Consultation on the Home Report - Analysis of Responses

2 The Home Report's Objectives & Potential

2.1 The first section of the consultation focused on the Home Report's objectives and for what else the Home Report could be used.

2.2 When the Home Report was introduced the original objectives were:

• To improve information about property condition and thereby provide an incentive for repair or maintenance works to be carried out;
• To address the problem of buyers paying for multiple valuations and surveys which was prevalent in "market hotspots"; and
• To address the problems created by the practice of setting artificially low asking prices.

2.3 Home Reports also provide information on the energy efficiency of a property and can help buyers obtain mortgage finance with the addition of the Generic Mortgage Valuation.^[2]

Question 1: Do you think the Home Report is meeting its original objectives?

2.4 Question 1 asked respondents to consider whether the Home Report is meeting its original objectives. A breakdown of responses by respondent type is set out in Table 2 below.

Table 2: Question 1 - Response by Respondent Type

Respondent Type	Yes	No	Mixed	N/A	Total
Chartered Surveyors	8	-	1	-	9
Construction Industry	-	1	-	2	3
Consumer, Advice & Campaign Groups	4	-	-	1	5
Legal Profession and Estate Agencies	1	5	1	1	8
Local Authorities, including Trading Standards	3	3	1	-	7
Property Management, Maintenance and Conservation	3	2	1	1	7
Other	3	2	-	3	8
Individuals	60	26	-	11	97
TOTAL	82	39	4	19	144
Percentage	57%	27%	3%	13%	100%
Percentage of those responding	66%	31%	3%	-	100%

2.5 A clear majority of respondents (66% or 82 of the 125 respondents that answered this question) thought the Home Report is meeting its original objectives. Chartered Surveyor, Consumer Group and Individual Respondents were particularly likely to consider the Home Report was meeting its original objectives, while Legal Profession and Estate Agent Respondents were more likely to think it was not. Local Authority, Property Management and Other Respondents were relatively evenly divided on the issue. A small number of respondents held mixed views with 4 respondents answering 'yes and no' to the main question.

2.6 Many respondents structured their further comments around the three original objectives for the Home Report (as set out above at paragraph 2.2), namely property condition, avoiding multiple surveys and artificial pricing.

Property condition

2.7 In relation to property condition, those who thought the Home Report is meeting its original objectives raised the following issues:

• Prior to the introduction of the Home Report, the proportion of buyers who commissioned a condition survey was relatively low, with buyers often relying on mortgage valuations to make purchasing decisions. This meant they often had little or no information on the condition of the property they were purchasing.
• Being equipped with information of the condition of the property allows buyers to make informed decisions about the possible purchase of a property. Specifically, having condition-related information allows buyers to consider the cost implications of making any necessary repairs and reflect those costs in any offer for the property. A number of individual respondents were amongst those identifying this as a strength of the Home Report system.
• The draft report on the Single Survey provided to the seller gives them the opportunity to address any outstanding repair or maintenance issues before the report is finalised. Some sellers are also undertaking repairs prior to commissioning the report.
• One private rented sector body noted that lenders are sometimes requiring that condition-related problems are rectified as a condition of a loan on that property.

2.8 In addition to making one or more of the specific points set out above, a small number of respondents suggested that one of the overall impacts of the Home Report has been to improve the condition of the private housing stock in Scotland. In contrast, a small number of others reported that they were yet to see any evidence of such an improvement.

2.9 Respondents who did not think the Home Report was meeting its original objectives in relation to property condition or who had mixed views sometimes pointed to areas in which they felt the Home Report lacks the necessary, or indeed, any detail. Specific suggestions made included common building elements and the roofs of tenemental buildings in particular. It was also noted that the costs associated with 'unexpected' repairs to common areas can be very considerable. One Property Maintenance Respondent went on to suggest that, while it would not be fair to make sellers responsible for detailed surveys of common property, regular surveys or maintenance plans could be organised by the property factor or the group of owners in the block, and that this information could be included within Home Reports.

2.10 A small number of respondents, including one Public Body Respondent, raised very considerable and detailed concerns about the insufficiency of information regarding private water supplies, including the maintenance required to keep a private water supply safe for users. Particular attention was drawn to the level of lead which is leached from lead supply pipes and storage tanks, and the microbiological and chemical quality of water provided by Private Water Supply sources and their treatment.

2.11 One Legal Profession Respondent suggested that they do not contain the specific information required to judge the potential cost of repairs and hence prospective buyers may actually be equipped with less information than prior to the introduction of Home Reports. It was also noted that where a surveyor does not inspect a particular area, such as the roof, they are required to assume it is in good condition. The associated concern was that this could lead buyers to have a false sense of security about the value of their home and future maintenance costs.

2.12 Other concerns raised included that the risk-averse style of reporting adopted by those producing Home Reports detracts from their value, along with a perception that surveyors' lack of accountability for any future consequences is also a problem^[3]. One Individual Respondent felt there to be an inherent conflict of interest in surveyors owing a duty of care to both the buyer and the seller. This respondent felt this means the survey rarely tells the buyer anything meaningful about the condition of a property.

2.13 Further issues raised were that, contrary to the view expressed by some other respondents, sellers are not proactively carrying out repairs or maintenance work identified through the Single Survey. More specifically, it was suggested that there remains a lack of interest in structural repairs relative to superficial appearance or that, if repairs are being carried out, they are probably being done to the lowest possible standard and only to facilitate a sale.

2.14 It was also suggested that there do not appear to be any arrangements in place to check the accuracy of the information included within the seller's Property Questionnaire, with the current approach pre-supposing that the seller has sufficient knowledge of the property's repair and improvement history, common property obligations, notices, title conditions, burdens etc. The Local Authority Respondent raising this issue went on to suggest that there may be a case for requiring sellers to source legal documents pertaining to these issues to accompany their Property Questionnaire. A further suggestion was that Home Reports should include details of any pending, proposed or outstanding works and of owners' potential liabilities more generally.

2.15 Other issues raised included that:

• The Home Report does not consider the appropriateness and quality of maintenance and repairs.
• New build properties do not, but possibly should, require a Home Report.

Multiple valuations or surveys

2.16 In terms of the problems of buyers paying for multiple valuations and surveys, a number of both group and individual respondents suggested that the incidence of multiple valuations and surveys being undertaken on the same property has been reduced. One Chartered Surveyor Respondent noted that information provided by their members in Scotland over the last 6 months suggests that the Home Report has reduced the number of multiple surveys considerably. A number of these respondents also highlighted the cost-savings for prospective buyers and that, by extension, buyers no longer perceive that they are wasting money on surveys on properties they do not go on to purchase.

2.17 One Chartered Surveyor Respondent also noted that some initial problems with England-based lenders continuing to instruct their own valuations now seem to have been resolved as they have become more informed about and comfortable with the Home Report approach.

2.18 Respondents who did not think the Home Report was meeting its original objectives or who had mixed views raised the following issues in relation to multiple surveys or valuations:

• The problem of multiple surveys had largely been addressed prior to the introduction of the Home Report through buyers purchasing properties subject to survey.
• Consumer choice is being severely limited by certain lenders only accepting Home Reports produced by those on their list of approved bodies and/or some lenders still requiring buyers to commission an additional survey before approving their mortgage. One Legal profession respondent suggested that further work is required to both quantify the scale of this problem and how it can be resolved.
• The perceived limited lifespan of Home Reports means that sellers frequently have to pay additional fees for updated reports.

Artificial pricing

2.19 In relation to the original objective of addressing artificial pricing, those who thought the Home Report is meeting its original objectives pointed to the following:

• Properties are generally being marketed at or close to their Home Report valuation. One Legal Profession Respondent noted that over the last 2 years, 83% of properties marketed through ESPC had an initial asking price that was within 5% of the Home Report valuation figure.
• In particular, the inclusion of a valuation has reduced the incidence of the artificially low price setting that was prevalent prior to the introduction of the Home Report. The Home Report requirement for a valuation to be carried out by a Royal Institution of Chartered Surveyors (RICS) member according to a strict set of mandatory standards ensures that valuations are both consistent and reflect demand in the market. A number of individual respondents welcomed this consistency and the transparency they felt the Home Report valuation process offers.
• The standardisation of the valuation process has helped avoid potential buyers viewing, paying for surveys and/or submitting offers on properties they are unable to afford. One Chartered Surveyor Respondent noted that the first information requested by prospective buyers is often the Home Report valuation.
• The approach also allows potential sellers to make a decision as to whether they can afford to sell.

2.20 Points raised by respondents who did not think the Home Report was meeting its original objectives or who had mixed views included that the increasing availability of house price data means valuation figures are actually of lesser importance.

2.21 It was also noted that the practice of setting artificially low asking prices was either over-stated or was more prevalent in a seller's market. Those taking this view suggested that any shift away from the 'offers over' approach may in part be due to changing market conditions rather than the inclusion of a valuation in the Single Survey. One Legal Profession Respondent suggested that there has not really been any change in price-setting practice and that, as before Home Reports and irrespective of the valuation contained therein, sellers can and will set whatever asking price they choose and/or believe the market will deliver. It was also suggested that the Home Report will not prove effective at addressing artificial pricing in a rising market. One respondent offered specific examples of artificial pricing in the Glasgow market to support this view.

2.22 Finally, other general comments made at Question 1 included that Home Reports offer transparency, are simple and straightforward, and can be easily accessed by potential buyers. In contrast, it was suggested that their length can make them inaccessible and that some consumers are not aware of the value of the information contained within them.

2.23 Some respondents commented on the contribution Home Reports have made towards increased understanding of the energy performance of properties, although others suggested that they could go further and one Consumer Respondent was looking for more evidence quantifying the impact of Home Reports in raising consumer awareness about energy issues. These issues are discussed further in the analysis of comments made at Question 3.

Question 2: Are the original Home Report objectives still appropriate?

2.24 Respondents' views on whether the original Home Report objectives are still appropriate are set out in Table 3 below.

Table 3: Question 2 - Response by Respondent Type

Respondent Type	Yes	No	Mixed	N/A	Total
Chartered Surveyors	8	1	-	-	9
Construction Industry	1	-	-	2	3
Consumer, Advice & Campaign Groups	1	3	-	1	5
Legal Profession and Estate Agencies	2	5	-	1	8
Local Authorities, including Trading Standards	6	-	-	1	7
Property Management, Maintenance and Conservation	5	1	-	1	7
Other	2	1	1	4	8
Individuals	64	20	-	13	97
TOTAL	89	31	1	23	144
Percentage	62%	22%	1%	16%	100%
Percentage of those responding	74%	26%	1%	-	100%

2.25 Very much in line with the balance of opinion on whether the original objectives of the Home report are being met, a clear majority of respondents (74% or 89 of the 121 respondents who answered this question) considered the original objectives are still appropriate. Chartered Surveyors, Local Authorities, Property Management and Individual Respondents were particularly likely to consider the original objectives to still be appropriate. Consumer Group and Legal Profession and Estate Agency Respondents were likely to consider them to be inappropriate.

2.26 Those respondents who suggested the original objectives are still appropriate sometimes pointed to the continuing importance of the fundamentals they saw as underpinning the Home Report regime - these included the provision of more and better information on property conditon, increasing transparency and the use of a standardised approach with which both buyers and sellers will become increasingly familiar.

2.27 A number of respondents also noted that Home Reports have only been mandatory for 5 years and that this is a relatively short period of time - both in terms of engaging buyers and sellers and having a positive impact on the market and that some of the benefits of the approach will grow and become more apparent as time goes on and the housing market picks up. For example, one Individual Respondent suggested that resurgence in the Edinburgh market, with multiple buyers submitting offers for one property, will mean the objectives of the Home Report are increasingly relevant. It was also suggested that any significant 'picking up' in the market could lead to a return to low upset pricing.

2.28 The need for continuing improvement in the condition of the private housing stock was also noted by some respondents. However, there were also concerns that irrespective of the Home Report's focus on property condition, the recession will mean that property owners simply lack the necessary resources to invest in their property.

2.29 Some of those who considered the original objectives to still be appropriate also highlighted risks associated with any rolling back of the current requirements. Individual Respondents were often concerned about any return to a system in which multiple surveys were required. It was also suggested that if the Single Survey was made optional, the majority of buyers would not obtain a condition survey prior to purchase.

2.30 Even amongst those respondents who considered that the original objectives remain appropriate there were sometimes calls for those objectives, along with the content of the Home Report, to be amended or expanded. Specific suggestions included:

• Including a rental valuation.
• Developing the reporting format to allow for inclusion of the registered title plan and photographs.
• Information on factoring arrangements should be included.
• A more direct link to the information gathered through the Scottish House Condition Survey, ideally through the creation of one register holding all the relevant condition-related information.

2.31 One area in which a number of respondents suggested the Home Report should go further was in the area of energy efficiency, including in relation to Scotland meeting its climate change targets. The main analysis of comments made on this issue is set out at Question 3 below.

2.32 Some respondents did not consider the original objectives to still be appropriate, with this group of respondents including some who stated that they had never considered them to be so. Others suggested that the housing market has undergone significant changes since the Home Report was introduced in 2008 and that the objectives need to be reviewed and amended to reflect those changes. Those suggesting the objectives need to be reviewed to reflect current market conditions included those who thought the current objectives suited either a buoyant or depressed market, although they tended to give little further explanation of their position.

Question 3: Should the Home Report play a more central role in promoting energy efficiency and property condition improvements among home owners?

2.33 As noted above, Home Reports also provide information on the energy efficiency of a property, while the Single Survey would be expected to raise property condition issues. Question 3 asked respondents if the Home Report could play a more central role in promoting energy efficiency or property condition improvements, with the balance of opinion on this issue set out in Table 4 below.

Table 4: Question 3 - Response by Respondent Type

Respondent Type	Yes	No	Mixed	N/A	Total
Chartered Surveyors	8	1	-	-	9
Construction Industry	2	1	-	-	3
Consumer, Advice & Campaign Groups	4	-	-	1	5
Legal Profession and Estate Agencies	1	6	-	1	8
Local Authorities, including Trading Standards	5	-	1	1	7
Property Management, Maintenance and Conservation	3	3	-	1	7
Other	1	3	-	4	8
Individuals	45	39	-	13	97
TOTAL	69	53	1	21	144
Percentage	48%	37%	1%	15%	100%
Percentage of those responding	56%	43%	1%	-	100%

2.34 Overall, a majority of respondents (56% or 69 of the 123 respondents who answered this question) considered the Home Report should play a more central role in promoting energy efficiency and property condition improvements. Chartered Surveyor, Consumer, Advice & Campaign Groups and Local Authority Respondents were particularly likely to consider the Home Report should play a more central role. Legal Profession and Estate Agency Respondents generally thought it should not. Individual Respondents were relatively evenly divided on the issue, although a small majority (54% or 45 of the 84 that answered this question), thought it should.

2.35 In their further comments, respondents sometimes focused on the role that Home Reports could play in promoting energy efficiency. Some of these respondents set their subsequent remarks within the context of the Scottish Government's Sustainable Housing Strategy and its focus on reducing carbon emissions and improving the energy efficiency and sustainability of Scotland's housing stock. One Consumer Group Respondent noted the establishment of a Scottish Government Working Group to look at minimum standards for energy efficiency in private housing.

2.36 In terms of possible changes to the Home Report itself, it was suggested that there is scope for Energy Performance Certificates (EPCs) to be improved in terms of clarity, credibility and comparability. A number of respondents also noted or expressed concerns that consumers have limited interest in the energy efficiency-related components of the Home Report, including the EPC, and that a significant culture change will be required if this is to be remedied. However, not all respondents felt that the Home Report alone can help bring about such a change. For example, one Construction Industry and one Consumer Group Respondent suggested that households choosing to buy an energy efficient home could be rewarded through the Land & Buildings Transaction Tax regime.

2.37 In terms of how the Home Report could contribute to change and/or play an increased role in promoting energy efficiency, a range of suggestions were put forward. Suggested alternatives or additions were for Home Reports to include:

• The EPC rating, along with the colour banding, at the front of the document.^[4] The EPC rating could also include a clear comparison with the Scottish average rating.
• Energy bill information, including the last 12 months of energy costs.
• Estimated energy bill savings due to existing energy efficiency measures. One Consumer Group Respondent noted that research has shown that energy bill savings are the most motivating aspect of the energy saving message. Another Consumer Group Respondent noted that consumers do not understand CO₂ or KWh savings and that although the A-G rating system is useful it is not sufficient as consumers cannot themselves translate it into monetary savings.
• A basic explanation of any installed small-scale renewables, along with a web link and the phone number of Home Energy Scotland so the buyer can access independent advice on these technologies.
• Income generation figures for any small-scale renewables.
• Information on whether a property is subject to Green Deal Finance^[5].
• Information on Green Deal or other schemes available in the area. Other sign-posting to appropriate sources of information and advice and specifically to Home Energy Efficiency Programmes for Scotland (HEEPS).
• Information on the condition, age and service history of the central heating system. Photographs of various energy efficiency-related elements, such as insulation in the roof space, the boiler, any solar panels etc.

2.38 Respondents identified a range of possible benefits which could be derived from a greater focus on energy efficiency, including that:

• With a backdrop of increasing energy costs and reports of increasing fuel poverty it is important for buyers to have clear information on the energy efficiency of any possible future home and to be able to use this information to inform their decision-making.
• A greater focus on the EPC rating could encourage sellers to invest in their property prior to putting it on the market.

2.39 Other issues raised included:

• Those working in the property industry (Chartered Surveyors, Solicitors, and Estate Agents for example) often take little cognisance of renewable technologies when valuing a property. Nor do they make potential buyers aware of the financial benefits of these technologies.
• However, the industry has also expressed strong interest in learning more about the Green Deal in particular. Poorly conceived or executed retro-fitting of energy efficiency measures can be costly to rectify and have a negative impact on the fabric of the building.

2.40 Finally on the issue of energy efficiency, a small number of respondents considered that energy efficiency already has an adequate profile with the Home Report and provides sufficient information to allow buyers to make informed decisions.

2.41 A small number of respondents noted that there are other factors which contribute to the creation of sustainable homes but that the current Home Report focuses very much on energy efficiency. Other factors that were suggested as warranting coverage in the Home Report were:

• Accessibility, and in particular the ability to meet the needs of an increasing population of older and more disabled buyers. The Advice and Campaign Group Respondent raising this issue suggested that the accessibility audit should have greater emphasis within the Home Report.
• Water efficiency measures, including in relation to the retro-fitting of water efficiency measures. It was noted that water efficiency measures are now a compulsory part of the Scottish Building Standards, meaning that in future all new housing in Scotland will have water efficiency measures installed, and that over time these new builds will come up for resale.

2.42 Only a small number of respondents commented on the potential of Home Reports in promoting property condition improvements, with those that did often expressing concern either about the current condition of the private housing stock and/or the level of understanding many owners have about the disrepair affecting their property.

2.43 One Construction Industry Respondent wished to draw particular attention to the extent of disrepair to the private housing stock and suggested that disrepair, and disrepair of critical elements in particular, are given insufficient prominence within Home Reports. An explicit connection was also made between property condition and energy efficiency - for example, it was noted that a property will not be energy efficient unless it is wind and water-tight and that the consultation on the Sustainable Housing Strategy identified making a property wind and water-tight and structurally sound as most important within its hierarchy of needs for looking after a property.

2.44 Further comments made in relation to the Home Report playing a more central role in promoting property condition improvements were that:

• There is currently a significant degree of inconsistency around the contents of the Single Survey and that tighter guidelines for surveyors could prevent confusion and help to stop buyers making inaccurate assumptions.
• Information provided about repairs could look to the longer term, not least because most housing is purchased as a long term asset.
• Information on the potential costs associated with ongoing maintenance of the property, sinking funds and common repair responsibilities could be included.
• Sellers could be encouraged to make condition improvements through the creation of standardised 'refresher surveys' which would comment on specific improvements made since the first Home Report was produced.

Question 4: Should a national register of Home Reports be established? If yes, please explain why, including who should have responsibility for development and maintenance.

2.45 The final question in Section 1 of the consultation document concerned a national register of Home Reports. As the consultation document sets out, Scottish Ministers have powers to set up a register for Home Reports and make regulations on who can keep the register. There is already a register of EPCs.

2.46 The balance of opinion on the establishment of a national register is set out in Table 5 below.

Table 5: Question 4 - Response by Respondent Type

Respondent Type	Yes	No	Mixed	N/A	Total
Chartered Surveyors	3	5	-	1	9
Construction Industry	2	-	-	1	3
Consumer, Advice & Campaign Groups	2	-	-	3	5
Legal Profession and Estate Agencies	3	4	-	1	8
Local Authorities, including Trading Standards	2	3	1	1	7
Property Management, Maintenance and Conservation	3	3	-	1	7
Other	2	2	-	4	8
Individuals	28	55	1	13	97
TOTAL	45	72	2	25	144
Percentage	31%	50%	1%	17%	100%
Percentage of those responding	38%	61%	2%	-	100%

2.47 The majority of respondents (61% or 72 of the 119 who answered this question), did not support the establishment of a national register. Group Respondents were relatively evenly divided on the issue (both as a whole and across most of the different categories of group respondent). Overall, Individual Respondents were least likely to support the establishment of a national register.

2.48 Those respondents who supported the establishment of a register identified a range of possible benefits that could result, with many of these focusing on its value as a source of data and information that could be used to assess progress in improving the condition of the private housing stock. Specifically, it was suggested that information could be cross-referenced with the Scottish House Condition Survey to ensure that similar levels of disrepair were reflected in Home Reports.

2.49 Other 'information-related' suggestions included that a register could be used as a 'market monitoring' tool or as a valuable source of information for evaluating the usefulness of the Home Report itself. It was also suggested that it could provide an invaluable tool for assessing the accessibility of Scotland's private sector housing stock and could be used to inform Local Authority Housing Need and Demand Assessments in particular.

2.50 From an industry perspective, one Estate Agent Respondent suggested that being able to access previous Home Reports could assist surveyors by flagging up issues they may wish to inspect closely.

2.51 Respondents also suggested a number of ways in which a register could be of direct benefit to buyers or sellers. For example, it was suggested that a national register would make Home Reports, including older reports, more accessible to prospective buyers and in particular would allow them to compare a number of properties prior to viewing. A further suggestion was that a register would reduce the risk of sellers shopping around for the 'best' Home Report to use in marketing their property - in other words that if all Home Reports were available this could help avoid a seller commissioning a number of Home Reports on their property and then selecting the one which showed it in the best light and/ or achieved the highest valuation. Individual Respondents were particularly likely to raise this issue.

2.52 Relatively few of those who supported the development of a register identified who they thought should have responsibility for its development and maintenance. However, the majority of those who did (9 out of 14 respondents), suggested the task should fall to the Scottish Government itself.

2.53 One Property Management Respondent did not favour a national register but did support a register being held by planning authorities. Another Property Management Respondent did support a national register and also suggested local authorities or the Scottish Government as possible hosts. Other organisations proposed as host for any register were RICS (3 respondents, including one respondent who also suggested the Scottish Government as a possibility) or Registers for Scotland (2 respondents). Finally, 2 respondents noted that a range of existing commercial organisations that run registers would have the necessary skills and experience to provide such a service.

2.54 Respondents who did not support the development of a register or who had some concerns raised the following issues:

• Implementing and maintaining a register would inevitably create bureaucracy and hence would come with resource implications, and there would be the potential for the costs associated with maintaining a register being passed on to consumers.
• The benefits from such a register are not clear or are insufficient and it is not clear that it would offer value for money. In particular, there is no evidence of consumer demand for such a register.
• The information gathered would potentially duplicate that already gathered about EPCs or through the Scottish House Condition Survey.
• In any case, the market changes so regularly that any register would be perpetually out of date and of limited use. In particular, the valuation component could change regularly in a rising market.
• The valuation element of any Home Report is simply the opinion of the valuer and gathering this information within a national register would be of no benefit. Should such a register be developed, valuations should not be included.
• If Home Reports were made more freely available, including online, there would be no need to establish such a register.
• A register should only be developed if it is proposed to extend the requirements for Home Reports to all properties at regular intervals (similar to the MOT requirement for cars).
• Given the amount of information and level of detail contained within a Home Report a national register could be considered intrusive and as presenting risks to security and confidentiality.
• If a national register were to be established the information contained therein should not be resold or used for commercial purposes.