Home reports – a bad idea brought in at the worst possible time

Published on Wednesday 26 November 2008 20:41

THE introduction of home reports is ill conceived, will stop residential property sales in their tracks and lead to more repossession orders.

Those are the unpalatable facts and I would urge the Scottish Government to halt the controversial reports, which will cost sellers between 600 and 800 and will be required for all home sales from 1 December.

It's my belief that the new system of selling properties will depress a sector which is already in meltdown and they should be avoided like the plague.

The Scottish Government recently came under united opposition pressure to provide home owners with the same protection against repossession as in England.

I predict that home reports are likely to increase the number of repossessions.

From 1 December anyone selling their home must first commission a home report which will include a professional valuation, an energy performance report and a property questionnaire.

The Law Society of Scotland voted overwhelmingly in favour of postponing home reports for two years. The Royal Institute of Chartered Surveyors in Scotland estimates the cost to sellers will be between 585 and 820.

Good work done by the Holyrood and Westminster governments and the Bank of England to stimulate the housebuilding market has been welcome but I fear this will be quickly undone with the introduction of home reports.

The Scottish Government has accelerated certain measures calculated to assist the housebuilders and should be applauded for doing so, but anything which is likely to depress the sector should be avoided. In my view home reports will at the very least depress the sector and at worst do dreadful harm.

As well as mortgage lending returning to normal levels on affordable terms, what is required just now is increased confidence to encourage people to place their homes on the market and sell them at realistic prices. Some of these people will inevitably buy new homes, which is why housebuilders have an interest in this issue.

With land values falling by the week, valuation surveyors are in an intolerable position and may be tempted to produce ultra cautious valuations for home reports to prevent subsequent challenges from mortgage lenders and potential court actions.

Faced with an additional outlay of more than 500, sellers could be required to hand over a report to a potential purchaser which is likely to include a valuation much less than the price which even a reasonable and realistic seller is expecting to achieve.

Substitute a forced seller or indeed a redundant seller, for a realistic and reasonable seller, and I expect that the necessity of producing home reports is likely to stop in its tracks even the meagre amount of activity which the sector currently enjoys.

It will also leave those homeowners who are worst affected by the economic downturn to face the prospect of repossession.

Another concern is that home reports only have a "shelf life" of three months before a new one needs to be produced. Anyone who sells their house in under three months in the present climate deserves a medal but there is no guarantee that lenders will trust or accept a home report containing a valuation commissioned by the seller, particularly the way the market is just now, and they are more likely to insist on their own valuation.

Home reports are ill- conceived, particularly ill-timed and likely to undo the good work already done by both governments and the Bank of England and I would encourage the Scottish Government to back off now, even at this late stage, before further damage is done to our country's fragile housing sales market.

&#149 John Curran has more than 25 years' experience in housebuilding. Based in Aberdeen, he is a partner in McGrigors real estate team.