The acronym FSBO stands for FOR SALE BY OWNER

 

 

 

 

Surveys and HIPs

What is a Building Survey and do I need one?

A Building Survey is likely to be a legal requirement in the future although it is not a requirement at present. It is however, a good idea to have a survey done before selling your house for a number of reasons. Firstly it will highlight things which might otherwise delay the sale and enable you to show that you have either taken account of these in the price or have taken care of the repair. This can reduce wasted viewings or haggling over price.

The main benefit of a voluntary Building Survey is that you can show potential buyers that you are trustworthy and have nothing to hide.

The Building Survey will report on the construction and general condition of the property and is advisable regardless of the age of the property, however new. The main reason for a building Survey is to reassure potential buyers that they will not have any unforseen expensive repair bills. The Building Survey only covers construction and condition of the property. It does not cover services e.g. water, electricity etc. If you have any comments on these (recent rewiring, replacement of lead pipes etc.) then this should be mentioned in the particulars and backed up with invoices if possible.

What is a ‘Homebuyer Survey’ and how does it differ from a full Building Survey?

A Homebuyer Survey is cheaper than a Building Survey but can give most of the assurances as in a Building Survey for a lower cost. A Homebuyer Survey is intended for standard residential buildings, houses, flats and bungalows that are conventional in type and construction and in reasonable condition.

The Homebuyer Survey concentrates on the main essentials and problems that need to be repaired straight away or are going to have to be carried out soon. It will comment on other general aspects of the property but not in the same detail as the full Survey. It will tell the potential buyer whether there are any major constructional issues and many Homebuyer Surveys will indicate a rough cost for any repairs noted. This enables the seller to either have the repairs carried out ahead of the sale or to indicate that the selling price has been reduced by the estimated cost of the repair.

The important difference between a Homebuyer Survey and a full Structural Survey (apart from the cost - A homebuyer Survey is typically 60% of the cost of a full Structural Survey) is that the Homebuyer Survey can miss structural details such as missing/removed lintels, altered supporting walls or other DIY alterations carried out without planning permission. It can also miss the presence of asbestos whilch may need to be removed. These are often disguised by the decor and can be overlooked in the Homebuyer Survey. This is a potential cause of extra expenditure to the buyer. If the property is modern and in generally good condition then a Homebuyers Survey may be all you will need. If it is older and much modified or run-down you may consider the extra cost of a Structural Survey to be well worth while.

 

HIP (Home Information Packs)

The sections of these FAQs referring to Surveys have been partially superceded in August 2007 with the (delayed) introduction of HIPs (Home Information Packs) for four-bedroomed or larger properties in England and Wales. The extension of HIPs to smaller properties is said to be purely dependant on the availability of more HIP inspectors and can take place at three weeks notice at any time in the future.

HIPs were proposed as a means of easing the house sales process by giving the potential buyer upfront a detailed report on the property on sale. This replaced the old process which was:

  1. See Property Details,
  2. Viewing,
  3. Offer,
  4. Survey (at buyer's cost)
  5. Review of Purchase,
  6. Buyer/Seller negotiations,
  7. Confirmation of offer,
  8. Legal Sales Process starts.

The old process introduced an automatic delay whilst the purchaser studied the survey and had to decide whether to change the offer before proceeding or even drop the offer. It was reported that the vast proportion of ‘failed’ sales occurred at this stage.

The proposed new streamlined process is:

  1. See Property Details including HIP(at Seller's cost),
  2. Viewing,
  3. Offer,
  4. Legal Selling Process starts.

When the HIPs scheme was being proposed Housing Minister, Yvette Cooper said,

Currently, one million pounds a day is wasted on buying and selling homes. Buyers often spend hundreds of pounds on valuations, legal advice and searches on sales that ultimately break down. By providing key information at the beginning of the process, Home Information Packs will prevent waste and significantly cut the number of sales that fall through. That is why consumers groups have been calling for them for years.

Home Information Packs (HIPs) were designed to speed up the home buying process by making sure the seller has information about their property ready before starting to market the property for sale. This means that a legal responsibility will fall on the person selling the property to ensure all relevant documents are ready to present to prospective buyers on request.

In its proposed form the HIP would contain:

In addition if the property is leasehold:

The Home Condition Report is the only part of the Home Information Pack that is not currently provided during the existing home selling and buying process. It is essentially the same as the voluntary Survey Report referred to elsewhere in these FAQs and reports on the general condition of the property and highlights required repairs etc.

Following pressure from Estate Agents worried about fewer sellers under the new scheme, the government appears to have scrapped the proposed Home Condition Reports after 130 MPs signed a motion against the packs.

There were concerns there would not have been enough inspectors to cope with demands for the Home Condition Reports. Plans to train 7,500 inspectors were behind schedule and at that stage only 232 inspectors had completed their training.

The Home Condition Report is now voluntary unless Governmental regulations change (again). The new advice is that the HIP comprises 'required' and 'authorised' documents. The 'required' documents include searches etc but the Home condition report is only 'authorised' meaning that it can be there if the vendor wishes but is not mandatory. The Home Information Pack (No2) Regulations 2007: Procedural Guidance published 12 July 2007 states:

Authorised documents and information do not have to be provided in home

information packs. However, it is strongly recommended that these documents

are included in the pack where they are relevant to the property and/or its sale

and are likely to be of interest to potential buyers. In particular, it is strongly

recommended that a home condition report, home contents and home use

information are included.

Including a home condition report in a Pack is likely to ensure that sales are not

delayed as a result of condition related problems coming to light later on in the

sale.

The Home Condition Report is a mortgage valuation type report known to the industry as a ‘level 2’ inspection and gives a similar amount of detail as that provided in the RICS Homebuyer Survey and Valuation, known as the HSV ‘level 1’ inspection and some aspects of the more detailed Building Survey or full Structural Survey known as a ‘level 3’. Home Inspectors must work according to inspection and reporting requirements specified by a Government approved certification scheme and under the National Occupational Standards.

The report is in a standard format with built-in flexibility to accommodate all sizes and types of properties from a small studio flat to a ‘listed’ country home. It is designed to be easily understood by the lay reader and is intended to be clear, consistent and accurate.

The HIP will also contain an Energy Performance Certificate as part of the Home Information Packs. To produce this Inspectors will evaluate the current and potential energy efficiency of each home, giving a rating from A to G. The report will also list measures the home owner could undertake to improve the rating (e.g. fitting low energy lightbulbs). From June 2007 all homes in the UK must have an energy efficiency rating before they can be sold. The government says this move, which is in line with European agreements, will help the UK reduce its carbon emissions.

In order to test the HIPs theory, HIPS including a voluntary Home Condition Report were rolled-out in 6 trial areas in Summer 2006. To encourage the inclusion of the HCR the Government provided funds to provide HIPS (with voluntary HCR) free-of-charge to the seller. A statement from housing minister Yvette Cooper indicated that £4 million of funding would support the 6 area trials later that year to show the government's renewed commitment to Home Information Packs, according to the industry body for HIP providers.

Home Information Packs were then introduced in each of the 6 locations of Phase I starting in Newcastle on the 6th of November 2006 with the final roll-out in Bath on the 17th.

The postcodes for the houses eligible for the government incentives were:

 

A survey reported by the BBC in January 2007 regarding the takeup of the HCR in the Newcastle area showed that 85 per cent of consumers had taken the Home Condition Report (HCR) as part of the HIP and had led to seller/buyer satisfaction in the process. The BBC program however did question whether this level of acceptance would continue once the ‘free’ period was over and the seller had to pay between £400 and £700 for an HCR for the average home. Sellers interviewed said they would still pay because of the easier sales process and reduced haggling involved in the sale.

HIP exemption for 'private sales'

“I’m selling privately and I’ve been told I don’t need a HIP. Is this true?”

There has been much confusion arising from the use of the phrase “private sale” in connection with a HIP exemption in Communities & Local Government documentation. In public mind, a ‘Private Sale’ simply means a sale made without the involvement of an Estate Agent. This is not the definition applying to the HIP exemption and in fact, it is not really an exemptioon at all.

The Communities and Local Government have defined verbally that their definition of “private sale” in this context is very much stricter than the concept of “Private Sale” as generally accepted.

The easiest way to visualise their definition is that a “private sale” is one where absolutely no “marketing” of the property has taken place. This is very specific and the only case they could quote is where a person walks up to a property not currently on-sale and asks the householder if they would be prepared to sell the property. In this case no HIP is required because the house was never offered for sale.

Anything involving ‘marketing’ of a property is liable to a HIP. The OFT definition of ‘Marketing’ can be just telling a friend or family member that the house is going on the market so even sales to a family relative fall outside of the exemption. This does beg the question of whether a family member asking another if they want to sell would be exempt! According to their definition it would seem to be exempt but until it’s tested in court no one knows!

The 'exemption' does not apply to house search agents as originally thought. House search Agents are people who take on a commission to find a property for buyers and go round knocking on doors of likely properties, on-sale or not. Originally these house search agents thought HIPs would not be required but they have now been told that they are.

The C&LG position here is that once the house search agent has received the answer that the house might be available at the right price, the property is now on-sale and being marketed. The agent can then potentially make the availability of the now 'on-sale' property known to multiple buyers. Even if only the original person that commissioned the search is informed of the avalability, 'marketing' is being carried out and a HIP is necessary. Once availabilty has been determined the house search agent is effectively merely acting as an exclusiver 'sole agent'.

The argument is that their actions are no different from Estate Agents leafletting areas of interest to buyers and then informing the potential buyers about any positive responses to the leaflets.

The truth then is that the ‘no HIP needed’ exemption is so tight as to be almost unusable, so the answer in the overwhelming majority of cases is simply “if you’re selling you need a HIP”.