Home re­ports fail­ing to

The Scotsman - - Farming - jeff Salway

HOME sell­ers could risk see­ing their val­u­a­tions slashed if they fail to do their home­work on home re­ports, ex­perts have warned.

The home re­port sys­tem has been dogged by con­tro­versy since its De­cem­ber 2008 in­cep­tion over len­ders re­ject­ing home re­port val­u­a­tions – and as house prices de­cline again the im­pli­ca­tions for sell­ers could be in­creas­ingly costly.

The len­ders that dom­i­nate the mort­gage mar­ket in Scot­land – in­clud­ing Lloyds Bank­ing Group, San­tander, RBS and Cly­des­dale – only ac­cept re­ports from sur­vey­ors on their pan­els, and buy­ers have to fork out hun­dreds of pounds for a new sur­vey when the ini­tial one is re­jected. The most re­cent re­search by the Ed­in­burgh So­lic­i­tors Prop­erty Cen­tre (ESPC) found that len­ders re­ject up to one in four sur­veys.

And it’s not just buy­ers pay­ing the price for re­jected re­ports, as

“This means the buyer has to in­struct their own sur­vey ”

David Mor­rans

there is ev­i­dence that se­condopin­ion val­u­a­tions typ­i­cally pro­duce a lower fig­ure, of­ten forc­ing the seller to re­duce their ask­ing price.

Home re­ports – which com­prise an en­ergy ef­fi­ciency re­port, a “sin­gle sur­vey” and a prop­erty ques­tion­naire – are com­mis­sioned and paid for by the seller. But while the sur­vey, which is a con­di­tion as­sess­ment that also in­cludes the val­u­a­tion, must by law be un­der­taken and com­pleted by a qual­i­fied Rics sur­veyor, sev­eral Scot­tish sur­vey­ors are not on the vi­tal lender pan­els.

Sur­vey­ors are not obliged to tell sell­ers which lender pan­els they are on – al­though so­lic­i­tors and es­tate agents gen­er­ally know – while len­ders don’t dis­close which sur­vey­ors they ac­cept re­ports from. The com­po­si­tion of lender pan­els can change reg­u­larly, but the big len­ders all in­sist that the big­ger sur­vey­ors are rep­re­sented. Lloyds Bank­ing Group is un­der­stood to have about three-quar­ters of Scot­land’s con­veyanc­ing firms on its panel.

When a val­u­a­tion isn’t ac­cepted – ei­ther be­cause the re­port is more than three months old or be­cause the sur­veyor isn’t on the lender’s panel – the buyer will ei­ther be asked to com­mis­sion a new one or the lender will in­struct its own sur­vey. The lat­ter is at ad­di­tional cost to the buyer, who has to fork out for both the new sur­vey and an ad­di­tional ad­min­is­tra­tion fee added by the lender.

Sell­ers lose out as well if the sur­vey in­structed by the buyer pro­vides a lower val­u­a­tion – as is typ­i­cally the out­come. Where the lender bases the mort­gage on the val­u­a­tion in the re­port rather than on the pur­chase price, the dif­fer­ence can sud­denly be­come very rel­e­vant – po­ten­tially putting the sale at risk.

David Mor­rans, di­rec­tor of Hon­our Fi­nan­cial Plan­ning, said that in two of the three most re­cent mort­gages his firm had han­dled, the sin­gle sur­vey was use­less as the sur­veyor was not on the lender’s panel. In the most re­cent case, the sur­veyor was only on the panel of two small build­ing so­ci­eties.

“This means the buyer has to in­struct their own sur­vey and pick up the tab and fre­quently this throws up a lower val­u­a­tion, which is ex­tremely rel­e­vant when len­ders base bor­row­ing on a per­cent­age of the val­u­a­tion, not the pur­chase price,” Mor­rans said.

“This can lead to the price be­ing rene­go­ti­ated down­ward, cost­ing the seller money and/or jeop­ar­dis­ing the sale.”

Re­search car­ried out by Grae­meMcCormick, se­nior part­ner at Con­veyanc­ing Di­rect, found that of 100 re­ports in which his firm had been in­volved, there were 61 cases where buy­ers needed a new sur­vey, and they pro­duced a val­u­a­tion lower than that in the home re­port on 31 oc­ca­sions. The re­main­der gave the same val­u­a­tion and not once was the re­vised fig­ure higher.

The prospect of pay­ing for a new val­u­a­tion may also in­flu­ence the de­ci­sion of buy­ers look­ing at more than one prop­erty, to the detri­ment of sell­ers who com­mis­sioned a re­jected sur­vey, said Robert Car­roll, man­ag­ing di­rec­tor and so­lic­i­tor at Mov8 Real Es­tate.

“When a buyer has to pay for their own sur­vey it does make the prop­erty less at­trac­tive com­pared with one where the home re­port is ac­cept­able to their lender,” he said.

The risk of val­u­a­tions be­ing

A sur­veyor car­ries out his as­sess­ments for in­clu­sion in a home

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