End the navel-gazing

I run a property-focused business in Edinburgh. Much of our work is estate agency related. I am happy to admit that I was not a fan of home reports prior to their launch. I am also happy to admit that, based on experience, I was wrong.

It is my opinion that the introduction of home reports is the single thing that has helped to break the paralysis that gripped the property market in the second half of 2008.

I am therefore disappointed to have seen the negative comments about home reports coming from our profession in recent weeks.

The criticism seems to be focused on two areas: first, that mortgage lenders are not accepting home reports; secondly, that home reports have caused a drop in the number of people wanting to market their properties and this is having a negative effect on the profession and the consumer.

Since home reports were introduced, for the first time in Scotland buyers can look at a property and see a large, metaphorical price tag attached to it. Buyers hated the previous system where, often bidding against many others, they had to guess what a property might be worth. They love home reports. One of the first principles of sales is to make your product easy to buy. So how can home reports be a bad thing from a buyer’s point of view?

According to an ESPC survey, in 25% of cases lenders are insisting that the buyer obtains their own survey, often from the lender’s own surveyor. It continues that this usually happens where loan-to-value ratios are high, the home report is more than three months old, or the surveyor is not on the lender’s panel.

However, all of these things happened prior to home reports. When loan-to-value ratios were high, lenders would quite often insist on carrying out their own survey. When a survey was more than three months old, the buyer would usually have to get an updated survey for the lender. And most lenders insisted that the survey was done by their own surveyor or by one on an approved panel. The difference back then was that the buyer had to bear the cost of all of this and, sometimes, would get the survey only to find out something negative about the property and back out, leaving the next potential buyer to have to risk purchasing another survey.

So, home reports are not being accepted in 25% of cases? If that’s true, that means that they are being accepted in the remaining 75%. Surely this is great news for property buyers.

As for home reports having a negative effect on the number of properties coming to market, I recently read a tirade along these lines by the managing partner of one of central Scotland’s largest firms. He claimed that, in the month after home reports were introduced, the number of new properties coming to market fell by 80%.

This startling statistic could perhaps be seen as being a little misleading.

After home reports were introduced in 1 December 2008, unemployment continued to rise, lending criteria continued to tighten, house prices continued to fall, and the media continued to carry mixed messages about house prices. All of these had a hugely negative effect on anyone who was thinking of selling property. And new listings always drop in December.

Otherwise though, have home reports directly lowered the number of properties coming to the market? Certainly, they have. The up-front cost of a home report has decreased speculative “listings” of property. It has reduced “listings” where people had deluded ideas about the value of their property, because the home report has put them right. It has also put paid to the age-old practice of overvaluing potential clients’ properties to ensure that the seller uses that company.

So, what have we as a profession lost because of home reports? Surely solicitor/estate agency firms would not wish to use estate agency as a way of getting new clients on their books, boosting the resale value of their firms and cross-selling other legal services to them, all in the knowledge that the property had no chance of selling? That being the case, the only effect home reports can have had on law firms is to reduce the number of properties that had no chance of selling, or the occasional speculative listing.

Professionals in the solicitor/estate agency area, as I see it, have two options. The first is to navel-gaze and pontificate about the negative effect that home reports have had on the property market in Scotland, by which we really mean on our law firms. The second is to accept the new reality, embrace the benefit to the customer, and do all we can to ensure that the properties we “list” actually sell.

My firm will be adopting the second of these options. I rather suspect that, behind all the whingeing, most others will too.

Robert Carroll is a solicitor and managing director of Mov8 Real Estate Ltd, Edinburgh