Mike Allardyce, business development director at UKValuation, commented: “The governments u-turn on HIPs will get a mixed reaction from consumers, many of whom were struggling to get to grips with the HIPs proposition in the first place. After all, in real terms, the HIP merely pulls together the component parts which make up a documented summary of the property being offered for sale.
"Although HIPs will still come into being on 1 June 2007, the u-turn is the announcement that the largest component of the pack, the Home Condition Report (HCR), will not be a mandatory inclusion. Of course, many sellers will choose not to pay for this item, instead opting for the traditional method of leaving their purchasers to commission their own report on the condition of the property in question. Therein lays the problem. Some purchasers will discover property defects that discourage them from buying the property. The advantage of a mandatory HCR within the HIP pack was that perspective purchasers would know about any defect up front and could make their buying decision accordingly.
"In fact had the HCR been a mandatory component of HIPs, purchasers may well have found themselves buying an additional report anyway. This is because 85 per cent of purchasers in the UK require a mortgage to fund the purchase of a property and many mortgage lenders would not have been equipped to accept the HCR as evidence of the property’s soundness. In any case, an additional valuation would have been required, prompting the increased use of the AVM (automated valuation model).
"Regardless of the u-turn on HIPs, lenders are now much more aware of the cost effective solution AVMs provide and the potential cost savings to the consumer. UKValuation therefore believes that an increased use of AVMs will inevitably occur, which was predicted as a natural consequence of the original HIP proposition. AVM provider business plans should remain largely unchanged by the announcement.
"So what does this mean for the average buyer & seller? Answer: the system of the buyer commissioning the property report will probably remain unchanged from 1 June 2007. However, the formation of a HIPs pack containing title deeds, local search, home energy certificate etc. will at least speed up the initial phase of the purchase i.e. the exchange of documents between the seller’s solicitor and the buyers solicitor.
"As regards the supply of the home energy certificate which remains a mandatory HIP pack inclusion, the utility businesses must be rubbing their hands with glee at the opportunity of entering this lucrative market.”
