, first time buyers.

“Despite the fact that estate agents could stand to benefit commercially from the introduction of HIPs, the majority of NAEA members are against it because they feel it simply won’t work. The HIP will merely shift existing delays to the beginning of the transaction. Meanwhile, the most serious problem – that of property sale transactions falling through – isn’t even being addressed by this massive change.”

THE VOICE OF REASON?

As an estate agent, it a fair assumption that you do not support the introduction of HIPs.

Despite the best efforts of the anti-HIP lobby, resigned acceptance to HIPs appears more commonplace. Both sides appear polarised making issue resolution appear intractable. Despite the concerns of the property industry, the legislation is fixed and there is little that can be done about it.

Given the direct impact that HIPs will have on agents’ businesses, the anti-HIPs arguments are understandably emotive. On closer inspection, the concerns raised may not have such a major impact as some fear.

Most in the property business acknowledge the system is not perfect and improvements should be made. Agents themselves have promoted regulation as a way to improve performance. For the public, opinion polls support more information about the property being made available in advance to improve the process.

The anti-HIP lobby has raised the following key objections.

HIPs are expensive, costing sellers an additional £1000 or more.

Most costs are already paid today in some form, by either the seller or (mostly) the buyer. It is recognised that most sellers are buyers, so would incur most of these costs anyway. The only additional costs are the Home Condition Report, which, for the majority of properties may come down to about £250 in the future. Therefore, whilst there will be additional costs, they will not be as high as projected. For sellers that are not buying, there will be a cost, but the consistent increase in house prices make such amounts relatively small.

The contents of a HIP will often go out of date.

The legal content will usually be accepted up to 6 months old, sufficient for most correctly-priced properties to sell, even in a slow market. As agents are seeing HIPs accelerate the sales process, average market times will be shortened, reducing this risk further.

There will be times where the legal content is not be accepted by a buyers’ conveyancer because it is out of date and they will update the information as they do today. The implication of the validity of the HCR is less clear and will depend on whether the lender will rely on it or not.

HIPs will stop day one marketing which is anticompetitive.

As an agent cannot market a property without a HIP, it is claimed that this puts buyers with houses to sell at a disadvantage, compared with those without properties. As an agent you know that a buyer without a property to sell is usually more attractive anyway; the capability of a buyer to sell their property will always affect their profile, HIP or no HIP.

Agents do need to get properties onto the market quickly to attract the most buyers. But all agents are in the same position. Everyone will need a HIP and agents will still have to compete against those that market a property without a HIP in the same way as they do today with those that flout the law in different ways.

The Home Condition Report (HCR) is an expensive waste of time and money.

The report is identified as the major issue with HIPs, with claims that as buyers won’t rely on it, it’s an expensive waste of time. However, most buyers don’t rely on surveys today anyway. For most buyers the HCR will meet their needs for more information about the property that they didn’t have to pay for.

The lack of a valuation in the report is seen as a fundamental flaw. However, if a valuation was included, conflict of interest would be cited. Mortgage lenders have been caught out in the past by not carrying out their own valuation survey and they are unlikely to make the same mistake again. Most buyers pay for valuation surveys today, so this will continue to be the case, and does not add cost.

HIP providers will make large profits from their introduction.

Criticising companies looking to make money from providing a service is questionable. It is the same as criticising agents for making money from “just selling houses”. With Asda moving into the estate agency market, payment for quality service has never been higher on the agenda. Providers will indeed make profits from HIPs, but they are providing a service that the public have asked for.

HIPs will reduce the number of properties on the market increasing prices.

The matter of the elimination of the “speculative seller” has lead to estimates that the market will be reduced by 30% leading to inevitable price increases. Undoubtedly speculative sellers do contribute to the market, but the proportion of real business coming from such sellers is more difficult to ascertain. If they are eliminated, which is not certain, it raises the question of the impact of the impact of greater efficiencies brought by having more qualified sellers on the market.

Conclusion

Claims by the anti-HIPs lobby need to be in carefully considered and weighed up against the benefits that agents are seeing from the use of HIPs. The arguments for and against HIPs are perhaps not quite as clear as some may have first thought.

Peter Ambrose, director, The Partnership www.thepartnershiplimited.com

NAEA HOMELINK NEWS

OneSearch Direct to provide surveys for NAEA Homelink’s HIP

OneSearch Direct, a HIP component provider, has announced an exclusive agreement to provide the pre-sale survey element of the National Association of Estate Agents (NAEA) Homelink Network Home Information Pack (HIP).

The contract will see OneSearch Direct’s survey division – OneSearch Surveys – supply a key component of NAEA Homelink’s HIP, produced in conjunction with MacDonald Dettwiler and Associates Ltd (MDA) and distributed to NAEA Homelink’s 750 members.

“This is a significant agreement for OneSearch Direct and reflects our growing reputation as partner of choice for fulfilment of HIP content. The pre-sale survey - or Home Condition Report as it will be known - is a vital part of the HIP and our unique panel management system ensures a fast efficient service for both estate agent and seller alike,” said Ronnie Park, Managing Director, OneSearch Direct.

Peter Bolton King, Chief Executive of the National Association of Estate Agents said: “The Homelink side of the Association is pleased to have come to an agreement with MDA to include a One Search Direct Home Condition Report and we look forward to working closely to provide our members with the service levels they require.” HOMELINK

TRAINING HELPS SELL THE SERVICE

With all the controversy over HIPs and the components such as the Home Condition Report (HCR) receiving negative reaction from a large percentage of Estate Agents it’s no surprise that we find the Government and the industry in an adversarial position. Although the Department of Communities and Local Government (DCLG) say they are providing in-depth information for industry members, the key area where they have contributed nothing is in how to deal with the cultural change.

For the last five years, members of NAEA HomeLink have already been providing the HomeLink Pre-sale Survey to clients. In that time HomeLink members have found the benefits to be an increase to their bottom line, reduced fall through and a more committed seller. If you were to ask any agent using the service what the biggest obstacle was to introducing the service they would probably admit that it was their own perception in how sellers would receive it.

That is why NAEA HomeLink provide their members with a free training session for their team on not only the service but, more importantly, on how to change their old perceptions to improve their sales. Keith Bridgen, Managing Director of UK Direct Property Services in Sittingbourne, Kent believes that the training was instrumental in their success with the HomeLink Pre-sale Survey. “The HomeLink training made me realise how my pre-conceived ideas on how the seller would feel were actually affecting how I sold my company. After the training I found my clients very receptive to providing information about their home to buyers”.

Maybe the government should realise that an alternative to a forced solution could, in fact, be a structured training programme of change to encourage agents to make the cultural shift and provide their own market led solution.

NAEA HomeLink will be running workshops throughout England beginning in July. For information on a workshop in your area please contact Shelley Brown on 01926 417792.

HIPs could reduce East Lancashire housing market by 25%

The East Lancashire property market could be slowed down by up to 25 per cent if proposals to introduce Home Information Packs get the go ahead, says a local conveyancing solicitor.

MP Ian Liddell-Grainger presented a Bill in Parliament recently against the introduction of HIPs. Graham Ireland, Haworth & Nuttall conveyancing partner said:

“Ian Liddell-Grainger voiced the concerns of a large number of professionals involved in the conveyancing industry, with the key concern being the destructive impact HIPs will have on the housing market, not only here in East Lancashire but nationally.

“People will not be able to put their houses up for sale to test the market without first paying out up to an anticipated £1,000 for a pack. This will put many people off and will see a significant reduction on the number of houses for sale, which in turn will have an impact on the local and national economy.

“HIPs are bound to result in there being less houses available to buy which in turn, in my view, is likely to lead to an increase in property prices. First time buyers find it increasingly difficult to find affordable housing as it is. I expect HIPs to make the situation worse for them.

“Regulations setting down the details of HIPs are due to be heard in Parliament in June, but this Bill will show MPs the many weaknesses in the Government’s case for HIPs and it is likely to cause a fierce debate.”

First Local HIP for Torbay

Mashford Estates in Paignton, Devon, have prepared their first live HIP. The provider to Mashford Estates is Localhip.

John Moss, sales manager for Mashford Estates says: “As an independent local agent, we are delighted to have this early opportunity of being involved with a live HIP. Ian Mashford and I have attended many HIPs seminars over the past few months with a view to understanding the requirements needed for HIPs and preparing our business by implementing the procedures we will need with HIPs become mandatory.”

Paul Raine, Localhip business director is also happy: “We are delighted to be providing the first ‘live’ Localhip pack for a property in the Torbay market. We are confident that many other local property owners will want to look at the marketing advantages of selling their property with a HIP now and not waiting until it becomes mandatory in 2007. We know buyers really value the condition report prepared by a Chartered Surveyor and also the Searches on which they can get an immediate legal opinion before they make an offer – without incurring any costs. For the seller, it makes sense to provide as much up-front detail as possible to the buyer to ensure a swift and trouble-free sale following acceptance of an offer.