Improving the homebuying system

I EXPLAINED last week how uncertainty caused by legislative delays when buying a residential property in Guernsey could and should be avoided.

Today I outline plans to improve the English system that has pervaded ours and is largely to blame for those fractious delays locally.

Within the British government’s Levelling Up White Paper, released in February, was an unexpected commitment to create a new ‘lite’ version of the defunct Home Information Pack.

HIPs were first cited in the 1997 Labour Party manifesto to address the problem of gazumping in a rampant housing market. Later research revealed it occurred in less than 2% of sales, whereas 28% fell by the wayside through delays and unforeseen issues.

Consequently, HIPs were a directive under the Housing Act 2004 but their introduction was deferred until August 2007 amidst fierce debate until finally becoming mandatory for houses with four or more bedrooms. This was soon extended to include three-bedroomed properties and by December Housing minister Yvette Cooper announced that HIPs would include one- and two-bedroom units.

They were intended to reduce the need for multiple prospective buyers having to obtain their own information and were also expected to reduce the number of aborted sales by having that information available as soon as the property was put up for sale. The cost to the vendor varied in 2007 but was approximately £500 on a four-bedroom property.

With the pack came a series of mandatory documents including title searches and what was then the new Energy Performance Certificate. A structural survey was also included, but sceptical mortgage providers wanted greater accountability and required purchasers to obtain their own survey.

What was formerly the National Association of Estate Agents – now Propertymark – lobbied extensively against the need for a survey and other measures in the pack that by the following year had been changed significantly.

When the Conservative-Liberal Democrat coalition came into government in May 2010 HIPs were scrapped altogether, with the exception of EPCs due to European Union directives. Communities Secretary Eric Pickles said at the time that the expensive and unnecessary Home Information Pack had increased the cost and hassle of selling homes and was stifling what was then a fragile housing market.

Under a 2006 Scottish law a house listed for sale north of the border still required a home report to be made available and still does today. This includes something called a single survey, which provides a fair market valuation and a three-level assessment of the condition of the building. This ranges between no immediate action required up to apparent future or clearly urgent repairs. An energy report assesses the building’s efficiency and environmental impact and a property questionnaire completed by the vendor provides year-on-year factoring costs such as council tax banding.

As offers are typically invited in excess of a quoted price in Scotland, the fair market valuation addresses the problem of artificially low asking prices simply to attract a higher level of interest.

Now comes the British government’s pledge to improve the home buying process by working with the industry to ensure the critical information buyers need is available digitally wherever possible from trusted and authenticated sources. If necessary, the government says, it will legislate.

On that basis various property professionals have been quick to devise and promote their own house-sale packs. The Home Buying and Selling Group, for example, claims to be actively participating with the ministry for housing to develop and test improvements in the homebuying process.

Among its focus areas, the group has developed a Buyer’s and Seller’s Property Information form to become the ‘single source of truth’ by containing all the information required about a property to ensure it is both ‘market ready’ in the disclosure of material facts and ‘sale ready’ with the information used by valuers and solicitors. All this upon the property first being listed on the market for sale.

To be market ready, would-be vendors or their estate agents will need to provide such information as disputes and complaints, alterations and changes, notices, fixtures and fittings, utilities and services, insurance cover and any specialist issues affecting the property. Any known defects with the building must also be disclosed.

To be sale ready, the new BASPI is concerned with legal ownership and boundaries, rights and informal arrangements, services crossing other property, energy provisions, guarantees, warranties and indemnity insurances.

In addition, all property listings should disclose restrictive covenants, local planning applications, flood risk and other factors that impact on that property. Much of this information is hoped to be available on secure digital platforms in the very near future, the sheer volume of which illustrates why there are delays in the English conveyancing system and the number of hurdles a sale could stumble over before completion.

Guernsey’s system is relatively straightforward by comparison, although would certainly benefit from some form of pre-sale information pack. To what level is a matter for discussion in order not to hinder the local market that this time next year will have a totally different complexion to that of the previous two years.

The upfront cost will deter some prospective vendors, especially those who need to act swiftly to secure a specific property. In all likelihood they will immediately withdraw their own from the market if the other property is sold before theirs, leaving them out of pocket.

A pre-sale home-buyer survey commissioned by a vendor seems a good idea but the purchaser will need another survey unless it can be assigned with the surveyor’s permission and approved by the purchaser’s mortgage provider as valid for its purposes.

Similarly, a purchaser’s advocate will not rely on title searches and boundary checks made by another office acting for the vendor, resulting in doubling-up on work, although pre-sale searches and pre-sale surveys might uncover problems that later would cause the sale to crash anyway.

In any event, if a purchaser’s surveyor, advocate and mortgage provider are not prepared to commit to operative dates in conditions of sale, as I pleaded for last week, any benefit in vendors having their ducks in a row ahead of time is completely wasted.