Sunday, May 27, 2007

HIP Replacements

It’s almost a year (June 16 2006) since I ventured into writing about Home Information Packs. Back then, the government, in the persona of Yvette Cooper, had just announced they were adding the Energy Performance Certificate to the pack as a way of complying with the European Energy Directive. About two weeks after this, they then ditched the requirement for a Home Condition Report, which until then had been the main feature of the pack.

The new slimline, energy saving HIPS were to have been introduced next week (June 1 2007) but the government has climbed down once more and postponed the launch till August 1 and even then has restricted the range of properties covered to those with four or more bedrooms. One of the reasons given is that there is an acute shortage of Energy Assessors: to date just 500 have been trained up.

It’s all become a bit of an embarrassment for the government. The idea of HIPs was first mooted back in the 1997 Labour manifesto but it wasn’t until the last election that the introduction of HIPs became part of the governments programme. Though most property people will happily admit that the English way of buying and selling houses is lengthy and chaotic, few can come up with any appealing alternatives. And they appear to have been almost universally united in their condemnation of HIPs. In fact, it’s been a legal challenge by the RICS (Royal Institute of Chartered Surveyors) which has caused the government’s latest turnaround.

The point, which is often overlooked, is that the market could have adopted HIPs, or something similar, without any prompting from government. A HIPped house would be advertised as Sale Ready, which would increase its attractiveness to buyers and just possibly its price, rather like words like organic or natural increase the attractiveness of items in supermarkets and the promise of a Full Service History makes a second hand car more marketable. It would suggest that a) the seller is serious and not just testing the waters and b) that there is a certain amount of confidence that the house is what it appears to be, and not a pile of shite waiting to be pulled apart by the buyer’s surveyor.

So why then have HIPs proved to be so unpopular? Why does nobody have a good word to say about them? My suspicion is that it’s to do with the vested interests of the property professionals to whom we entrust the buying and selling of our homes. And primarily, it must be the estate agents who fear HIPs the most. Estate agency is a classic foot-in-the-door business which survives on a mixture of confidence and blagging: they win business by promising huge sales prices achieved on tiny commissions and anything threatening this status quo threatens their livelihood. Thus HIPs have always seemed like very bad news for estate agents. For one thing, it has never been clear just how the pre-sale work was going to be paid for. An estate agent who asked for £500 up front before taking on your business would end up waiting an awful long time for a customer. On the other hand, if you offer to add the cost of the HIP survey work onto your commission, you run into all sorts of problems if the sale doesn’t go through. No, estate agents like things as they are, thank you very much, even if this does involve delinquent sellers, incompetent buyers and lots of broken chains.

But gnawing away at the back of my mind is that idea that there remains the nugget of a good idea in having Seller’s Packs prepared before a house goes on the market. Not necessarily for all houses, because there are many instances where people really do want to just test the market and don’t want to commit themselves to any expenditure in case the offers that come in aren’t what they want. But if you have to sell, for whatever reason, the availability of a Seller’s Pack would be like erecting an double-size For Sale sign outside your front door. It would create a two-tiered market of 1) houses for sale (maybe) and 2) houses really for sale.

What slightly amazes me is that the estate agency business is so up its own arse on this one that none of them has ever sought to offer Seller’s Packs as an extra marketing tool. If you sell something on e-bay, you get offered all kinds of add-on options, at a cost, to improve your visibility and your chances of getting a good price. Why not with houses? As someone who plans to be selling a house in the next twelve months, it’s a service I would happily pay for if I thought it would attract buyers. And I think it would.

Seems to me there is an opportunity here which everybody in the business is overlooking and the reason for this is that the government chose to force HIPs through using legislation, so that it would apply to every sale. By doing this, any hope of competitive advantage is wiped out and it just becomes another piece of useless red tape. But the estate agency businesses have been so knee-jerk in their opposition to HIPs that they have missed out on what could have been a really useful marketing tool.

In fact, the government’s chosen stance of making HIPs compulsory makes such an outcome unlikely. Only if HIPs were voluntary would there be any competitive advantage in using them. If one agent took up the challenge and it was shown to work well, then it wouldn’t take long for HIPs to spread throughout the sector and everybody and their aunt would be jumping up and down saying what a wonderful idea they were. But for that to have a chance of happening, Yvette Cooper and Ruth Kelly, the ministers responsible for this mess, have to have a change of heart. Or perhaps Gordon Brown is going to sack them anyhow.

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