The introduction of Home Reports (HRs) by the Scottish Government was a major change to the environment of the sale and purchase of residential property. Not without some controversy on its introduction, the HR was seen by some as an unwarranted addition to, and an unjustifiable expense in, the process of selling residential property on the one hand, and a beneficial protection and source of information for purchasers, on the other.

Since their introduction in 2008, the initial concerns have died down, so that HRs are an accepted part of transactions. There is little doubt that purchasers do value the HR, particularly the generic mortgage valuation.

For sellers, the most keenly felt aspect of the introduction was the additional cost of the HR, borne by sellers. Additionally, there was a concern that the HR would disadvantage sellers in the market by highlighting damaging information regarding defects, and by “fixing” the sale price by virtue of the valuations contained within the Report.

In practice, these concerns have disappeared, and the HR is viewed as an integral and beneficial part of the residential housing market.

What is a Home Report?

HRs consist of 3 constituent parts:

• The Property Questionnaire (PQ)
• The Energy Performance Certificate (EPC)
• The Single Survey (SS)

The PQ is completed by the owner(s) of the property and is intended to provide information about the property, helpful to a prospective new owner. It follows a set style.

The EPC indicates the energy efficiency of the property and suggests any improvements that can be made. It is normally produced by the surveyor who inspects the property to prepare the Single Survey.

The SS sets out the terms and conditions under which the surveyor reports, a description of the report, the single survey, including a valuation, and a mortgage valuation report.

It also gives information on terms used in descriptions of properties, together with a schematic of a house, illustrating these.

The report in the SS is prepared “with the skill and care reasonably to be expected of a competent residential surveyor who is a member of” the Royal Institution of Chartered Surveyors. It is prepared and addressed to the seller of the property. The surveyor acknowledges that the report may be made available to interested third parties, including the eventual purchaser, for example. The surveyor acknowledges a duty of care only to the seller and purchaser. No other responsibility or liability is accepted in respect of any other party, including any lender.

The SS also includes the "Generic Mortgage Valuation Report" (GMVR). This is prepared by the surveyor and issued along with the SS. It is the responsibility of the seller to ensure that the GMVR is provided to every potential purchaser.

A distinction requires to be stressed here, between the GMVR and the “Transcript Mortgage Valuation For Lending Purposes.” This is not part of the HR but is a report which the surveyor undertakes to provide, on terms agreed between the surveyor and lender providing mortgage facilities to the purchaser and solely for the use of the lender, and upon which the lender may rely. Any decision on whether to lend is entirely a matter for the lender.

The benefits of Home Reports

Understandably, when HRs were first proposed by the Scottish Government, sellers were concerned that they would add to the cost of selling a property, and anxious that they would disadvantage or prejudice sellers.

It is true that the seller now bears an added expense when marketing residential property. HRs are fairly costly, but in the overall picture of moving house are not an unduly significant feature.

The fears of sellers have been demonstrated to be mostly unfounded, otherwise. The introduction of HRs may have improved matters, overall.

In the first place, it is helpful to sellers to have a surveyor report on condition and value, before sale. If the HR discloses a problem, steps can be taken to assess and remedy any matters that could prejudice a successful sale.

Secondly, knowing in advance what the valuation is allows better targeted marketing to take place. If both seller and potential buyers know what a lender will take as the mortgage valuation, both parties can know what will or will not be a realistic sale price. HRs have proved themselves to be useful in reducing volatility in markets. Popular properties where a closing date may be fixed for competing offers will still attract offers over the asking price, but all parties will be starting more or less from the same benchmark, the HR valuation, and will only “push the boat out” in exceptional cases.

An element of predictability in residential markets is a desirable state of affairs.

Thirdly, purchasers will feel more confident in offering for a property where the HR does not disclose any significant problems.

Lastly, most sellers are purchasers, too. They will feel the benefit of the HR when they are looking to buy.

Since the introduction of HRs we have seen original concerns dissipate, and HRs are now a familiar and helpful part of the process of buying and selling, in Scotland.

At ASPC, we are passionate about helping buyers, sellers and renters across the North East find a home that best suits their needs. From the initial search to the keys being handed over, our dedicated team is here every step of the way.

To help make the process of buying your new home as seamless as possible, we’ve created a range of insightful blog posts and information pages. Browse our helpful home buying guide here, or if you have any further questions, please get in touch with one of our team members on centre@aspc.co.uk.