31 Mar 2014

Home Reports: 5 Years On

Home Reports: 5 Years On

As the Scottish Government conducts a consultation after five years of operation, Senior Solicitor Douglas Telfer looks back at the Home Report's impact since its introduction on 1st December 2008.

As the Scottish Government conducts a consultation after five years of operation, Senior Solicitor Douglas Telfer looks back at the Home Report's impact since its introduction on 1st December 2008.

Few changes to the Scottish residential property market have been as controversial as the introduction of the Home Report. Home Reports were devised at a time when the housing market was buoyant. Prior to their introduction it was the responsibility of the buyer to instruct a survey over any property they were interested in purchasing. Given that competition was fierce and it was normal for properties to sell in excess of 10% of the surveyor’s value, it was not uncommon for a buyer to have to pay for several survey reports before being successful with an offer.

The Scottish Government decided, rightly or wrongly, that the onus should instead be placed on the seller to provide a Home Report. The stated aim was to make the housing market “fairer, greener and much more informed.” The Home Report comprises a single survey on the condition and value of the property, an energy efficiency report and a property questionnaire completed by the seller. The theory was that this would limit the liability of purchasers (particularly first time buyers), provide a clear, defined value of the property for all prospective purchasers and a more detailed report on the condition and energy efficiency of the property.

Timing, as ever, was critical and it is unfortunate that the introduction of the Home Report coincided with a recession. The first time buyers who it was primarily aimed at helping disappeared from the property market almost overnight. Sellers were also put off selling their property due to the average cost of instructing a Home Report (£480) payable in addition to the usual marketing fees. Furthermore, it became apparent that if a purchaser’s offer of loan was not issued within ninety days of the date of the surveyor’s inspection then a seller would have to incur additional expenditure paying for an updated report.

One other major problem has been that Home Report valuations have been viewed as a maximum price resulting in offers being submitted as much as 10% below the valuation – the complete opposite to what was happening pre 1st December 2008.

There is also the important question of conflict of interest – is the surveyor acting for the seller or the buyer? The answer appears to be he is acting for both but at different stages of the transaction although this issue is another article in itself! In the early days, concern about whether or not the Home Report surveyor was acting in the best interests of a buyer led to many instructing their own independent survey reports thus defeating one of the Government’s main aims. In recent years however, this practice is no longer common.

It could be argued that many of the initial problems associated with the Home Report were directly linked to the poor market conditions. Thankfully the housing market is now showing great signs of recovery and throughout our offices across Scotland properties are now attracting much more interest and selling for at least Home Report value.

There is no doubt that when the property market is buoyant a good Home Report will help to attract far greater interest in a property. It will also assist buyers to make far better informed decisions about properties without incurring great expense.

The Home Report has certainly faced a rocky start in this first five year period but many of the problems could be said to be symptomatic of the of the property market in general. A more accurate review will be better judged on the 10 year anniversary when there will hopefully have been two equal periods of both a slow and buoyant market.

Douglas Telfer, Senior Solicitor

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