August 2007 heralded the start of the Home Information Packs, or HIPs for short. This was the “big idea” from the government to make buying and selling houses quicker and easier.

It has long been recognised that buying and selling a house can cause considerable stress and frustration. This is because for most people it is the largest single financial transaction of their entire lives and the outcome depends on so many factors outside their control. There is the hunt for the “ideal” property, putting in a successful offer for it, arranging finance, a survey and all the relevant searches. The searches ascertain whether a housing estate is due to be built next door, or a motorway planned to come through the garden, or if the house has been built on a flood plain and disappears under two feet of water after heavy storms. All these things take time and more importantly money, money which can all too easily be wasted if someone else comes along and offers the seller more money.

To help alleviate some of these problems the government has introduced HIPs. These put the onus on the seller to provide information about the property that they are selling. In particular the seller must provide the potential buyer with details of the property such as evidence of title, which shows the extent of the property, a sale statement detailing what fixtures and fittings are included in the sale (carpets, curtains etc) and local searches which show planning decisions and road building proposals. There is also information on the provision of water and drainage.

The biggest change is the requirement to provide an Energy Performance Certificate. The need for an EPC stems from the EU Energy Performance of Buildings Directive (are you still awake at the back?). Initially it is for domestic property, but next year will be extended to commercial buildings and to rentals. The EPC gives information on insulation and CO2 emissions and expected heating costs. It is produced by a qualified Domestic energy Assessor and the results are available on a centralised database.

One of the advantages of HIPs is that they cost money. This may seem a perverse statement, but the reasoning is quite simple. Up to now it has cost the seller nothing to market their house and so it is not unknown for someone to put their house on the market with no intention of selling it, just to see what sort of price they were offered. This causes intense bad feelings with potential buyers who spend much time and money in trying to buy a house that the seller has no intention of selling. If a seller has to pay £400 (a typical price for a HIP) then he or she will think twice about “phantom selling” their house. Another advantage is that HIPs save a lot of time if a sale falls through and a chain of sales is threatened. If a new buyer comes along, all the searches are already in place and the buyer only has to find finance and commission a survey rather than go through the lengthy search procedures all over again.

When HIPs were first suggested the government intended to include a Home Condition Report. This was to be a survey of the house, carried out a licensed home Inspector. For various reasons the HCR has been dropped from the HIP, not least due to objections from the Royal Institution of Chartered Surveyors (RICS). Other objections to HIPS were supposedly from the big mortgage lenders, who said that they would not accept the searches in them. This was later denied by HSBC and Barclays, not least because searches generally come from reliable sources such as professional search providers and they are covered by liability insurance. Other objections were based on the cost of HIPs, usually about £400. This is a significant amount of money, but not quite so significant as the amount that a person buying and selling a house costing £500,000 would have to pay: 4% stamp duty, 1% estate agents fees, conveyancing and removals costs would leave little change from £28,000……

Most people agree that the mechanism for buying and selling houses needs an overhaul. Whether the Scottish system, whereby a sale agreement is binding (as is also the case if you auction a house in England) or some other method, is the best way forward, only time will tell. At least HIPs are a step in the right direction.