HIPs

Searching for a HIP provider

June 2006

The proposed live introduction of Home Information Packs (HIPs) is just 12 months away, and those firms who are engaged in the manufacture and production of these new components to the house buying and selling process are really starting to ramp up activity to ensure delivery for HIP Day – 1 June 2007.

Estate agents and brokers alike will be and are being bombarded with propositions from the multitude of new organisations, all offering the HIP service that will differentiate you from your competition and help you to win customers.

Many of these companies are ‘virtual’, in that they farm out the HIP instruction to a panel of external providers to conduct the work with no real control of service or delivery. Companies forming relationships with HIP providers need to consider posing significant questions to these would-be providers to ensure that the HIP is delivered within a timescale, style and format that suits its business needs and those of its customers.

Ensuring that the basics are in place and that the provider is going to work with the business to add value, in terms of additional sales and income opportunities from the relationship, should be explored. In order to do this, you may wish to:

• Determine the level and/or degree of training and consultancy that can be supplied to support staff and ultimately customers
• Ascertain the marketing experience and support you will receive as well as the success rate of this activity and how it is demonstrated
• Identify any other income-streams that will be offered, protected or enhanced

Any organisation offering HIPs should have a demonstrable track record either working within or supporting the estate agency, mortgage broker or lender environment, and therefore a thorough understanding of the issues within estate agency, surveying services, financial services and conveyancing.

The introduction of HIPs is far-reaching in that it will fundamentally change the way estate agents do business and the attitude of customers looking to offer their properties to the market. Today sellers may test the water at a price in excess of that recommended by an agent but often achieve a sale. If they are unsuccessful and ultimately withdraw, the customer has generally incurred no cost.

Costs

After June 2007, when you need a HIP before you can put your property on the market, potential vendors are likely to be more circumspect in instructing an agent unless they are committed sellers. Most consumers are not willing to risk costing themselves over £500 if they can’t sell their property as a result of incorrect pricing. This should be positive, but, as we know from experience, an impulsive market appraisal often results in a sale, so the costs of committing to selling may have a limiting factor on the number of properties coming to the market.

Training

Training and education of staff will be the key to ensuring a smooth transition into the world of HIPs. Agents will need to educate customers on the benefits that HIPs should offer in the marketing of their property to prospective buyers, and many agents will require considerable training to develop the skills to overcome what may be negative customer attitudes. Despite the legislation, customers may not immediately understand the merits of having a HIP before marketing of their property can begin.

Estate agency firms that prepare early for this are likely to have the greatest opportunity to ensure that they experience as seamless a change as is possible. Preparation could involve making the most of the pre-market opportunities, diversifying and/or considering the introduction of other income streams to protect your business.

Intermediaries

Brokers will also need to be well versed in all aspects of HIP provision. Many customers contact their mortgage broker prior to selling their property in order to ascertain how much they can borrow on their next mortgage. So an IFA who is in a position to recommend a HIP is in an excellent position. In addition, they can also provide their customer with guidance if they are not sure about using their estate agents HIP service.

Further preparation could involve starting to talk to and educate your customers now about the forthcoming changes and consider introducing elements of the process ahead of the live date. Vendors will ultimately be judging agents on a whole raft of criteria, including:

• Speed to market
• Marketing and branding
• HIP knowledge
• Ability to handle the multitude of questions that HIPs are likely to pose to vendors and purchasers alike
• Price – how and when it is to be paid
• Presentation – how agents present the whole HIP package will be central in determining success or failure, so in choosing a HIP provider the agent or broker should be considering the same criteria as would a customer

Key aspects for agents and brokers to consider in choosing their HIP supplier would include the factors mentioned below.

Volume capability

Agents and brokers should only be considering manufacturers with proven service delivery capable of high-volume manufacture, management, packaging and delivery systems. Suppliers need to be able to demonstrate logistical back-up facilities, guarantee continuity of supply and have in place a fully tested disaster-recovery plan.

Home inspectors

Much has been written concerning the availability of sufficient numbers of Home Inspectors. What guarantees can the HIP provider make in relation to access to sufficient numbers of suitably qualified Home Inspectors? Can the HIP provider control both panel management and the availability of Home Inspectors to conduct work when the agent/broker needs a Home Condition Report? If you have a business that employs surveyors, what volume of work can you expect to receive and what guarantees can the HIP supplier offer?

Technical advice

What technical expertise and resources exist to deal with the spectrum of questions arising from vendors and potential buyers concerning aspects of the HIP’s content, and queries and concerns arising from the Home Condition Report? Agents and brokers are unlikely to want to get into a discussion where aspects of the HIP are contentious as most will not be competent to do so, and offering an opinion that may ultimately prove incorrect is likely to end in litigation. The HIP provider will need to have suitable resources to undertake this aspect of customer handling and service.

Funding options

What options does the HIP provider offer in terms of funding the pack? Few clients will want to pay up-front, but some may want to do so as they then own the pack and can choose alternative agents to market their property if they are unhappy with the initial choice. Fixed-term, interest-free, unsecured loans should be offered and guaranteed to all prospective vendors, and clients offered the chance to market the property in a timely manner without incurring initial expenditure. Many customers choose to sell to trade down because they are experiencing debt, and to find between £600 and £800 to fund a HIP would not be feasible.

Transparency of service and value

Agents and brokers should not be tied into exclusive arrangements for the provision of HIPs. This is a new market for all involved and as with the financial services industry following M-Day, consolidation is likely to take place once the winners and losers emerge. Companies should not limit themselves to one supplier but look to have at least two options from day one. Market forces, service delivery and ability to work with individual businesses to meet their objectives will, in the words of Alan Sugar, determine who gets hired and who gets fired.

The provision of HIPs is about high-volume, digital high-speed data collation and co-ordination utilising document-manufacturing systems and processes. Many local firms will not have the resources or capacity to act effectively in what will become a commoditised market. Many agents will have strong relationships with local solicitors and conveyancers, and any HIP proposition should allow those tried and tested local arrangements to remain for customers who wish to appoint a local firm to conduct conveyancing of either sale or purchase.

Firms should ascertain what options prospective HIP providers can offer in relation to branding of the HIP, be that branding for HIP provider, agent/broker or vendor.

HIP providers should be able to offer support for businesses by way of innovative marketing propositions and if, as widely predicted, the overall level of transactions falls, companies will need to focus even harder on those other areas of their business to maximise the cross-selling and income-stream opportunities that will underpin and support their business through a period of considerable change.