Over the last few years the question of whether to introduce a Sellers’ Pack has caused controversy, from the initial research, to becoming a pilot scheme through to finalising proposals. But last year the issue appeared to drop off the agenda, leading many to think it had been accepted as an unsuccessful exercise. However, it is now clear that in the next few years Sellers’ Packs are going to be a fact of life rather than a perennial question mark.
So if the debates and discussions are over it is no longer important what people think, but what they know about Sellers’ Packs.
Ironing out creases
It has taken four years to get to the current situation, beginning with Government research carried out in 1998. This research concluded the house-buying process would be faster and more efficient if buyers and sellers were well prepared beforehand. It found the stage from offer to exchange of contracts is fraught with delays and uncertainty, with almost 30% of transactions failing at this stage, and that the UK has one of the slowest property transaction processes in Europe (but also one of the cheapest). It also found many buyers and sellers expressed satisfaction with the professionals involved in the process.
Put simply, timescales were viewed as unacceptably inefficient and the Government decided to investigate where potential improvements could be made.
In October 1999, the Government announced proposals to reduce delays and uncertainties when buying and selling a property in England and Wales. It published a Green Paper in which the key recommendation was for sellers to produce a pack of information, called a Sellers’ Pack before putting a property on the market. This pack would be designed to provide more information to buyers at an earlier stage to help with their decision-making and reduce worries between offer and exchange of contracts that something unexpected would arise.
Although the exact details are still a long way from being finalised, the Sellers’ Pack will probably need to contain five key items. It is likely to include a report of the property’s condition called a Home Condition Report (HCR). This will be in a prescribed format, and each one will be recorded on a central database. It will also need to include reparatory legal work including draft contracts and answers to standard questions. A third item for inclusion is a copy of title deeds to the property, as well as an energy efficiency report for the property and details of local authority searches.
Turning on the pilot light
In order to check how viable the proposals were, the Government decided to run a Sellers’ Pack pilot. Between December 1999 and July 2000, the pilot ran in the Bristol city council area and Sellers’ Packs were given out to buyers at no cost to the sellers. The actual ‘pilot pack’ cost is reported to have been just under £600 each.
Among the small number of buyers who participated in the pilot the majority reported being satisfied with the experience. The HCR and legal documentation were certainly found to give a clearer and earlier understanding about the property. Conveyancers were also happy, and reported a new level of efficiency during the pilot.
It is interesting to note that the pilot results indicated many of the sales involving Sellers’ Packs had been completed around two weeks faster than the average time without a pack. On the other hand, there were delays of up to 11 working days before the properties could go on the market in the first place. And the reason ‘ the Sellers’ Pack contents had to be collated ‘ a point that proved irritating for estate agents.
However, the pilot proved controversial in itself ‘ decried as being an insubstantial experiment due to the small number of packs tested and because they were all undertaken in an affluent and buoyant property market. There were also a number of serious issues raised by using Sellers’ Packs that were not addressed by the pilot. Under previously proposed legislation, if estate agents did not give packs to buyers, they would have been liable to criminal proceedings. Needless to say, this caused much commotion among agents. But it is now unlikely to come to that. Lord Rooker, the minister for housing, recently confirmed the revised Bill will contain new proposals to provide for civil sanctions instead.
In addition, many people believe the Sellers’ Pack cannot remove the effects of gazumping or long chains so hopes should not be raised for a ‘perfect’ market in the future. Some commentators, however, suggest the Land Registry’s proposals for electronic conveyancing will be the main initiative that will change the home-buying and selling experience.
Surveys and valuations
One limiting factor highlighted in the Government’s research was that only around 20% to 40% of people currently instruct a survey more detailed than the lender’s valuation when buying a property. But the new regime will require 100% of pre-marketing HCR surveys. You can hear the groans of the surveying profession suffering under the additional pressure of an overnight workload increase of around 60% to 80%. Many extra surveyors will be needed, but where will they come from ‘ and can they be trained in time? This is one serious headache for the Government, which has said packs will not be introduced until it knows there are enough surveyors to cope.
However, overall the pilot was viewed as an important learning experience about the practical operation of packs by the then housing minister, Nick Raynsford ‘ and the process moved onto the next stage.
Towards the end of 2000, a Homes Bill was introduced to Parliament, which included the new draft legislation required to make Sellers’ Packs law. However, after lengthy discussion in committee, the Bill remained at an early stage because the 2001 General Election was called. After this everything seemed to go quiet, but behind the scenes further consultation has been going on and the industry has been waiting to see if the packs would make a reappearance.
After a delay of a year and a half, in November 2002 the Queen outlined the objectives for the Government’s year ahead. Just when it was thought safe to sell houses again, Sellers’ Packs were back on the agenda.
Lord Rooker, minister for housing, recently confirmed a revised draft Homes Bill will be published in early 2003 and is planning two additional consultations: one to look into areas of low-cost property and the likely detrimental effects Sellers’ Packs could have there; the second is to look at the actual content detail of the packs and HCRs. The potential timetable can be seen in the table below:
Sellers’ Packs timetable
Early 2003 Further consultation on low price areas and pack contents
Mid-2003 New Housing Bill introduced to Parliament
Late 2003 Bill becomes law and the housing industry prepares for Sellers’ Packs
January 2005 or 2006 Sellers’ Packs are launched in England and Wales and become normal
The introduction of packs will be a fundamental change in the way customers and professionals buy and sell houses. Confidence in the housing market will need to be carefully managed and maintained both before and after the changes. To support this, the Government must start a clear education process ‘ for both consumers and industry professionals. Sellers and buyers will need a lot of ‘hand-holding’ in the Sellers’ Pack infancy. It will fall to the professionals in the industry to provide this guidance, but the Government will have to take the lead. Indeed, this education will need to continue for many years as homeowners who only move, on average, once every seven years, gradually start to experience the new process.
The other key concern remains the potential cost of the Sellers’ Pack. The Bristol pilot placed the cost at just under £600. This may be acceptable in high property value areas, but do not forget about the areas where properties struggle to reach values of even £30,000. The housing industry needs to consider ways to minimise the cost. Some agents or lenders may consider whether they would be willing to defer payment, or even provide the pack ‘free’ of charge. However, whatever the extra cost ends up being, it is inevitable borrowers will pay one way or another.
The early bird
From the pilot and the research in other countries, having the searches carried out before going on the market and the benefit of viewing the HCR at an early stage could save around two weeks between offer and exchange. This is great, but it also needs to be remembered that the pre-marketing organisation might also take two weeks to deliver the report. The real benefit is believed to be that buyers will no longer have to suffer so much uncertainty when making what is probably the biggest financial decision of their lives. Buyers will no longer be faced with the worry of having to pay for several different home valuations due to failed transactions. And add to this the financial savings for first-time buyers who do not have a property to sell.
The reintroduction of the Sellers’ Pack legislation means we are heading towards a huge change in our business processes. No matter what has been said in the past, the sooner we embrace the proposals the easier it will be to adopt the changes when they become a reality. To find out the real impact on the housing market ‘ we will have to wait and see. The more proficient we are with the Sellers’ Pack, the bigger the opportunities for turning an unpredictable position into a positive sales message to customers.