Mortgages. Big Changes In The Buying And Selling Of Houses.
Below is a MRR and PLR article in category Finance -> subcategory Mortgage.
Major Changes in Buying and Selling Homes: All About the New Mortgage Laws
Overview
Significant changes in real estate law will take effect from June 1, 2007, impacting the buying and selling of houses. Sellers will now be required to prepare a Home Information Pack (HIP) before listing a property.
What Happens If You Don’t Comply?
Failing to prepare a HIP will result in a £200 fine. Estate agents are likely to require the pack before listing your home, and buyers’ solicitors won’t proceed without it. Essentially, there’s no way around this new requirement.
What Should Be Included in the HIP?
Though final details are pending, here’s what the Government currently proposes for the HIP:
- From H.M. Land Registry: Search results.
- Initial Enquiries: Replies to common inquiries made by the buyer's solicitor.
- Planning and Building Consents: Copies of all relevant consents and approvals. If missing, request these from your Local Planning Authority.
- New Properties: Include building warranties, electrical test certificates, and other relevant guarantees.
- Draft Sale Contract
- Professional Survey: A Home Condition Report, which gives more detailed information than a lender’s valuation report. It should cover the property's condition, energy efficiency, room details, and parking situations. Both buyer and seller can legally rely on this report, potentially reducing the need for separate surveys.
- Local Authority Searches
If the property is leasehold, include:
- Lease Copy
- Service Charge Accounts and Receipts
- Building Insurance Details and Receipts
- Regulations from Management Company or Landlord
Cost Implications
The Government estimates the HIP will cost around £825, including VAT, though these aren’t viewed as additional expenses. Since sellers are often buyers too, costs might balance out through savings elsewhere.
Paying for the Pack
While the Government suggests sellers won’t pay upfront, it’s likely that this cost will be due when listing the property. This upfront cost may discourage those who aren’t fully committed to selling, potentially reducing market entries.
Market Forces and Pricing
The Government believes competition will keep HIP prices down. However, how estate agents and solicitors adjust their fees will play a crucial role. Be ready to shop around for the best deal.
Impact on Sale Transactions
Annually, 30% of agreed house sales fall through, costing at least £350 million. The introduction of HIPs aims to reduce these failed transactions and associated costs. The hope is to address problems early before substantial investment is made in the process.
However, some argue that HIPs may simply shift existing issues to the start of the sale rather than eliminate them. There is skepticism around their effectiveness in preventing issues like gazumping.
Final Thoughts
If HIPs bring potential problems to light earlier in the process, this could lead to smoother transactions. However, there are concerns about the administrative burden this change may create, especially with the need to train and certify over 7,500 inspectors for the new Home Condition Reports. Only time will tell how these changes play out in practice.
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