HIP - The Rationale
Yesterday I looked at Home Inspection Reports from the point of view of someone who might be considering a career changeto become a Home Inspector, but what about the rationale behind the whole scheme?
Well the stated aims of the Government for the Home Information Packs are set out below, with my comments between each point in Italics (even if you get bored reading this please look to the last point for the real reason why this is all being foisted on us):
1. Consumer Benefits:
• Provide Transaction Improvements by reducing the abortive costs to consumers and the industry as well as reducing the number of failed transactions caused by survey or valuation inspection finding.
Currently the Home Inspection does not include a valuation, nor is it a full structural survey. Many houses are now sold without a survey being undertaken because most houses built during the last 10 years come with 10 year guarantees from NHBC or the like.
• Housing Stock Condition Improvements by a reduction in the incidence of unexpected repair bills and encouraging better maintenance of homes.
You have to be joking, people will either keep their houses up together because they take a pride in their home or they won't care less and this legislation will not make any difference to the way people care for their property.
• Greater Consumer Choice by reducing the entry costs to first time buyers and creating a market of serious sellers.
Do you really create greater consumer choice by reducing the number of houses on the market? If you reduce the number of houses available that is likely to push up prices and squeeze first time buyers even further out of the market.
2. Cost of Home Information Packs:
• The Packs will cost around £600 plus VAT, and most of this is not new cost. Included in this is the Home Condition Report, which is expected to be cost around £300, for an average home, plus VAT.
It is true that most of the other costs are not new, but to date they have only been incurred at the point of sale not before marketing, this is a significant shift that will reduce the number of properties being offered for sale.
• The content of the pack includes searches and other information which is currently paid for by the buyer, If several buyers pursue the same home, then currently these costs are paid for several times rather than just once with the Home Information Pack.
It has generally been held that the person who gets the benefit of a service or information should pay for it. If the vendor pays and the purchaser gets the benefit can the purchaser be sure the information is all that they want and all they can trust? Another consideration is that most buyers are also sellers so they have to meet the costs at some stage anyway.
3. Market Impact:
• Home Information Packs will make the market more efficient and certain. They will make home buying more affordable and sustainable for first time buyers, who will receive full information in packs without having to pay for it.
They will make home buying more affordable by making home selling much more expensive. The total costs will increase since the reports will have to be time limited and in a slow market the seller may have to pay for the preparation of more than one pack and the Condition Report is a totally new cost.
• Major players are now investing heavily in Home Information Pack systems and intend to market these well in advance of packs becoming mandatory. This means sellers and buyers will not have to wait until June 2006 before they can benefit from packs, and there is less likelihood of a ‘spike' of properties coming to the market immediately before implementation of the mandatory scheme.
Absolute rubbish – in trials there was no rush to use the reports and now that the national introduction is approaching there is no evidence of any real enthusiasm to get involved. Therefore there is likely to be a rush before they become compulsory and then a dearth of properties thereafter.
• Industry accepts that sellers will not pay up front for HIPs. Thus there is no impediment to sellers marketing their homes with HIPs both before and after implementation.
Again rubbish – if some agencies offer to cover the costs of HIPs before marketing they will soon alter this when the costs become significant and they will not want to carry higher levels of abortive costs than they do at the moment. Someone has to pay every time and they will not enjoy the experience if they can see no real benefit.
4. Home Inspectors/Certification Scheme:
• Only inspectors qualifying under a certification scheme approved by the Secretary of State will be able to prepare home condition reports. The scheme will be responsible for monitoring and auditing inspectors' work. This will be robust to ensure that standards are maintained.
A nice little earner for the Government then. At the moment you as a buyer are already covered by your solicitor's and surveyor's professional qualifications and indemnity cover.
• If inspectors fail to maintain the correct standard or act in a way that is partial to one party contrary to the rules of the scheme, their certification will be removed, along with that their ability to produce HCRs.
So what – this is a report you don't want. At the moment you already need a mortgage inspection and valuation carried out by a qualified valuer. Any lender will still need this so what has been gained?
• Research on the number of Home Inspectors required provides a range of estimates of between 5000 and 7,400 based upon assumptions around numbers of HCRs required and Home Inspector productivity levels in liaison with the industry. Details of the assumptions are described in the full report, which will be published shortly. The report also highlights the need to continuously monitor and revisit the range estimates as more evidence on the assumptions and Home Inspectors working patterns becomes available.
Yes and so far they have about 1,700 of the 7,400, what happens in the event not enough people are attracted into the scheme? Answer – delay and recrimination.
5. Home Condition Report:
• The Home Condition Report will be an objective report on the condition of the property that buyers, sellers and lenders will have a legal right to rely on. Home Inspectors will have to have suitable insurance that will be backed up by insurance of last resort provided by the certification scheme.
Insurance already carried by your valuer or surveyor. Yes the report will be objective but you always need to think of who is paying, when the seller pays the writer of the report will lean as far as they can (without compromising their standards) towards the seller. When the buyer pays for a survey then the person carrying out that survey has no duty of care towards the seller and therefore no interest in their likely requirements.
6. Integrated Government Policy Benefits
• Home Information Packs link into the Government's wider agenda including compliance with the EU directive for energy reports, contributing to energy efficiency education among consumers as well as contributing to more sustainable home ownership and communities.
Here it is hidden right at the end - the real reason (although carried to greater extremes than even the EU required), the Government needs to comply with the EU directive and they have found a way to make property sellers pay, and pay far more than need be the case just to undertake an energy survey.
Stay tuned to Property Development Fortunes...
Well the stated aims of the Government for the Home Information Packs are set out below, with my comments between each point in Italics (even if you get bored reading this please look to the last point for the real reason why this is all being foisted on us):
1. Consumer Benefits:
• Provide Transaction Improvements by reducing the abortive costs to consumers and the industry as well as reducing the number of failed transactions caused by survey or valuation inspection finding.
Currently the Home Inspection does not include a valuation, nor is it a full structural survey. Many houses are now sold without a survey being undertaken because most houses built during the last 10 years come with 10 year guarantees from NHBC or the like.
• Housing Stock Condition Improvements by a reduction in the incidence of unexpected repair bills and encouraging better maintenance of homes.
You have to be joking, people will either keep their houses up together because they take a pride in their home or they won't care less and this legislation will not make any difference to the way people care for their property.
• Greater Consumer Choice by reducing the entry costs to first time buyers and creating a market of serious sellers.
Do you really create greater consumer choice by reducing the number of houses on the market? If you reduce the number of houses available that is likely to push up prices and squeeze first time buyers even further out of the market.
2. Cost of Home Information Packs:
• The Packs will cost around £600 plus VAT, and most of this is not new cost. Included in this is the Home Condition Report, which is expected to be cost around £300, for an average home, plus VAT.
It is true that most of the other costs are not new, but to date they have only been incurred at the point of sale not before marketing, this is a significant shift that will reduce the number of properties being offered for sale.
• The content of the pack includes searches and other information which is currently paid for by the buyer, If several buyers pursue the same home, then currently these costs are paid for several times rather than just once with the Home Information Pack.
It has generally been held that the person who gets the benefit of a service or information should pay for it. If the vendor pays and the purchaser gets the benefit can the purchaser be sure the information is all that they want and all they can trust? Another consideration is that most buyers are also sellers so they have to meet the costs at some stage anyway.
3. Market Impact:
• Home Information Packs will make the market more efficient and certain. They will make home buying more affordable and sustainable for first time buyers, who will receive full information in packs without having to pay for it.
They will make home buying more affordable by making home selling much more expensive. The total costs will increase since the reports will have to be time limited and in a slow market the seller may have to pay for the preparation of more than one pack and the Condition Report is a totally new cost.
• Major players are now investing heavily in Home Information Pack systems and intend to market these well in advance of packs becoming mandatory. This means sellers and buyers will not have to wait until June 2006 before they can benefit from packs, and there is less likelihood of a ‘spike' of properties coming to the market immediately before implementation of the mandatory scheme.
Absolute rubbish – in trials there was no rush to use the reports and now that the national introduction is approaching there is no evidence of any real enthusiasm to get involved. Therefore there is likely to be a rush before they become compulsory and then a dearth of properties thereafter.
• Industry accepts that sellers will not pay up front for HIPs. Thus there is no impediment to sellers marketing their homes with HIPs both before and after implementation.
Again rubbish – if some agencies offer to cover the costs of HIPs before marketing they will soon alter this when the costs become significant and they will not want to carry higher levels of abortive costs than they do at the moment. Someone has to pay every time and they will not enjoy the experience if they can see no real benefit.
4. Home Inspectors/Certification Scheme:
• Only inspectors qualifying under a certification scheme approved by the Secretary of State will be able to prepare home condition reports. The scheme will be responsible for monitoring and auditing inspectors' work. This will be robust to ensure that standards are maintained.
A nice little earner for the Government then. At the moment you as a buyer are already covered by your solicitor's and surveyor's professional qualifications and indemnity cover.
• If inspectors fail to maintain the correct standard or act in a way that is partial to one party contrary to the rules of the scheme, their certification will be removed, along with that their ability to produce HCRs.
So what – this is a report you don't want. At the moment you already need a mortgage inspection and valuation carried out by a qualified valuer. Any lender will still need this so what has been gained?
• Research on the number of Home Inspectors required provides a range of estimates of between 5000 and 7,400 based upon assumptions around numbers of HCRs required and Home Inspector productivity levels in liaison with the industry. Details of the assumptions are described in the full report, which will be published shortly. The report also highlights the need to continuously monitor and revisit the range estimates as more evidence on the assumptions and Home Inspectors working patterns becomes available.
Yes and so far they have about 1,700 of the 7,400, what happens in the event not enough people are attracted into the scheme? Answer – delay and recrimination.
5. Home Condition Report:
• The Home Condition Report will be an objective report on the condition of the property that buyers, sellers and lenders will have a legal right to rely on. Home Inspectors will have to have suitable insurance that will be backed up by insurance of last resort provided by the certification scheme.
Insurance already carried by your valuer or surveyor. Yes the report will be objective but you always need to think of who is paying, when the seller pays the writer of the report will lean as far as they can (without compromising their standards) towards the seller. When the buyer pays for a survey then the person carrying out that survey has no duty of care towards the seller and therefore no interest in their likely requirements.
6. Integrated Government Policy Benefits
• Home Information Packs link into the Government's wider agenda including compliance with the EU directive for energy reports, contributing to energy efficiency education among consumers as well as contributing to more sustainable home ownership and communities.
Here it is hidden right at the end - the real reason (although carried to greater extremes than even the EU required), the Government needs to comply with the EU directive and they have found a way to make property sellers pay, and pay far more than need be the case just to undertake an energy survey.
Stay tuned to Property Development Fortunes...
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