Home Information Packs (HIPs) were introduced in the UK this past summer as a way to improve transparency in the HomeBuying process. HIPs contain information related to a property’s title, local planning decisions, drainage and water services and an energy performance certificate. HIPs, which are prepared by the Seller of a property, help HomeBuyers make more informed decisions about the property they are considering purchasing.
As of December 14th, every property marketed for sale in the UK will need a HIP. While it’s the responsibility of the Seller to prepare the pack, most hire a company to prepare them for a fee between $800 to $1,400 CDN.
Is it time for our governments to consider implementing some version of Home Information Packs in Canada? I started thinking about this possibility when I read about a Manitoba couple that spent $180K on their home, only to find out a short while later that it had previously been under more than 2 meters of water during the Red River flood. Upon starting their home renovations, the couple found mould in the walls and the ceilings along with wiring and foundation problems. The problems with the house were so severe that the home had to be demolished.
The UK experiment has not been without problems. First, and most importantly, there was concern that by omitting the mandatory inclusion of a home inspection (Sellers are encouraged to include one on a voluntary basis), HomeBuyers would not benefit greatly from HIPs. There was also widespread industry concern that the
government's aggressive implementation schedule failed to first
consider whether there were enough qualified professionals to produce
HIPs, particularly those required to do energy audits. Following a legal challenge, the government was forced to compromise with a phased-in approach, which made homes with four rooms or more subject to HIP regulations first, with other homes to be included as resources allowed. This 'loophole' was quickly utilized by Sellers eager to save a buck - some four-bedroom homes were listed as having three bedrooms. The December 14th roll-out to all homes has also had a temporary impact on the timing of homes going on the market, as Sellers have moved quickly to avoid being subject to the new regulations.
Implementation challenges aside, the HIP shows great promise in strengthening the position of HomeBuyers in the real estate transaction. By modifying the UK version to Include home inspections as part of a similar Home Information Pack, we could ensure greater transparency during the multiple offer process. HomeBuyers typically remove their condition on a home inspection when competing in a multiple offer scenario in order to improve their odds of winning (for more on this, see Realosophy's HomeBuyers Guide). The problem is that all too often the ‘winners’ of the multiple offer discover that their newly won dream home requires thousands of dollars in repairs that a home inspector would have discovered had they insisted on a home inspection.
Would HomeBuyers benefit by making a home’s title information, local planning decisions and a home inspection report mandatory when marketing a property for sale in Canada? Of course.
Perhaps our provincial governments should keep an eye on how HIPs unfold in the UK to see if there are any ideas we can transplant courtesy of our neighbours across the pond.