Top 10 Tips for HIPs
Doubtless you've all heard of Home Information Packs by now – even though you might be a little unclear about what they actually are. But what might have escaped you completely is the fact that every seller marketing their residential property in England and Wales from December 14th 2007, will be required to provide a HIP.
Home Information Packs aren't radically different to some of the components of the current conveyancing process, it's just that the seller (or to use the technical term, vendor) will now have to put this information together before the property goes on the market, rather than the buyer's solicitor sorting it out later on in the process. The only new thing is the introduction of the Energy Performance Certificate, but more on that later.
As there is so much misinformation in the press, I thought it might be helpful to look at the facts and separate them from the fiction. Here's the low-down:
What is a HIP?
A Home Information Pack is a collection of information that needs to be assembled when you put a residential property on the market. Due to recent changes, any residential property in England or Wales put on the market from December 14th 2007 onwards will require a HIP. Also, all estate agents in England and Wales who market homes with HIPs will be required to be registered with an independent arbitration service run by the Ombudsman for Estate Agents (OEA). Similarly, HIP providers are encouraged to subscribe to the Home Information Pack Code. Those providers that have signed up to the code can be found on a register maintained by the Property Code Compliance Board. A HIP will consist of:
- A HIP Index (essentially a contents list of what's in the HIP)
- An Energy Performance Certificate or EPC (a software-based calculation of the approximate energy costs for running the property, together with an indexed value of the property's current energy efficiency and its potential energy efficiency after the relevant energy efficiency measures have been put in place.)
- A Sale Statement (this gives the basic details of the property, such as name and address of owner, address of the property being sold and tenure, e.g. freehold or leasehold)
- Evidence of title (usually the basic Land Registry registers and title plan)
- Local and Drainage Searches (or a record of the fact that they have been ordered)
Homes can be marketed as soon as the HIP and its contents have been ordered – you don't have to wait until the pack is delivered in order to get your home on the market.
Why do I need one?
The thinking behind HIPs was originally to get all the documentation that you need in order to exchange on a property in place up front so as to speed up the sales process. However, the main element of the original HIP was to include a survey (or Home Condition Report) which meant that the buyer knew before they made an offer on the property what state it was in and if there were any problems. In 2006 the Government decided to drop this element of the HIP for the initial launch, although it is thought that this may well end up being included at some later stage.
If I pay for a HIP up front, then decide to change Estate Agents, can I use the HIP I already have or do I have to get another one done?
Yes, you can and no, you don't need another one! In theory, you can get your own HIP done before you approach any estate agent, and, providing all the information required is there, they will have to use it. So, if you decide to part ways with your agent and instruct another one, don't worry, your HIP is transferable.
Should I let my estate agent add the cost of a HIP as a percentage of his commission?
It would be a very expensive mistake if you did.
Let's say he offers you a HIP at ½%. That sounds pretty reasonable, but on an average priced London home of £375K that's actually £1,875 + VAT which works out to a hefty £2,203.12. More than six times what it would cost if you bought a HIP through Tesco Property Market. And higher priced homes will pay more.
I'd also urge some caution about agents who may try to lure you into instructing them by offering 'free' HIPs. Check the small print - I've already heard of some agents who are suggesting that they will only foot the bill for the pack if they sell the property, so in other words, if you put your home on the market both with an estate agent and on a 'for sale by owner' website, for example, and were successful in selling your property yourself, then you'd probably find that the agent would expect to be paid for their HIP. Get them to spell out to you the terms of any 'free' HIP so you understand what the cost is should you ever have to pay for it. If you need advice, the best people to contact are the Ombudsman for Estate Agents (OEA). You can find them at www.oea.co.uk
Can I shop around to get the best deal on a HIP?
Yes, you definitely can and I'd advise that you do. Whilst the agent that you decide to use to market your home will probably try to get you to use their services to generate your HIP, you can use any HIP provider – although make sure that they subscribe to the Home Information Pack Code and are registered with the Property Code Compliance Board. Better still, haggle hard when you're instructing your agent and get him to either foot the bill for the HIP (see previous note on checking the small print!) or at least only charge you what it costs him – estate agents should be transparent about how much profit they make on this.
Remember, estate agents will make a fortune out of HIPs – so make sure that you get a good deal. In the estate agency trade press, there are hundreds of articles about how estate agents can profit out of the implementation of HIPs, so don't feel guilty about making sure you get the best value for money.