What lessons can the Home Report market learn from the roll-out of Home Information Packs (HIPs) in England and Wales? David Kempster, marketing manager for MDA SearchFlow offers the perspective from south of the border.

Since December 2007, every home put on the market in England and Wales, no matter what size, has needed to have a Home Information Pack (HIP) in place. The HIP scheme was originally designed to bring together valuable information at the start of the process - such as a sale statement, local searches and evidence of title – in order to make transactions more efficient and less likely to fall through between offer and exchange. In other words, HIPs were launched as a way of giving consumers a clear, up front picture of what they are buying and selling.

The Scottish Government hopes to achieve similar goals with the Home Report, and yet also wants to address three particular areas of concern in Scotland's house buying process:

• The reliance on scheme1 valuations which offered very little protection to the purchaser, and which provided benefit mainly for the lenders
• The need for multiple surveys and unnecessary costs
• The propensity for agents to set artificially low asking prices for properties, in order to generate interest and drive up the value

HIPs in England and Wales have been something of a political football ever since their launch, and their implementation has been haphazard – even though they may be a good idea in principle. The Conservative party, for example, has pledged to abolish HIPs if the Conservatives win the next election, which will be held in May 2010 at the latest. They may renege on this, especially if HIPs have been sufficiently reformed to provide an improved level of information and speedier transactions in the meantime.

Ever since their initial launch, however, one glitch that made HIPs less attractive to the public in England and Wales was the lack of a Home Condition Report. With this report omitted, home inspectors and surveyors felt alienated, and the Royal Institute of Chartered Surveyors (RICS) and the Council of Mortgage Lenders (CML) were instrumental in delaying and adapting the launch of HIPs, as the survey was not considered robust enough for lending purposes and there were concerns that the traditional surveyor would lose out in this new market. Even now, it is unlikely that a survey will be a mandatory part of a HIP in England and Wales, as the lender will almost always insist on their own valuation survey in any case.

Estate agents also initially distrusted HIPs, mainly due to a fear of change, but also because of the complexity of the documents themselves. In addition, many agents are still uncomfortable about first-day marketing and the time it might take to get a completed HIP, as any delays will have a major impact on how quickly a property can go onto the market. From April 6th, revised HIP regulations will require agents to have obtained the HIP before the property can be marketed. This will increase HIP orders in the marketplace, but it will bring the speed of pack compilation into sharp focus and those HIP and content providers that deliver the searches, Energy Performance Certificates (EPCs) and legal documentation quickly and efficiently will win through in an already aggressive, price competitive market.

Until now, many agents have been ordering a HIP only when a serious offer has been made, in order to reduce the cost burden on the seller and keep the transaction. Attitudes are changing, however, and estate agents are now increasingly seeing HIPs as a valuable source of upfront income, where their fee income usually comes after a very hard fought and not guaranteed completion. This is enhanced by increasingly generous packages from HIP providers, driven by a desire to gain market share in a difficult market.

Property searches in HIPs remain highly contentious. Due to the attraction of a national price that a HIP provider can use, personal searches are used widely. These are undertaken by a physical visit to a local authority and information recorded, based on what can be obtained at the time. Anything they can’t (or won't) get is covered by an Incomplete And Inaccurate Answer Insurance policy, inclusive with the search. These searches are still not trusted by a large number of conveyancing solicitors, who want to do their own due diligence for the buyer and are therefore rejected and duplicated, usually with an Official Search from the Local Authority, that provides the full content they need. .

This insurance will be removed as part of the revised HIP regulations coming into effect on 6th April, meaning that full information will be required for all searches on properties in both England and Wales from that date onwards. As a result, access to Local Authority information for personal search companies remains a hot topic, as it is feared that the Local Authority will not change already restricted access arrangements for personal search companies to access this data.

The fees required to access information will also be increasing, and the Local Authority will be able to charge for other information that the search company would have normally insured away. This will make personal searches more expensive and create more demand for the official search, delivered in a more efficient way, such as the National Land Information Service (NLIS).

As far as the future is concerned, in order for HIPs to be useful, they will need to be much more consumer-friendly, and will need to contain content that is useful to the point of being accepted by all parties, so that the transaction can be accelerated to the point that it could be “exchange ready”. This change has started (to a degree) with the addition of the Property Information Questionnaire (PIQ), which also becomes a mandatory part of the HIP from 6th April. The PIQ contains questions that previously would have been asked by the buyer's solicitor, in a clear informative manner for the buyer. Until now, HIP content has been wrapped in legalise and only really for the benefit of the legal professional.

For better or for worse, the Home Report is different to a HIP in many ways, and will therefore bring its own challenges. Perhaps the biggest difference is that a Home Report will contain a survey, so that bids can be made with all of this information in hand. While the Home Report is more expensive than the HIP, it will be currently more useful to all parties.

Home Reports will now provide one comprehensive document that all parties can review, and will therefore be an important tool for reducing costs and saving time. Searches will need to be ordered separately, however, usually toward the back end of the transaction, before exchange (sic) [Editor’s note – conclusion of missives].

We recently conducted a survey of more than 2000 law firms and conveyancers and although the majority of respondents still believe that further reforms need to be made with regard to HIPs, more than half of all respondents reported that they are now producing their own HIPs in-house.

As such, it would be a big mistake for anyone in this highly-competitive industry to ignore the current opportunities in this area. Whether you like them or not, HIPs and Home Reports – and the spirit of what the projects are trying to achieve – will be here for a long time to come. They may be modified and expanded over time, so that they are fit for the market and the consumer, but that is a good thing.

Given the current economic climate, perhaps it is time for law firms, conveyancers, and estate agents throughout the UK to embrace these tools as a way of adding real value to today's challenging property market.