By Archie Love
It’s difficult to believe but the Home Report is now 10 years-old and, while questions remain about its fairness and effectiveness, it is an indisputable part of the Scottish property sales landscape.
I was a member of a consultation group that advised the Scottish Government prior to the Home Report becoming law in January 2009, and some of the issues we flagged up then are still of concern.
However, the proof of the pudding is in the eating and, not only is the Home Report still going strong, moves are afoot to introduce it in the rest of the UK so, while it has its detractors, it is generally seen as a positive part of the property sales process.
A Home Report is a pack of documents that informs prospective buyers about a property that’s for sale. Anyone selling a home in Scotland needs to provide would-be purchasers with a copy of the document that costs up to £700 + VAT and includes a single survey, a property questionnaire and an energy report.
When a property goes on the market, those documents must be no more than 12 weeks old. While there’s no official expiry date, buyers can ask for a ‘refresh survey’ if a home has been on the market for a long time.
Properties that don’t need a Home Report include new builds sold by a developer for the first time, those with commercial use (a flat above a shop, for instance) and newly converted homes that haven’t been used before they were converted.
Home reports were conceived by a Scottish Labour government under Jack McConnell and introduced by the SNP administration under Alex Salmond that succeeded it.
Their introduction couldn’t have come at a worse time, in the aftermath of the 2008 financial crash, when the housing market was in a downward spiral, lenders weren’t lending, and cash was tight.
There was confusion about what would happen if people in financial difficulties couldn’t afford to pay the up-front cost, whether the property could be legally marketed.
There were also questions over who would be liable if separating or divorcing couples refused to pay or if elderly people with limited funds, who were experiencing dementia or memory loss, were unable to make decisions. Who would pay if a householder died suddenly; would the executor be liable ahead of the estate being wound up?
In many cases those questions remain unanswered and, when such situations arise, people generally struggle through as best they can.
Some unscrupulous finance providers tried to cash-in on such uncertainty, offering loans to sellers to cover the upfront costs of the Home Report and marketing fees. However, the deferred period for credit was too short, particularly in areas where selling times were longest.
While there was little impact on sellers in major cities, poorer people in parts of Lanarkshire, Ayrshire and the Lothians, many of whom had to wait for up to two years to sell their homes, fell heavily into debt and some had Sherriff’s Officers chasing them up for unpaid fees.
The main reason for the Home Report being introduced was to bring an end to multiple survey reports being commissioned on the same property. This made sense to prospective buyers who often had to pay for several surveys when house-hunting before landing a property.
Less happy were chartered surveyors who had been living high on the hog from the thousands from transcription fees they were able to charge and who were less than enamoured by the potential drop in income.
Ironically, at a time when the housing market was in meltdown, the guaranteed income that the new system provided was a godsend. Used to being paid and instructed only when a property received an offer, they could now charge a fee prior to every home going on the market.
Home reports have also ensured that homeowners maintain their property to a high standard to avoid negative comments and this has impacted positively on sales prices.
In addition, they have factored out much of the guesswork over the vexed question of valuation.
This issue has not been completely resolved and a significant minority of sellers remain worried that the Home Report will undervalue their property.
A 2017 study showed that 19% of sellers feared the Home Report would cause them to lose a sale, with this number increasing to 38% among those aged 16-24. Some 12% were worried about getting a category three rating, meaning that urgent repairs were required.
Only 16% said they had total confidence in the reporting and had no problems whatsoever with the Home Report process. This rose to 27% for those aged 55 and above.
The question of whether the Home Report is a benefit or not, and whether it should be introduced in England and Wales, remains, for me at least, moot.
A five-year review carried out in 2014 identified several weaknesses and, through my local MSP, I raised the question of conflict of interest.
Some of the country’s largest estate agents have their own preferred chartered surveyor firms, allowing both to collude to win business and, often, to value properties higher than their competitors. Such practices distort the housing market and are clearly wrong, but they are permitted to continue, unchecked.
Also damaging is the practice of potential buyers asking sellers to pay for a replacement Home Report if the existing document is more than 12 weeks old. A Home Report remains valid indefinitely, so long as the seller does not remove the property from the market for more than four weeks.
Because it has no shelf-life, the seller is obliged only to have a Home Report in place before the property is marketed.
A seller, or their agent, has nine working days to provide the document, if requested, and failure to do so can result in them being fined up to £1500. I asked my local MSP how many fines have been issued since the system was introduced and I’m still awaiting an answer.
I’ve seen properties being advertised without a Home Report and reported them to trading standards but, as far as I know, no formal action was taken against them.
We have received several visits from trading standards officers of our Motherwell branch asking to see Home Reports for all the properties listed on our website and, because we’re a reputable estate agency, we’ve always been able to provide those.
Some individuals have tried to sell their properties privately, without commissioning a Home Report, because they think they’re only obliged to do so if they sell through an estate agent. They’re wrong.
The legislation states that a seller doesn’t need a Home Report if they sell their home to a relative or friend without advertising it. Advertising includes placing a sales board in their garden, posting an advert on social media or on a website or even placing a telephone number in their window. In all cases, they need to provide a Home Report.
Some English-based lenders and the surveyors they appoint refuse to recognise the validity of a Home Report because they work to rules that apply south of the border..
Sellers often become frustrated when they’ve paid for a Home Report and the buyer borrows from a bank which ignores the document and appoints an independent surveyor to carry out a separate valuation.
I’d like to wish the Home Report a happy 10th birthday but also to acknowledge that, while it has brought benefits, it also has many flaws. Whether it enjoys many happy returns remains to be seen.
Archie love is a Director of Scottish Property Centre Motherwell.