The great “will they or won't they” debate finally came to a conclusion last week as the government confirmed that legislation to bring in seller's packs will be brought forward in the new session of Parliament. The sections of the Homes Bill that related to seller's packs, which were put on hold when last year's General Election was called, will be brought back – probably in February, next year. Thereafter, there will be a further period of consultation on the Bill and then a second reading in, perhaps, June. Overall, the government is aiming for the Bill to become law during 2003, with implementation of the new requirements in 2005 or 2006.
The only significant change from the legislation that was discussed previously is that criminal sanctions for the non-production of a pack will be replaced with lighter civil sanctions. This change will be welcomed by many estate agents who resented possible criminalisation.
A big change to the estate agency market then – and it could send shockwaves right through the closely related mortgage and protection markets, too.
There will continue to be much opposition to the plans over coming months and those with strong views should continue to make these known – it will not be too late to influence the detail of the proposals. But perhaps the most pragmatic approach now is for businesses to start to plan how they would operate in a seller's pack world. Serious planning for their arrival will be needed regardless of opinions about their merits.
The controversial packs have polarised opinion within the housing industry with critics believing that, while they might shorten the time taken from offer to exchange of contracts, there is great concern over their potential cost and the effect on the flow of properties to the market. In addition, people should be cautious about expecting great improvements in the process of buying and selling homes as a result of seller's packs. They may not be the great panacea to the remaining ills of buying and selling homes.
Many people believe that they will not address the problems caused by chains and they will not eliminate gazumping. Even if the use of seller's packs does manage to reduce the process by two or three weeks, there will still be ample opportunity for buyers to put in higher offers and for sellers to accept them. And, acting as the agent of the vendor, the estate agent is often caught in an uncomfortable position, being obliged to pass on other offers, even if the sale is at an advanced stage, to another party. Agents often get the blame for gazumping, but in reality it is the actions of buyers and sellers that bring it about.
Another area of concern is the cost of packs. Some commentators have said this could be as much as £500 although, in reality, sellers buying elsewhere will save the cost of a survey themselves so the net cost could be lower. However, any additional cost, hassle or delay in putting a property on the market might cause some homeowners to question the wisdom of moving in the first place. Might this cause a downturn in the supply of properties onto the market at the time the packs are introduced? Many of Legal & General's estate agency Business Partners believe so.
The main area of controversy though, is around the survey – called the Home Condition Report – that will have to be done for every housing transaction. This will require a huge increase on the numbers of surveys and valuations conducted. Leaving aside the non-trivial issue of who is available to do these surveys in the first place, some people may question whether it should be the government's role to compel people involved in commercial transactions to have such a survey in the first place. However, there is an expectation that, by forcing sellers and buyers to face up to the defects in their properties, a gradual improvement in the quality of the housing stock will follow. In this way, the government may be trying to kill two birds with one stone.
But this degree of change to the way we are all used to buying and selling homes in England and Wales won't happen smoothly – or without a lot of people putting in a lot of work between now and 2005-6. The government has a major role to play in managing the expectations of everyone involved in moving home and educating them about the changes.
The CML recently published the results of research that it had commissioned on all the other positive developments that are going on in the housing market and concluded that the case for seller's packs was not compelling. We believe that the industry has proved it can respond to challenges with the changes it has already made to the process of moving home without legislation. Much of this has been achieved through the exponential rise in the use of technology by estate agents, lenders, surveyors, intermediaries and even solicitors. We would hope that, by building on the achievement of all this voluntary change, the enforced change to a seller's pack system can be managed smoothly.
Mortgage intermediaries may feel that this is a change they can ignore, but in reality, the degree of change to the estate agency market that seller's packs will bring may affect the flow of business up the chain. What if lenders start to use pack production as a customer retention tool – locking in borrowers with packs that are free if the new mortgage is taken with them? Could the protection sale be at risk in this way as well? And there may be a jockeying for position with estate agents too, which may affect long-standing introducer arrangements.
So, alongside the changes to mortgage regulation, planned for late 2004, our industry now has to start planning for another major change from possibly as early as 2005. The ancient Chinese curse “May you live in interesting times” is certainly apt. But, as always, walking towards change rather than waiting for it to run you over has got to be the best course.
Packs won't cure gazumping problem
Paul Duckworth, managing director, xit2
“I was reassured to hear that seller's packs are back on the legislative agenda. Any initiative that aims to improve the house-buying process can only be a good thing, particularly as England has one of the slowest home-buying and selling processes in Europe.
However, seller's packs should by no means be seen as the panacea to solving the gazumping problem. There is, in fact, little evidence that seller's packs in isolation will significantly reduce gazumping. Other initiatives, such as e-enabling the house-buying supply chain have almost overtaken the initiative during the time it has taken the Homes Bill to reach draft stages.
E-enabling many of the processes necessary to complete a house purchase is equally, if not more, important in achieving a level playing field and improving standards for the consumer.”