Mortgages. big changes in the buying and selling of houses

On June 1 st 2007, the law concerning the buying and selling of houses changes. From that date onwards everyone who wants to sell a house has firstly to prepare a Home Information Pack (HIP).

And if you don't? You're in the frame for a Ј200 fine! It's also probable that estate agents will also insist on you having the Pack ready by the time they put your home on the market. Certainly, buyers' solicitors won't do a thing until you provide the Pack. All in all, you don't have an option – you'll have to go along with the law.

So what has to go in the Pack?

The Government has yet to confirm the final details but at the moment, it proposes that your Pack must include the following information:

Search results from H. M. Land Registry

Replies to anticipated initial enquiries – these are the currently raised by the buyer's solicitor

Copies of any planning, listed building and building regulations consents and approvals. If you don't have these, you'll need copies from your Local Planning Authority

And for new properties, copies of building warranties, electrical test certificates, and any other warranties or guarantees attaching to the property.

A draft sale contract

It is also proposed that the Pack should contain two items currently obtained by the buyer:

A professional independent survey of the property called a Home Condition Report. This is expected to be mid-level survey like the current Homebuyer Survey and will offer far more information than a lender's valuation report – but the Government has yet to announce the details. However, it seems likely that the Report will have to comment on the property's state of repair, it's energy conservation efficiency, the number and type of rooms and parking arrangements. Both buyers and sellers will have a legal right to rely on this Report and there'll be no need for buyers to obtain their own reports or surveys. We expect lenders to make their own valuations as they do now, but they'll want to maximise the use of the new Home Condition Report to improve their valuations and cut costs to consumers.

Replies to searches made of the Local Authority

In addition, if the property is leasehold:

A copy of the lease

The most recent service charge accounts and receipts

Details of the building's insurance and receipts for the premiums paid.

And finally, any regulations made by the management company or landlord

And how much is all this going to cost? The Government believes that t he Pack is likely to cost sellers around Ј825 including VAT. But they claim these are not additional costs.

The Government make the following points:

The HIP transfers responsibility for obtaining local searches and a home condition report from the buyer to the seller. But since most sellers are also buyers, the costs will usually be balanced out by corresponding savings and benefits. We agree.

The Government also say that most sellers won't have to pay up front for the pack. We very much doubt that. Someone is going to have to pay and we doubt whether solicitors or estate agents will pay upfront on behalf of the seller. The seller is going to have to fork out as soon as the property is put up for sale. Some commentators predict that this will act as a brake on properties coming to the market. We think that it will dissuade all but the committed sellers – those simply wanting to test the market will probably back off. In practice this will be a good thing, but we agree that it will reduce the amount of property on the market.

The Government believes that market forces will keep down the prices for preparing Home Condition Reports and Home Information Packs. We aren't so confident about this. It very much depends on how estate agents and solicitors adapt the pricing within their fee structures. Expect some very creative pricing, especially from estate agents! It's certainly going to pay you to shop around for a good deal.

Every year around 30% of agreed house sales fall through. The cost? At least Ј350 million each year! It's the Government's hope that the Home Information Packs will greatly the numbers falling through and avoid much of these wasted costs. We won't argue against that but the National Association of Estate Agents disagree with us.

They think the new Packs will simply shift the existing problems from the middle of the selling process to the beginning. Other commentators believe that HIPs will do nothing to reduce gazumping or indeed, the tricks employed by some of the less reputable estate agents.

Our general view is that if the packs help to identify problems before everyone starts incurring cost and instructing solicitors, then surely that's for the better? We say better to have problems out in the open at the start than stumble upon them half way through the selling process.

We just hope that all these changes in the buying and selling houses don't result in a bureaucratic nightmare. Over 7,500 inspectors will be needed to carry out the new Home Condition Reports and getting them all trained, qualified and registered in time may yet prove to be that fly in the ointment!