Peter Ambrose, director of The Partnership, said companies providing HIPs at low costs were practising a high risk strategy which leaves little room when things go wrong.
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Companies such as eConveyancer, LMS, Hipstar and Simply HIPs are all aiming to provide HIPs around the £225 to £350 mark. However, Ambrose said he felt service levels would suffer as firms struggle to find a profit margin.
He said: “Right now this is not a good strategy to buy business. There is no room for error and they will have problems when things go wrong. If there is any movement in prices such as local authority searches, they will make a loss on every HIP. The margins are tiny and I believe they hope they can beat inspectors down on price.”
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Richard Sexton, business development director for e.surv, said: “It’s a low margin, high volume business across all areas and those that can do volume will have the advantage. This is why there will be a lot of consolidation early on. Ultimately, people have to look at the financial stability of the firm they are getting the HIP from. We are looking at the very early days of an entirely new market.”
Alan Dring, sales director at eConveyancer, added: “This is not a product with big margins. The market will find its own costs and consumers will go for the cheapest price as long as it is provided efficiently. Anyone trying to cut their margins for the short-term will find it very difficult.”
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