Home information packs 'could encourage gazumping'

Thursday, 2 February 2006 12:00 AM

Estate agents are warning that the introduction of home information packs (Hips) could cause a return of gazumping.

They are worried that the supply of properties on the market may be reduced by their introduction, giving buyers less choice and encouraging gazumping - where a seller accepts a second, higher, offer after already agreeing to sell to someone else.

It follows criticism by mortgage lenders about the government's failure to properly evaluate their likely impact.

Home information packs will be introduced in June 2007, meaning sellers will have to pay for a home condition report prior to putting their property on the market.

The National Association of Estate Agents (NAEA) says home information packs will alter the balance of the property market that has traded successfully on a 'no sale, no fee' basis for many years.

It is concerned that homeowners may be deterred from selling property because they have to pay for a home information pack regardless of whether a sale is achieved.

Additionally, a property cannot be marketed by an estate agent until a home information pack is put together, with a possible delay of 14 days.

While unlikely to put off the determined seller, those taking a more speculative approach may be put off.

According to the NAEA, there is currently a plentiful supply of properties for sale, reducing the chance of gazumping.

But experts are predicting a huge increase in the number of properties being marketed prior to the introduction of home information packs, followed by a decline after their introduction - increasing the chances of gazumping.

"Buyers who are concerned about a lack of properties available from June 1st next year may find themselves in a gazumping situation," said Peter Bolton King, NAEA chief executive.

"There is also an argument that says the Hip could actually make gazumping easier. The objective of the Hip is to speed up the buying and selling process by making all the required information available at the start of the process.

"The ability for increased numbers of people to have instant access to the Hip could increase the chance of gazumping."

Earlier this week, the Council of Mortgage Lenders (CML) expressed concern about how the home condition report element of home information packs would impact on the mortgage process.

It said mortgage lenders would still need to conduct their own valuations of property to assess levels of lending risk, and like the NAEA warned of a "feast and famine" around the go-live date for home information packs.

"Hips represent a huge change in the process of buying and selling a house and will undoubtedly impact upon the market possibly unintentional ways," said CML director general Michael Coogan.

"The government must examine what impact the packs will have so that all stakeholders can be prepared for their onset."

But this argument is rejected by Mike Ockenden, director general of the Association of Home Information Pack Providers. "We do not subscribe to the view that the introduction of Hips will lead to a feast and famine of houses on the market," he said.

"There may be a small flurry of sellers putting their homes on the market before the compulsory introduction of Hips. But what about the buyer?

"Buyers are not so stupid as to accept a house for sale without a home condition report which will be free to them and is of considerable benefit to a purchaser. They surely will demand one and any house for sale post-Hips, without a survey, will be at a distinct disadvantage.

"As to the CML's point that the Hips will not remove the need for lenders to conduct valuations is a little disingenuous.

"Many so-called valuations are simply 'drive-by' exercises and with automated valuation models or desktop valuations being increasingly used the need for an additional survey is totally unnecessary. In time the home inspector will be qualified to undertake such valuations."

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