The Unconditional Blog

The impartial voice of the industry

 
12

Should NZ implement the UK scheme of Home Inspection Reports?

Posted on: June 14th, 2008 | Filed in Buying / Selling a home, Green

Since December of last year all properties in England and Wales that have been marketed for sale have been required to have a Home Inspection Pack (HIP). Scotland will implement the scheme from December 2008 and already there are signs of disquiet north of the border.

UK HIP bookletThe HIP is a comprehensive set of reports and documents that bring together all of the pertinent information a buyer would need to be well informed about the prospective property they would be interested in buying.

The UK government are pleased with the implementation of the scheme, the Housing Minister Caroline Flint said:

“Consumers are already benefiting from the introduction of HIPs. Search costs are falling as a result of increased transparency in the market, energy ratings can help people to reduce fuel bills, and first time buyers are receiving important information about their home for free.

“I welcome the fact that buyers are starting to act on their energy ratings, which could cut a million tonnes of carbon a year as well as helping families with their fuel costs.

“However, what is clear from the trials is that more buyers wanted to see the HIP but it was not always made available to them. That’s why we have taken action to increase awareness of the consumers’ right to see a HIP and to remind agents of their responsibility to provide the pack.”

So what does a HIP comprise? There are mandatory documents and optional documents within the pack.

  • Mandatory requirements include a sale statement stating key facts about the property, local searches very much akin to LIM’s. Legal titles and the energy performance certificate – a professional report on the energy efficiency rating of the property and an environmental impact rating.
  • Optional components a house condition report – very much akin to a building inspection report and a legal summary report.

Certainly the objective of the implementation of the HIP scheme was in its ability to aid transparency in the home buying process. The costs of a single HIP does range anywhere from $800 to $2,500 and is paid for by the vendor of the property.

As to implementing such a scheme in NZ. You would have to say that from a consumer perspective the greater the level of transparency and ease of access to pertinent information has got be seen to be of great benefit for buyers. Naturally initial reaction would be cold, especially to the cost; but living as we do in an ever more open and transparent business environment this initiative has got to be of value. We will just have to wait patiently to see if a future NZ government decides to implement such a scheme.

Article Discussion

  1. John Saunders says:

    As a UK resident I have to contest the statement provided by Caroline Flint about HIPs.The government made a complete hash of introducing the HIP scheme and it’s an unmentionable subject among agents. The credit crunch has now killed the housing market but even prior to that the HIP was causing problems as the cost has to be borne by the seller; the reports only last 3 months so if a sale falls through the seller has to get a new HIP! It’s quite absurd. A HIPs report often takes several weeks to be provided. The system has not proved to be of any value as most buyers don’t worry about energy ratings. Solicitors don’t trust the property searches provided by HIP co’s. Lenders will not trust the optional home condition reports provided by the HIP co’s as most of the surveyors are not chartered; they are in-house trained and consumer tv programmes have exposed many of them to be very poor in comparison to career chartered surveyors.
    I don’t know how expensive house conveyancing is in NZ but it would certainly escalate if a HIPs type system was introduced and the process would take longer.
    As a subsidiary point, several hundred people invested up to £14,000 to be trained as HIP surveyors having been promised the earth by the government but haven’t earned a dime because the mandatory home inspection report was withdrawn from the legislation.Most of the work undertaken is energy surveys which generate small fees.There are therefore many angry people with debts of up to £14k.

    The whole concept has been a complete disaster and not been the success Caroline Flint claims. The government was warned 2 years before HIPs became mandatory it would be of no value and just add expense and time to the buying and selling process.

    I advise you to discourage your government from contemplating adopting HIPs.

  2. John

    I really appreciate the time taken for you to share this experience of the implementation of HIP’s in the UK. It further goes to reinforce the value of social media, especially around a specific subject area. Agents in NZ ready your comments can gain a good understanding of the issues and impact.

    As you say the implementation timing has coincided with the crash in the market (as you point out caused by the credit crunch) – my question would be – if launched 2 years ago in a brighter market, allowing for these highlighted weaknesses, would you say as a principle that greater access to more comprehensive information in a readily available form to buyers would be seen as beneficial to the sales process – either from the perspective of buyers or agents??

  3. Ross says:

    In my office we usually have available up front for each property we are marketing:

    An Auckland City Council LIM report
    Copy of the Title Search
    Building report if paid for by vendor
    Value Verified Certificate
    Registered Valuation if paid for by vendor

    I fail to see what the problem is if any of the above are not supplied then the buyer can make the offer conditional on any of the above.

    Not sure that many people would be interested in energy efficiency rating of a house. We try to ascertain when listing the property if it has been insulated, re-roofed, re-wired etc, etc

  4. Ross says:

    As far as cost goes LIM $284, Valuation say $500, Building Inspection $400, Electrical report $200 so these items alone almost $1,500 so the cost of the HIP doesn’t seem too far off the mark.

  5. Ross

    Just for clarification.

    1. If I was interested in buying one of your listing – you would give me a copy of these documents?

    2. How much encouragement do you give the vendor to get some of these reports and documents on their property to assist the prospective buyers. My view / question is based around the idea that is these documents were available to genuine buyers it would enhance the buying experience (and as a consequence the credibility of the agent).

  6. This report from the Sunday Express in the UK clearly highlights the view that the HIP is seen by the vast majority as a burdensome cost and thereby supports John’s comments.

  7. Ross says:

    Alistair, yes we would supply the documents to any buyer who wants them.

    Soon we will have a button on our website to click for the “Documents” for each property – initially including LIM, Title, E-Valuer report, Value Verified certificate and if available a Registered Valuation and Building Report. Will save us printing truckloads of documents every month. I don’t think anyone else is doing this at present so we will have a short term advantage over our competitors.

    We may have to come up with a name for it like the HIP. Maybe a PIP = Property Info Pack.

    Most sellers understand the benefit of supplying this information and are happy to pay for it. Also helps us tidy things up if there are problems identified before we commence marketing.

  8. I wholeheartedly commend you – as you appreciate (more so than others) the buying consumer feels and wants to be, empowered in the buying process largely as a function of the web’s ability to answer any question. By providing rich and relevant data you establish a credibility and respect that will see your business succeed. Good on ya mate!

  9. Neville says:

    As a UK resident that has marketed the same house both with the HIP and without I can say what a complete waste of time and money it is. The buyers solicitor carries out land searches and the buyer gets a professional survey carried out so what is the point.

    Take one part for example the energy efficiency rating that is part of the HIB, our agent told us we had to change our light-bulbs to a more energy friendly type which we did and we got nearly the highest possible score.

    As from the 1st of June you now need to get your HIB completed prior to placing your property on the market, our house took 5 weeks to get a water and drainage search last time so imagine the frustration for sellers now.

    Do it by all means but just don’t take a leaf out of our book, it’s a shambles and not needed. Would much prefer a way for buyers to be made to cough up a percentage of the sale if they decide to pull out like they do in Scotland. At least then we can make solid plans for migration with the secure knowledge that your deal will go through.

  10. Neville

    Thanks for contributing – some valuable insight for what at first sight seems a good initiative, but as a function of protracted process has obviously become a laboured and cumbersome headache – waiting 5 weeks for a report before being able to market a property will impact the flow of the market.

  11. Jan Reynolds says:

    I fully agree with John Saunders on the UK HIP packs. It is probably the most stupid legislation introduced by this government so far.It contains nothing of use to a buyer and they end up paying for it in the same way as they would for any other expense connected with the property, then they pay again for information acceptable to solicitors and building societies. The only gain is to the government in the form of Value Added Tax which is levied on the HIP. There is no doubt that the scheme will be dropped as soon as Caroline Flint thinks that nobody will notice that a massive amount of money has been totaly wasted, and that the whole house selling industry was right all along!

  12. Jan,

    I think there is a clear message coming through the threads here – the UK model should not be allowed to be arbitrarily adopted in NZ without learning the true implementation of the UK model.

Post your views