Home Reports 'depress price of properties'

MOST readers will be aware of the need for a Home Report when selling a residential property. They came into use in December 2008, generally contrary to the views of the legal and surveying professions. Now the dust has settled we are better placed to consider how the system works in practice.

On the negative side, the biggest issue raised by clients is cost. A typical Home Report for an average Edinburgh property (value 250,000) would be around 650. Although there are many schemes for deferring payment, ultimately this is a large cost for the seller to bear.

Pre Home Reports, the seller bore no survey costs. However, the purchaser would need to bear his or her own survey fees, usually around 285 for a typical valuation, or 625 for a typical survey. A "valuation" is very different from a "survey", and the condition report in the Home Report is less detailed than a proper survey. One of the issues which concerned the Scottish Government before Home Reports were brought in was that purchasers were tending to rely on valuations and were then surprised when repairs were required to their property about which they had been blissfully unaware.

The cost of a Home Report could perhaps be justified if the information it was providing was equivalent to that of a survey. Unfortunately the single survey part of the Home Report, which is supposed to be an independent assessment of the condition of the property, tends to be very bland. Surveyors appear nervous of providing a detailed description of the condition of a property to a client they have never met, the ultimate purchaser. For instance, a recent Home Report relating to an Edinburgh New Town flat stated the roof "could benefit from some general maintenance". Bear in mind this roof was originally installed in 1830, comprises part of an A-listed building and contains ogee gutters and at least one turret. I wonder whether the purchaser, if he relied on the Home Report, was therefore receiving an assessment of the roof which gave him a full picture of maintenance costs going forward?

A further negative relates to the old chestnut of "multiple surveys". There was a time, now of happy memory, when multiple surveys were an issue. It would be more accurate to say "multiple valuations" as there was a practice in the 1990s of solicitors recommending to their clients that they had a valuation carried out on any property for which they offered, the intention being that if they were successful at a closing date they would then commission a survey.

Most purchasers, in the euphoria of being successful at a closing date, would generally forget this advice and simply rely on the valuation. However, that problem was resolved before the Home Report legislation came in by the practice of offering "subject to survey". This meant a solicitor could then quite easily persuade his client to commission a survey. However, due to the bland information in the Home Report, and the reluctance of many lenders to accept the market valuation contained therein, almost inevitably a successful purchaser will wish to commission his own survey, meaning that multiple surveys are more common in the Home Report era than they were beforehand. Good news for surveyors, but not necessarily for consumers.

There are, however, positive aspects of the Home Report. The valuation aspect of the report means that the days of unrealistic offers-over prices are largely gone. However, there is still nothing to stop an agent putting a low offers-over price on a property in order to stimulate interest – but at least interested parties should have an idea of the valuation before submitting their offers.

Most agents believe that the Home Report has provided a stabilising effect on the Scottish property market and is helping buyer confidence (at a time when confidence is just returning to the market) by providing at least some additional information to help purchasing decisions.

There is, however, still a significant issue in persuading lending institutions to accept the valuation aspect of the Home Report, with evidence suggesting even some major lenders have conflicting policies on whether to accept the valuation. It is prudent to check with your lender at an early stage whether they will accept a Home Report valuation and whether the valuer is on their panel.

The Property Questionnaire, which is part of the Home Report, is generally considered a very useful document containing practical information relating to council tax, historic alterations, service providers etc, and purchasers generally welcome this detailed information at an early stage in the purchasing process.

However, the positives having been stated, it is this author's view that Home Reports act to depress the value of the housing market. It is largely accepted that the Home Report system results in lower offers and thus does not assist in optimising value for a property. While this is good for first-time buyers, there are wider economic implications. The question of whether a system that does this is in the best interests of the economy, particularly in the current climate, is one best left to the reader.

Glen Gilson is head of private client and financial services at HBJ Gateley Wareing solicitors and estate agents