Calls are growing for a reform of Scotland’s home report system after new evidence emerged of frustration with the system among buyers and sellers.
Almost a third want the reports to be scrapped, new research shows, with just one in ten sellers saying they would commission a home report if they were optional.
Home reports, introduced in December 2008, are required for almost every property marketed in Scotland and feature a single survey, including a valuation, an energy report and a property questionnaire.
The latest concerns over the system come after the Scottish Conservatives claimed last summer that home reports should be scrapped, following a sharp fall in home sales in Scotland.
New research by Edinburgh Solicitors’ Property Centre (ESPC) has cast fresh doubt over the effectiveness of the system. A survey conducted recently among some 300 buyers and sellers found that less than two thirds of the former found the home report useful. One in four described them as “not particularly helpful” and another 12 per cent as not helpful at all.
One principle issue to have arisen is the return of multiple valuations, which home reports had been intended to help eliminate.
The lender had requested a second survey in a fifth of cases covered by the research, while 13 per cent of buyers have asked for at least one extra valuation.
Mortgage lenders only accept reports from surveyors on their panels but, with it not always made clear at the outset which panels a surveyor is on – if any – buyers are often forced to spend hundreds of pounds on a new survey when the initial report is rejected.
Previous ESPC research suggested that around a quarter of surveys were being rejected by lenders.
The problem is that when a valuation isn’t accepted, the buyer – ideally the main beneficiary of the report – either has to commission a new one or the lender will instruct its own survey, for which the buyer typically has to foot the bill.
Fresh valuations are bad news for sellers too, with past research suggesting that they tend to produce a lower figure than the original (particularly in a market in which prices are edging downwards).
A study carried out for The Scotsman in 2010 by Graeme McCormick of Conveyancing Direct found that, of 100 reports in which his firm had been involved, there were 61 cases where buyers subsequently needed a new survey.
Those new surveys produced a valuation lower than that in the home report on 31 occasions, while the remainder gave the same valuation, with no instance of the revised figure being higher.
Home reports were expected to signal the end of multiple valuations, but, according to Mark Dyason, director of broker Edinburgh Mortgage Advice, they have had the opposite effect.
“The seeming return of multiple valuations is caused by those purchasers wanting a more detailed survey, buyers wanting to use their own report as a price negotiating tool in this market and lenders reducing the number of valuers on their panels,” he said.
“These are all ongoing reasons and no change to the home report would reduce these.”
Dissatisfaction with the home report system is – unsurprisingly, considering the cost of commissioning them – greatest among sellers, with 65 per cent declaring that they hadn’t found them helpful in the sale of their home.
With the cost of the reports averaging out at around £500, sellers are unlikely to be well disposed towards the system.
Almost three quarters of those surveyed claimed that if the reports were available but not compulsory they wouldn’t have arranged one before putting their home up for sale. “Sellers dislike them because of the cost and they are not a tool to help sell a house, just one to let you sell your house,” said Dyason.
Yet the system is only marginally more popular with buyers, ESPC found, with just 37 per cent finding it helpful. Malcolm Cannon, chief executive of ESPC, said: “Our research with buyers has shown that, while most find it a helpful document, it is not a ‘must have’. Plus a third of respondents had an additional survey completed either on request of their lender or of their own choice.”
Some elements of the home report were rated by purchasers as more valuable than others, however. The property condition report was the most useful part, according to 45 per cent, following by the valuation.
Yet only 9 per cent of buyers said they would disregard a potential home if there was no report and four in ten would be happy to view a property without one, provided the seller paid for a report at a later date.
That comes as little surprise to Dyason. “The majority of buyers are really only interested in the value and, to a lesser extent, state of the property, so the majority of the report holds too little value for the money being spent on it by the sellers,” he said.
But surveyors point out that the benefits of the reports are not all immediately obvious to buyers and sellers.
Sarah Speirs (CORR), director of the Royal Institution of Chartered Surveyors in Scotland, said: “One reason home reports were introduced by the Scottish Government was to improve Scotland’s housing stock. Chartered surveyors report that a quarter of home owners improve their property before commissioning a home report and a further quarter improve their property after they receive the results of the home report.”
Both buyers and sellers with experience of home reports believe changes are needed, however, with almost a third surveyed by ESPC suggesting they should be abolished.
“Unprompted, respondents recommended changes to improve home reports; 43 per cent suggested content changes and 31 per cent were of the view that the best way to improve the home report would be to scrap them,” said Cannon.
He called for the Scottish government to look again at the content, structure and requirement of the home report
“ESPC would like to see a broad group of stakeholders brought together to identify how the home report can be a stronger contributor to a healthy property market”.
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