Home Reports - A Reaction
Since December 2008, sellers in the Scottish property market have had an obligation to provide a Home Report for properties marked for sale. A Home Report consists of three documents: an Energy Efficiency Report, a Property Questionnaire and a Single Survey prepared by an independent chartered surveyor. It is the Single Survey that has created the most comments.
The initial reaction of most sellers to the Single Survey was “why should I have to provide such a detailed report for the purchaser’s benefit”? It has certainly added to the seller’s expenses and we have seen instances of people deciding not to market their property because of the extra cost in a slow market. In the past, this type of seller might have tested the market and taken it off if they did not achieve the price they were looking for.
With the cost of a Home Report typically being anywhere between £500 and £1,200, it is not a sum to be dealt with lightly. Surveyors have been particularly cautious in the current economic climate and some sellers have been disappointed with the valuations obtained. Some have even been prepared to pay for a ‘second opinion’ in a bid to achieve a higher valuation.
Over the year, we have observed that if there is only one potential purchaser for a property, the bidder will put in an offer under the Single Survey Valuation. If there is competition at a closing date, then generally we are seeing bidders offering a premium in excess of the valuation very similar to the pre-Home Report era.
Purchasers were the most welcoming of the Single Survey. They do, however, have to be wary that the valuation may be based on a cautious figure set by a surveyor. If there is competition and the purchaser is relying on the valuation for mortgage purposes, they may struggle to compete at a closing date. A lender can only lend an amount based on a percentage of the valuation which may be unrealistic in competitive conditions. Purchasers also face the problem that some lenders will not accept the Single Survey and will insist on an independent valuation.
In summary, whilst there are obvious advantages of the Single Survey, the downsides are the extra cost to the seller, the fact that early valuations may be too low or, indeed, if a property sits on the market for too long, the valuation may be too high. Lenders may not accept the valuation which means that offers are still being made “subject to survey” and there are definitely instances of selling agents putting pressure on surveyors to increase their initial valuations. Purchasers should always bear in mind that the surveys are paid for and instructed by the sellers and their agents, who may have obtained several pre-sale valuations before selecting the highest.
Sandy Burnett
sandy.burnett@murraybeith.co.uk