Home Information Packs (HIPs) have failed to win favour among estate agents, intermediaries and home owners ever since they were first launched on 10 August 2007.
The reaction to HIPs continues to range from indifference to outright hostility, with the common criticism being that they are an unnecessary expense and administrative burden on what is already a complex and expensive housing transaction process.
However, HIPs are here and, for the foreseeable future at least, here to stay. Despite considerable opposition the government has continued to forge ahead with its HIPs programme, which now applies to all new homes being put on the market.
The government’s rationale for HIPs has changed significantly, from its early promise when the concept was first launched more than 10 years ago – to speed up and simplify the house selling and buying process and reduce gazumping – to today’s focus on environmental benefits with HIPs being a key component in the war against global warming.
The government’s obstinate refusal to deviate from its original plan to introduce HIPs lies at the heart of much of the animosity against this new legislation.
Opponents argue that although the original idea had merit 10 years ago, the market has evolved and that the idea is no longer as relevant today as it was a decade ago. Many critics believe that the demise of the Home Condition Report fundamentally undermined HIPs and they also argue that home buyers don’t take any notice of what is a door-stopper of a legal document.
European influence
So why did the government continue to back HIPs, against growing opposition from almost everyone? The answer would appear to be European legislation.
Article seven of EU Directive 2002/91/EC states that: ‘When buildings are constructed, sold or rented out, an Energy Performance Certificate (EPC) must be made available to the owner or by the owner to the prospective buyer or tenant.’
EPCs were therefore made mandatory and the government viewed HIPs as the perfect way to introduce them into the UK. In fact, EPCs actually became mandatory with effect from January 2006, but the government has a three-year window in which to comply with article seven.
It has been suggested that EPCs could have been introduced on a standalone basis and did not need to be part of a HIP, but the government was not persuaded by this argument.
Neither was it thrown off track by concerns about the availability of suitable numbers of qualified home inspectors, or worries that HIPs would have a detrimental effect on a housing market which was already showing signs of a slowdown.
In its defence, the government said its research showed that nine out of 10 consumers were dissatisfied with the house buying and selling process, with 28 per cent of property sales failing after terms had been agreed, resulting in more than £350 million of consumer costs being lost each year.
It also pointed out that UK property transaction times were about twice as long as our European counterparts despite the fact that we have one of the largest and most active housing markets in Europe.
No change in plans
Prime Ministers and Housing Ministers changed, but the plans to introduce HIPs did not and the new legislation was introduced in three waves, with four-bed houses requiring a HIP with effect from 10 August 2007, three-bed houses requiring a HIP from 10 September 2007 and 2-bed and smaller houses requiring a HIP from 14 December 2007.
The government also made a few concessions to make the new legislations more palatable, most notably that properties which were on the market before the HIPs ‘go live’ dates did not need a HIP and that properties can be marketed before a HIP is available, as long as a HIP has been requested.
However, most estate agents remain unconvinced by the requirement for HIPs and say they get in the way of their main purpose, which is to sell property.
Data suggests that only 55 per cent of HIPs are sold by estate agents, which is surprisingly low when you consider that estate agents are in pole position to capitalise on this new market opportunity. House sellers have no option but to have a HIP and estate agents are the obvious provider of this service.
A potential source of income
Interestingly, mortgage brokers account for 35 per cent of HIP sales and the slowdown in the housing and mortgage markets may well encourage more to consider this potential new source of income.
In fact, there are good arguments as to why brokers are perfectly placed to sell HIPs. Brokers are independent and are not directly linked to the sale of a house.
If the home owner decides to move estate agent in the future they have no worries about being left with an inappropriately branded HIP.
Perhaps most importantly, however, arranging a HIP enables brokers not only to provide their clients with a comprehensive service but to also generate additional income. In a slowing housing market, brokers need to consider not just the mortgage procuration fees they generate, but the total fee earning potential of each and every deal.
HIPs may only generate modest fees, but as part of a total package which also contains conveyancing and property related insurances, brokers can easily double their fee-earning capability.
The truth is that arranging a HIP is simplicity itself. In most instances it’s simply a case of giving a HIP provider a few basic details about the client and their property, and the HIP supplier will do the rest. HIPs packages vary from provider to provider, but the most competitively priced HIPs are less than £300.
What’s more, some providers offer a choice of packages which can be selected based on cheapest price, best value for money, timescale or budget constraints. HIPs can be produced either in hard copy format or as digital documents and clients are offered a range of payment options including credit card, personal cheque or finance.
Unlike some of the new market opportunities opening up to mortgage brokers, HIPs require very little time or effort to start selling and absolutely no capital outlay. There are no compliance issues and, being a compulsory purchase, clients who are selling a house need little persuasion to buy a HIP.
Full information about HIPs is available on the government website www.homeinformationpacks.gov.uk. Not only does this site give basic information, but it also provides regular updates and answers questions about issues such as first-day marketing exemptions.
It is perhaps unrealistic to expect intermediaries to suddenly fall in love with HIPs, but there is a sound business case for brokers adding HIPs to the range of products and services they offer.
Someone has to sell HIPs and, at the moment, estate agents are not falling over themselves to be first in line. This is one opportunity which is being handed to mortgage brokers on a plate.
