Unless you have been enjoying your annual Summer holiday in Outer Mongolia, it is likely that you will have noticed the ‘HIPsteria’ that seems to be taking place.
Yes, after innumerable months, various arguments and a huge amount of column inches, Home Information Packs (HIPs) are a reality and, as of 10 September, will be a legislative requirement for houses with three bedrooms and above.
So is this a good thing? Well, it rather depends who you are talking to. If you ask Kirstie Allsop of Location, Location, Location fame, they are due to cause the ruin of Western civilisation and may just be a greater scourge than the Black Death.
However, if you ask the ever-optimistic Paul Broadhead from the Association of Home Information Pack Providers, then you might believe that HIPs will single-handedly rescue the UK market from ruin. So who should we believe?
The lenders’ point of view
I think that perhaps we should consider the lenders point of view. After all, we are the organisations who will providing the financing to purchase the property, so any changes to the process will have a direct impact on us. So lets take a look at HIPs through a lender’s eyes.
From our point of view, these products could have a hugely positive impact on the house buying process if they actually stop property transactions falling through. Yes, I admit that there will always be sales that falter due to reasons as diverse as death in the family, a house having a bad aura or – more simply – a change in financial circumstances.
However, these packs should signal the end to transactions falling through due to problems uncovered by local searches or evident in the leasehold agreement. How many properties fall though due to this right now is impossible to tell, but I expect that there are quite a number.
In addition, HIPs should speed the process up. Both lenders and buyers alike are often kept waiting as someone in the chain undertakes searches and potentially negotiates for fixtures and fittings. The introduction of HIPs should shave days, if not weeks off this process and a quicker more efficient transaction will provide cost savings for all concerned.
Personal searches
One lender issue that has hit the headlines in this sector is the industry’s stance on personal searches. Just to recap quickly, in the conveyancing process it is necessary to have a copy of a selection of documents from the local council. These can either be obtained by getting a personal search agency to sift through the records – often faster, but more expensive – or pushing the council to do it on your client’s behalf.
The main difference between these searches is the accountability. With a council search, the local authority is accountable but with a personal search, generally this fell under the purchaser’s solicitor’s indemnity insurance.
However, now that the onus has shifted to the seller, this has put some strain on the process and raised the question whether a solicitor would be happy indemnifying the search of a company they may not know or have worked with. The answer is somewhat predictable – no.
This response has led to some lenders expressing natural reluctance to take ‘un-insured’ personal searches. This issue can be quite easily solved should the HIP provider be able to encourage the seller’s solicitor to provide indemnity insurance with the pack. However, some pundits confused this issue with HSBC’s long-standing refusal to accept personal searches and rather a storm in a teacup developed.
Energy efficiency
Another aspect of the HIP that is interesting from a lender’s perspective is the Energy Performance Certificate (EPC). If this document is reviewed and used effectively by consumers then we might see increased interest in green renovations.
This could lead to green mortgages becoming far more mainstream and lenders naturally including them within their product ranges. However, it will take a great deal of education from the government and industry to achieve this.
So what of the future? Well, after only a month, it is rather difficult to say. Some organisations such as the Royal Institute of Chartered Surveyors (RICs) and the National Association of Estate Agents (NAEA) have reported a downturn in some areas of the market. However, whether this is actually a reaction to HIPs or simply fallout from current market conditions and a by-product of the holiday season is unknown.
Perhaps if HIPs had been rolled out across all properties at once rather than in stages, we could accurately assess their impact on the market. But this did not happen, so for now we need to rely on pundits and various organisations’ figures. It will be interesting to see how accurate they are when we have definitive data to compare them to.
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