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SPECIAL FEATURE: The long wait is nearly over

Ryan Fowler

October 17, 2014

It is now nearly 10 long months since the Scottish government’s Home Report review embarked on its exhaustive consultation and research study to discover how this controversial piece of legislation has performed in the real world.

It took submissions from 144 stakeholders and individuals and it is due to deliver its verdict, and a comprehensive market analysis, by December. It would be quite a Christmas present if it achieved that deadline.

For the issue, which still reverberates divisively among property professionals after five years in operation, remains enormously complex, and taking a definitive position on its effect on the market is a Herculean task.

But it is perhaps worth at this stage weighing in the balance some of the pros and cons of Home Reports based on the intensive experience which surveyors have gained of one of the biggest-ever upheavals to hit the market.

The stand-out conclusion is that Home Reports have brought an unprecedented degree of clarity to the marketplace on opinions of property value. Unlike the old days, everyone is now singing from the same hymn sheet. As a result there is greater stability in the pricing structure and price inflation should be more manageable.

This is due, in its essence, to the fact that the opinion on value is given by a chartered surveyor, an independent and heavily-audited property professional with no vested interest in the process. His, or her, impartiality removes emotion from the purchase or sale.

There is also greater transparency of information. The reports give a flavour of the condition of the property as well as providing information about alterations, documentation and repair guarantees.

However, perhaps one of the most important add-ons which surveyors have brought to the process is not actually required by the Home Report legislation. It is the mortgage valuation report, which creates a bridge between the buying and selling process.

The MVR provides, at the outset, information about the saleability and the mortgageability of the property. It oils the system and provides the informed opinion that lenders need when they are making a lending decision.

One of the aims in introducing the reports was to help improve the condition of housing stock and there is little doubt that this has been a success. More people are now aware at the beginning of the process of how to market their home and will make repairs before they begin.

Similarly, buyers know from the report what needs to be done. They can purchase with their eyes open and walk in to the house with a detailed plan of what needs to be done to bring it up to scratch.

The reports have also achieved their other aim of reducing the number of multiple surveys. That cannot be gainsaid. Surveyors might have been expected to see that as a downside, but in fact the market has been moved into a higher quality area, in which valuable information is being supplied about the biggest financial decision most people will ever make.

It could also be argued that Home Reports have hammered down price inflation. They have introduced a new realism, compared to the old situation in which agents priced properties ludicrously low to encourage competition.

What this gung-ho marketing actually encouraged, of course, was unchecked competitive hype, which had a knock-on effect all the way down the line. Pricing realism is in everyone’s interests.

What issues could the review most profitably address? The most important one is public expectations. Many people do not fully understand the restrictions under which surveyors operate. They cannot gain access to every nook and cranny of a property and there are often very valid reasons for them not to.

The review could make clear that Home Reports are an opinion, albeit an informed one, and not a warranty. There is a lot of work to be done on educating the public and their advisors that the report is a snapshot of the property at a specific point in time from what is a non-disruptive inspection.

The turnaround expectations of estate agents and sellers need to be guided. Home Reports involve huge amounts of work and deliberation, and often cannot be produced, out of a hat as it were, within a day or two of commissioning. Hasty delivery can encourage poorly constructed reports and limit crucial information.

A well thought out and informative Home Report from a local surveyor, who understands the local market, is a valuable asset for the seller and buyer. The Mortgage valuation report added by many Chartered Surveyors is invaluable to the buyer and the funding institution but only if the surveyor is recognised as suitable by the funder. Lending is not recognised in the legislation and more discussion with lenders and the acceptability of information from a Home Report is desirable. Nonetheless lenders will require safe guards against risk to be considered in any discussions.

Finally I would hope that the importance of transparency and independence is not only recognised but reinforced as part of the review process because these are the corner stones of the Home Report product. It is worth repeating that the surveyor has no vested interest in the sale of the property therefore is well placed to provide independent information and this should encourage trust.

We may have to hang on slightly longer than December for the review’s deliberations to be handed down, but if it takes into account some of the issues above, it will have been worth the wait.


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