Is it fair for sellers to pay up front?

THEY will be called Home Information Packs - HIPs for short - and the Government hopes they are going to revolutionise the way we buy and sell our homes.

From Spring 2007, anyone putting their house on the market will have to pay for a new 'home condition report' first - a report which will be available free with the house's details to anyone interested in buying right from the word go.

As well as this report, the new Home Information Packs also will contain:

Evidence of ownership

Local authority searches, which should reveal, for example, if any planning applications lodged in the immediate area could affect the value of the property.

The new 'home condition reports', which the Government estimates will cost people selling their homes about £350, will not be as thorough as the 'homebuyers' survey', which is the medium-priced survey paid for by many people buying a home. But it will be more thorough than the valuation carried out by a mortgage lender, and the Government hopes it will flag up potential problems with a property right at the beginning of the sale process.

The idea of the new system is to make buying and selling homes more transparent, with more information provided up front for those buying a home, so that there is less risk of a deal falling through later on.

The Government claims £1 million is wasted across the UK each day when property sales fall through after potential buyers have already spent hundreds of pounds on valuations, legal fees and searches.

The new HIP packs should help reduce this, it claims. They should also help first-time buyers, who will no longer have to find the money to pay for a survey.

Overall, the Government says, the costs involved for people buying and selling a home should be about the same as now under the new system - but with some of the costs switching from buyers to sellers.

Housing Minister Yvette Cooper, who published draft regulations setting out the detail of the Home Information Packs yesterday, said: "Buying a home is stressful enough without losing hundreds of pounds on legal fees or valuations for properties that then fall through.

"It is crazy that more than £1 million a day is wasted like this. Home Information Packs will save money and cut waste in buying and selling homes."

The plans have already come in for criticism in some quarters, however - with claims that the new HIP packs could cost anyone selling a house up to £1,000.

"Labour's sellers packs will simply put up the cost of selling a home, create more red tape and ultimately undermine a fragile market," said Caroline Spelman, the Tory shadow secretary of state for local government affairs.

Sarah Teather, the Liberal Democrats' local government spokesman, added that many buyers would not trust a survey report paid for by the person selling a house.

"Home information packs will be a breeding ground for cowboys happy to ignore problems, or worse not qualified to identify them," she said.

"Most buyers will simply not trust the report of a home inspector paid by the seller and will end up paying for their own survey."

So what is the truth about HIPs? We spoke to two local estate agents, a mortgage advisor and two people with experience of buying and selling homes to find out...

:: The estate agents

HUNTERS has been running a pilot scheme from its Bishopthorpe Road office in York since May in which anyone selling a home is provided with a Home Information Pack along the lines of those being proposed by the Government. The Hunters packs include:

A home condition report

A sellers' property information form

A fixtures and fittings form

Land registry title details

A local search.

Hunters director Kevin Hollinrake said the main effect was to 'increase transparency' in house buying and selling, and to move away from the 'buyer beware' philosophy.

He did not think there was a danger of worthless 'cowboy' reports being produced which sought to skim over or ignore potential problems with a property, because those who carry out surveys under the Government scheme will have to be properly qualified 'home inspectors'.

They will also be subject to court action if they do not do their job properly and someone buys a house which subsequently turns out to have problems, he said. "They would go bust, because people would claim against them."

The big advantage of the system, said James Wort, manager of the Hunters branch in Bishopthorpe Road which has piloted the scheme, was that potential buyers could see the home condition report before they had made any financial commitment.

As many as one third of house deals fell through at a comparatively late stage, which could represent a considerable loss of money for someone who had paid legal and survey fees, he said. "Under this system, people can make a more informed decision from the start."

The downside of the Government system, Mr Hollinrake said, was that it could put off people who were simply putting their homes on the market to 'test the waters' - because they would not be able to do so without first paying for the HIP. The Government estimates that it will cost £635 on average, not the £1,000 some critics have claimed - but it is still a substantial amount of money.

The problem was that as many of 30 per cent of homes on the market had been put up for sale by people who were 'testing the waters', Mr Hollinrake said.

If they stopped doing that, it could lead to an increase in demand - which could put house prices up.

Ben Hudson, of estate agents Hudson Moody, said the main effect of the new system would be that more information would be available to the buyer 'up front'. It probably would put up the cost of selling your house, he said - and he agreed with Kevin Hollinrake that it might well put people off 'testing the water.' "But that's probably not a bad thing from our point of view, because it would mean there would be less messing around."

:: The mortgage adviser

STEVE Broadley of the Mortgage Advice Service in Skeldergate said there were some pluses - mainly that house buyers could save the cost of a survey. But he said there were problems, too. If he were buying a house, he said, he would have serious doubts about relying on a survey which had been paid for by the person selling the house.

"I would want something a bit more detailed that was prepared for me," he said.

Overall, the measures would do little to address the underlying problems of the stalled housing market, which stemmed from the lack of affordable housing for first-time buyers on modest incomes. What was needed was more affordable housing, he said. Saving the price of a survey would not kick-start the housing market.

"You are not going to get lots of people suddenly starting to buy properties because they can save £350 on a valuation."

:: The homeowners

Alan and Janet Lightfoot are selling their £183,000 extended four-bed semi in York and downsizing to a £126,000 three-bed terrace in Scarborough.

They put their home on the market through Hunters, with the help of the Hunters Home Information Pack. "I think it is a good idea," Mrs Lightfoot, 49, said.

"When we got the pack, it put our minds at rest. We felt we were in a better position to sell, because we knew the price was reasonable."

They also knew, she added, that there were no major problems with their house that could scupper a sale late on.

They have now had an offer on the house. The Home Improvement Pack definitely made it easier for the people buying the house, Mrs Lightfoot said.

"They came and had a look around, then read the report from the estate agent. They knew exactly what they were getting. There were no hidden surprises at the last minute."

They had to pay for a survey for the house in Scarborough they are buying. Luckily, it revealed no major problems.

"We had already made an offer, ad if we had found something seriously wrong we would have had to back out and start looking again."

Debbie and Herman Louw are selling their Bishophill flat and moving into a £176,000 terrace just outside York's city walls.

Debbie, 33, thinks the whole process of buying and selling will be made much easier once the new system comes in.

"If the seller is getting the report done, it will all have to be sorted before the house goes on the market," she said.

"If it is all up-front, and you're having the survey done and paying for it, you are making sure that what you are selling is in good order."

Updated: 09:12 Tuesday, November 01, 2005