Home Reports

Writing this on the 2nd December 2010. Two years have now passed and as Online Estate Agents we would like to share our opinion as to whether Home Reports have been a success or failure.  To found out more on Home Reports visit our website at www.scottishhousemove.com.

Lets look at the reasons for introducing them.  Stewart Maxwell (by the way Mr Maxwell actually attended my wedding - this was the first time I met him) a SNP member of the Scottish Parliament raised a private members bill for there introduction, which was passed by MSP's.  In my view they were introduced for two reasons

1)  To give buyers a clear picture of what they were buying.  Might sound simple but as most buyers only obtained a mortgage valuation when buying property, this survey was limited.  Very few people instructed a Scheme 2 survey. this survey gave a full view of the condition of a property prior to purchase.  So this could only be a good thing for the buyer.

2)  To stop multiple surveys.  In the Scottish market prior to the slow down, offers over was commonplace.  If you wanted £200K for your property price it at offers over £180K and see what happens.  Some areas would mean you paid 10% over the asking normally but others e.g. Glasgow West End or say Newton Mearns 40% was not uncommon.  Estate Agents would have several closing dates where buyers would make a sealed bid.  The most bids at a closing date I saw was 45 offers and each one of the offers had carried out a survey or at least paid for a transcript of another bidders.  So you could have paid £500 and missed out on a property.  Now multiply this by 3,4,5 or in some cased more.....

So has the introduction of Home Reports dealt with the above two issues?  The Scottish Government seem to think so.   I will steal a few facts from their interim report

60% of buyers found them useful
20% found the Energy Performance Certificate (EPC) and questionnaire useful
150,000 home reports had been carried

One of the real interesting facts was about what sellers paid.......

32 per cent of sellers paid less than 300 pounds and 45 per cent paid between 300 pounds and 500 pounds. For properties usually at the top end of the market, 18 per cent paid between 500 pounds and 800 pounds.

I think this is flawed info.  With most High Street Estate Agents charging a minimum of £350 I believe the figure of 32% who paid less that £300 should be nearer 10%.  It is still possible to get Cheap Home Reports from companies like http://www.allscotsurveyors.com/ who are like ourselves internet based and therefore can lower the cost.

Lets look at issue 1 - Buyers be aware

The Home Report details the condition of the property.  All the surveys are carried out by RICS qualified surveyors who detail things such as condition of the roof, guttering, dampness issues, structural flaws, walls, floors, joinery, electricity, gas etc etc etc.  These are then graded 1-3 and comments noted beside them.  In a lot of cases (in fact in many many cases) surveyors caveat their responses by saying "We found something that may be an issue but suggest you get a qualified person to look at it".  But at least this is a warning not all is well.

So yes this is good news for the buyer as they can see if their is any major issues before a purchase.  But be aware of the grading.  We sold two flats in the one close recently and two completely sets of answers from two different surveyors came out.  Surveyor A gave the roof a 2 and noted a few bits on pieces of damage but gave the close a 1 and no mention of dampness.  Whereas Surveyor B gave the roof a 1 and never noted anything but gave the close a 2 and mention dampness.  Same close two different replies??

Issue 2 multiple surveys

This has probably been negated by the crash anyway as very few properties now go to closing dates.  So potential buyers get the home report free of charge and decide what they want to pay.  As the Home Report contains a valuation, very few buyers pay over the valuation, in fact a very high percentage negotiate prices under the home report valuation.

The Scottish Government noted yesterday that in 30% of sales a further survey was required.  This could be for two reasons, the home report provider is not on the banks lending panel (all lenders have a list of surveyors they trust to provide surveys - if you are not on their panel they will not lend you money on the basis of that surveyor) and therefore they will instruct their own.  Who pays for this other survey?  I have found it is split equally between the banks, seller and the buyer. 

What about the refresh survey?  Even if a survey is carried out by a surveyor on a banks panel if the report is over 3 months old, they will not accept and the sellers needs to get a refresh done.  This involves the surveyor returning to the property and doing a quick update.  The bad news is the seller has to fork out another £100 plus vat....

So have they been worth all the cost and hassle to sellers?

YES & NO.

For an estate agent they have probably been a good thing.  I remember not so long ago when you visit a property and the value is £100K before you walk in the door.  You have just sold 5 similar properties all for this figure and the owner thinks their property is worth £120K because their garden is 3 feet bigger!!!  Remember these days?  Now a surveyor today would value it at £100K on the Home report and the seller is therefore more realistic in their expectations.  Job done.  Who needs a valuer these days?

It must also be a good thing for the buyer and seller that issues about their property are raised at the start of the process.  We have found many sellers who see issues on their home report and carry out repairs before putting their property on the market.  From a buyers point of view, you have the confidence that the property you have bought is not falling down.

On the cost side two things are happening, as new entrants come to the market the major Scottish surveyors may have to reduce their prices as internet start ups continue to gain market share.  The banks need to start accepting reports at least 6 months old as well or what is the point in having a valuation on the report?

The EPC no one understands either, just a document with some numbers and pretty graphs, but it is EU policy so they are here to stay....

So from the view of ScottishHouseMove.com a good thing with some minor issues.  However, with the Scottish Elections in 2011 will they be here for good?