Mortgages, HIP's - Who Will Benefit?

 


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The time is drawing ever nearer when Home Information Packs will be a legal requirement for house sales, initiated and paid for by the seller. With costs variously estimated to be from a low of £500 to a high of £1200 it can be seen that ‘facts’ are somewhat scarce. What is certain however is that from 1st June 2007, the additional funds necessary to provide this pack for any and every house sale attempt will make many potential sellers think twice before committing their property to the market.

Note the words ‘sale attempt’ – failure to sell the house will not result in a refund of these costs. The house inspector will have done his job and been paid, and the government will have taken their cut in the form of VAT, so it will be ‘sorry folks – no money can be returned’. Try again later? Certainly, but in the increased ‘Snakes and Ladders’ format of house sales you have gone back to the beginning and must start the whole process from square one.

The ‘life’ of a pack will be three months (subject to a provision if the house is off the market for sales negotiations); after this period a new up-dated pack will be required. Under these circumstances the speculative sellers who are testing the market will disappear rather than face this new cost; they are likely to decide to stay out of the market. This loss of a seller also means loss of a buyer, and there is concern in some circles that this could reduce labour mobility. Home owners may be reluctant to move to a new job if it means the additional hassle of moving house, with a consequent increase in unemployment.

What of the HIP itself? Does it provide really sound information to alert the buyer to any potential problem areas? The true answer is both positive and negative. On the positive side there is a visual survey (Home Condition Report) but this is not likely to come anywhere near the true structural survey required by a mortgage lender. Defects in the building fabric including damp and decay will be included, as will power installations, insulation and energy efficiency – even potential tree root damage will be mentioned, but some rather more serious situations will not.

The negative aspect will relate to the items which will not be mentioned, such as possible subsidence or land slip, flooding risk, presence of rights of way etc. All this, and still the buyer will have to arrange and pay for whatever additional survey the lender will require. Note that all the third party costs are covered, including the governments cut in the form of VAT (estimated at £111m per annum), with little real benefit to either the buyer or the seller but plenty of additional expenditure.

There is also little room in these regulations for the honest seller. Anyone who is prepared under present legislation to warn potential buyers of possible problems is likely to decide that they are covered by the HIP, and that they do not need to comment on anything. There is no obligation within the HIP for the seller to confirm any of the findings, nor any caveat warning the buyer to be aware of the risks involved in property purchase.

The HIP will be with us and operational in less than 12 months, and history tells us that, no matter how flawed the legislation, governments apparently regard it as a sign of weakness to repeal legislation no matter how unpopular it may be or by how far it fails to meet the original good intentions of its originator.

It all seems to add up to more costs for the home owner, more income for the government, more regulation and less workforce mobility. The mobile home ethos begins to look more attractive!

Express have extended their product range to include mortgage quotes and remortgages .

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