Three Year Anniversary of Home Reports in Scotland: Have They Been a Success or Failure?

It’s nearly three years now since the introduction of Home Reports in Scotland. The general consensus in the property and estate agency industry is that they have been bad news. So it might surprise you to know that, as someone who runs a firm of estate agents, I actually think that the Home Reports have been good for the Scottish property market. Why?

When the housing market started to tank (technical term!) in early 2008 it shook the confidence of property buyers and sellers in Scotland. People in certain areas of Scotland, particularly in the east of the country, believed that even when property prices in the rest of the UK were falling theirs would be fine. Even during previous property market problems in the 80s and 90s, property prices in the east of the country and, to a lesser extent in the west of the country, seemed to be immune to the movements of the market in the rest of the country. In Edinburgh in particular, when prices had previously fallen elsewhere in the UK, property prices had remained strong. There was a feeling of disbelief that it could possibly be happening in their own area.

This caused a large expectation gap between property sellers and buyers. Property buyers of course read the newspaper stories saying that prices were falling. Many sellers, on the other hand, hung on to the belief that prices in their area would remain unaffected, in spite of what national statistics were suggesting. As a result, there was total paralysis in the property market for a year.

Home Reports, in my opinion, helped to address the fundamental question that was causing potential buyers to be reluctant about buying: in short, ‘What is this property ACTUALLY worth?’. Home Reports, amongst the other elements of the Home Report, contain a property valuation by a chartered surveyor. These people are professionally qualified to say what a property is worth. Prior to that, the only way that a buyer could have an idea of what the property was worth prior to putting in an offer was to get advice from someone who knew the market (often their solicitor) or to pay for their own survey (an expensive option if the purchase didn’t proceed). Home Reports helped to instill a sense of confidence in buyers: they knew that the property they were looking at, regardless of the asking price or the seller’s expectations, was worth £X. They could then factor-in what they thought was going to happen to property prices in the next few years and make an offer that made sense to them.

The uncertainty about what a property was worth was also made worse in Scotland by the widespread use of the ‘Offers Over’ asking price. A property might be on the market at £300,000, but the expected selling price could be something like £400,000 or even more. It lead to buyers having absolutely no idea of what the actual expected selling price was. One of the fundamentals of sales is to make your product easy to buy. Buyers hated ‘Offers Over’, countless wasted offers at ‘Closing Dates’ and lack of certainty that they might be able to buy a property that they had fallen in love with. The advent of Home Reports led to the demise of the ‘Offers Over’ asking price in most cases. It was replace in most cases by ‘Offers Around’ or ‘Fixed Price’. This simplification of the process, precipitated by the advent of Home Reports, has made the property buying process a little bit more transparent and therefore helped the market in a very difficult time. Every little helps, as they say.

Home Reports have also reduced the cost of buying a property for many property buyers. This can only be a good thing in a tough market. How has this happened? In spite of initial concerns that mortgage lenders might not accept a Home Report that was instructed and purchased by a property seller for the purpose of lending to the buyer, this turned out not to be the case with a lot of lenders being happy to accept the Home Report for the buyer’s mortgage. This saves a property buyer hundreds of pounds on having to instruct their own mortgage valuation survey. In addition, the Home Report flags up structural issues to the potential buyer before they invest time and money in pursuing their interest in the property. Since buyers have different thresholds for what they consider to be acceptable structural defects or issues, this allows them to focus on the properties that they are actually likely to move-forward on. This saves property sellers, their estate agents and also the potential buyers from wasting time negotiating deals only for them to fall-through when the potential buyer discovers something that they don’t like about the structural soundness of the property at the point when they instruct their own survey.

One other positive factor brought about by Home Reports has been that it has helped to ensure that only people who are reasonably motivated to sell their properties are putting them on the market. Home Reports add quite a significant up-front cost to selling a property. By law they have to be obtained prior to the property going on the market. They can cost several hundreds of pounds so, in theory at least, it helps to discourage people who are only speculating on the market, or ‘testing the market’, from putting their properties on the market. This prevents a high number of overpriced properties saturating the market.

One slightly overlooked element of the Home Report that has also been very useful is the Property Questionnaire. It focuses sellers’ minds on the various things that used to only surface once a sale had been agreed and the conveyancing solicitors were dealing with the sale: issues such as lack of paperwork for alterations. The Property Questionnaire ensures that sellers have to think about these things at the beginning of the selling process, not during the conveyancing process, and this helps to prevent delays or, worse, sales falling through later-on because of a lack of proper paperwork. Other items such as the Council Tax band, who is responsible for communal areas and the like, are all helpful things for a potential buyer to know prior to spending time going and seeing a property. It all helps to reduce the amount of wasted time that proeprty buyers and sellers have to put up with during the selling or buying process.

So, three years on, are Home Reports a success? Actually, I’d say that they have been. I do have certain criticisms though. There is a general principle of ‘buyer beware’ in Scots Law. If you buy a second-hand car, it’s your responsibility to get it checked. The fact that a seller has to pay for a survey that is solely for the benefit of buyers seems to me to be unfair. The problem of course is that the seller commissions the Home Report so to insist on the buyer paying for it when, if they wanted a survey, they could have their choice of surveyor firms to do the survey also seems unfair. I don’t massively see the point of the Energy Performance Certificate and feel that, if that’s important to a buyer then they should pay for their own, but that’s more down to European legislation than any desire on the part of the Scottish Government to put an energy rating on properties. On the whole though, Home Reports have helped to remove some of the hassles and risk for buyers, reduce the cost of buying in many cases, and to provide some sort of transparency and certainty as to what properties are worth for property buyers and I believe that all of this can only have been good for the property market in the past few years when the property market and economy in Scotland have been suffering.


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