The relationship between estate agents and mortgage intermediaries has always been an uneasy one, as each fights to gain revenue from financial products offered to house movers.
The introduction of Home Information Packs (HIPs) as a legal requirement for people selling their house has heightened the debate about product cross-selling, as many think estate agents will benefit the most. But is it all just the proverbial ‘storm in the tea cup’ and can mortgage intermediaries benefit as much from the introduction of HIPs?
Why HIPs?
HIPs are being introduced as part of government reforms to the housing market, designed to speed up house buying and selling, as well as reduce stress and wastage. The Department for Communities and Local Government (DCLG) estimates that over £1 billion is spent annually on property sales that end up falling through.
HIPs contain all the information that a buyer needs about a property, up-front and in a consistent format. The pack includes documents about the property and surrounding area, including evidence of ownership from the Land Registry, local authority search information, and an Energy Performance Certificate (EPC), which details how energy efficient the property is. Sellers can also choose to add additional documents, such as searches specific to the area, or a Home Condition Report (HCR), which is roughly equivalent to the current homebuyer’s survey.
All residential properties marketed from 1 June 2007 will need a HIP before they can be marketed to the public, and as marketing is often performed by the estate agents, it is assumed that estate agents will be the winners of the HIPs launch. Even with the rise of internet usage, only 6 per cent of sellers choose to sell their house without an estate agent.
There are definite possibilities for mortgage intermediaries. Firstly, the ability to offer HIPs directly to house sellers as part of a marketing drive to acquire or retain their mortgage business; secondly as a HIP provider to estate agents, providing a reliable service so they can concentrate of their core business of matching buyers and sellers.
The estate agency market
It is estimated that there are more than 12,000 estate agents in the UK, working for a mixture of independent and corporate estate agencies. Many of the larger groups have grown through the acquisition of local firms of estate agents, some of which continue to trade under their existing name, with other aspects of the business, such as the layout and furnishings in offices, tending to be standardised. Smaller independent agencies tend to join an association, which enables them to benefit from, among other things, referrals out of area.
The contact that estate agents have with home buyers, and to a lesser extent sellers, provides them an opportunity to sell financial products, in particular mortgage loans. It is for this reason that some banks and building societies acquired estate agency businesses, although more established industry members will remember the debacle of the 80s, when acquisitions were made on a rising property market and offloaded when the market collapsed.
In a survey by the Office of Fair Trading (OFT), 29 per cent of buyers and sellers questioned said that they were offered financial advice by an estate agent. A third of these subsequently obtained financial products from the estate agent:
- 90 per cent obtained a mortgage
- 30 per cent obtained life insurance
- 11 per cent obtained buildings or contents insurance.
Working with estate agents
HIPs potentially provide opportunities for mortgage intermediaries and estate agents alike. Although they may be competing for the same client in some instances, there may, nonetheless, be opportunities for brokers to work with estate agents.
We will undoubtedly see a large number of estate agents outsource the HIP provision process, so they can concentrate on their core business. They will be looking for a reliable provider who can take away the hassle of producing a pack that’s compliant with the regulations, in the shortest possible time.
Will HIPs happen?
Despite the efforts of anti-HIPs parties, trials of HIPs have started in many areas of the UK, including Bath, Cambridge, Huddersfield, Newcastle, Northampton, Southampton, Reading, Basingstoke and Woking, Manchester, Cardiff, Coventry, Hereford and the Marches, Bristol, Leicester, Chelmsford, Nottingham, Plymouth, Liverpool and the Thames corridor from North Kent and London to the Channel. This is aimed at providing a scaled introduction between now and June 2007, when HIPs become compulsory.
Now is the time for mortgage intermediaries to get involved, well in advance of the HIPs deadline date, so there is time for them to work out how HIPs can help improve their business.
Martin Willard, Managing Director of MDA Advantage
