Are Home Reports beginning to show their worth?

Eric Curran

It is nearly a year now since Home Reports were unleashed on the Scottish housing market and it is becoming clear that some of the more frantic predictions of doom and disaster were more than usually wide of the mark.

But that is not to say that the reports have not had a significant impact. Far from it. There is little doubt that they have changed the market in a number of ways, and the objective consensus is that, overall, they are an aid rather than a hindrance to successful house sales.

Across the sector, there is a range of mixed views about the impact Home Reports have had since they were introduced at the start of December 2008. My perception is that they are starting to assist the sale of property, if for no other reason that, in these uncertain times, they are crystallising the views on value.

That is a big help. It also helps the agent manage expectations and persuade clients of what is and is not achievable in today’s market. The hard, objective facts of the report can help make people realise that their castle is just not worth what they fondly believed it might be.

There perhaps understandably is a certain amount of mistrust, or uncertainty, about what the product actually is – from sellers, purchasers and lenders. Not all lenders, for instance, are taking the information from the Generic Mortgage Valuation Report compiled from the Home Report and using it to facilitate mortgages. That is still an issue.

In the initial consultations, the RICS realised that there was no bridge between the selling and the buying process because most people required mortgage funding, so surveyors decided to create an additional valuation report from the Home Report which buyers could take to their lender – as opposed to the lender having to obtain its own survey.

There are, however, some lenders who will not accept the Home Report information from surveyors not on their panel and question whether it is independent and unbiased. I’m not sure how they can be persuaded to trust the reports but I suspect that time will be the answer – as Home Reports become an increasingly fundamental part of the market infrastructure, lenders will begin to question the necessity for extra, costly information.

One major effect of the reports is that they have taken a lot of the hype out of the market. Where previously a surveyor would provide a valuation, the property would go on the market at an inflated "offers over" price which, in a competitive situation, could lead to quite remarkable premiums.

Now agents are marketing houses at "offers around" or "offers in the region of" and people are buying and selling much more strictly inline with the surveyor’s valuation.

This is not a bad thing. It could be argued that it is not in the interests of the seller, who is no longer making off with fanciful premiums, but it almost certainly bodes well for growth in a long-term sustainable housing market.

Prices at the moment are certainly being constrained by funding issues, with many lenders transfixed with the new-found need to display prudence, but it may well be that as funding criteria relax, as they inevitably must, premiums may well return to the market despite Home Reports.

Surveyors, at the moment, are setting benchmark valuation figures through market research, sales and evidence and, in a period such as this one of decreased housing activity, they may be in danger of making the market rather than reflecting it.

There is evidence of increased activity among buyers, which some commentators have attributed to the fact that they no longer have to pay for their own survey. I think it is more likely that buyers are gravitating to homes which have a Home Report because they have all the information they need to make an informed decision.

That being the case, it seems clear that the reports are developing into a useful marketing tool and there is little doubt that they are responsible for a proportion of the limited confidence which the market is now exhibiting.

That confidence, however, remains fragile and there is no realistic prospect, now or in the coming year, of the housing market floodgates being opened once again.

In the long term, that is actually in everyone’s interests and if Home Reports have played a part in creating a sustainable housing market, then all the hard work that went into their creation will have been worthwhile.