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What Effect Are Home Report Valuations Having On Prices In Scotland?

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The Scottish government brought in home reports with the intention of stopping the offers over system which contributed to the overheating of the housing market in Scotland. But, is it having the opposite effect by encouraging sellers to think that their house is 'worth' peak prices?

Surveyors who give 'low' realistic valuations obviously aren't asked back by estate agents so valuations tend to be high, close to or even above 2007 peak pricing. (In East Renfrewshire and East Dunbartonshire where we are looking anyway.) The result is lots of houses sit for weeks or months stagnating on the market as sellers believe they know what their house is worth. Its official after all in a legal document produced by a housing professional. Eventually after months of potential buyers failing to see things the way the surveyor did the price is dropped but usually only by a fraction of a % below the house's home report valuation.

The home report hasn't even stopped the offers over system. Most houses seem to be marketed this way. And it hasn't stopped people bidding over the valuation when a property comes on at a more reasonable price. Our experience is that some houses sold by solicitors who don't specialize in house sales and so who don't have a high volume of houses going through their books tend to be valued at more realistic prices (as they probably don't have the same cosy relationship with an inhouse surveyor). But because they are priced reasonably they stand out like sore thumbs generate lots of interest and then go for more than their valuation. For example we looked at a bungalow in the Kessington area of Bearsden a few months ago it was on at o/o 245k home report valuation 260k but went for 270k.

Anyone else got an opinion on home report valuations? Should we be arguing for them to be abolished as they have been in England?

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I invite you to read this report in the Scotsman:

Home Reports 'inflate prices by 20%'

The article mentions that sellers can be charged a small amount just for the valuation part of the report then pay the extra if they are happy with the valuation. Obviously the incentive is for the surveyor to over-state the true value.

I think what they do do is to help put an upper limit on the prices but the fact that it's common to see houses sold at "£5000 less than home report valuation" indicates that even the sellers think they can be unrealistic.

Edit: grammar

Edited by catmandu

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Thanks for that article it explains a lot. Have had the feeling this was going on for sometime and have even searched for newspaper articles addressing it but nothing til now. Feel vindicated but no less frustrated. Just another case of VIs skewing the market. I think I might send this to my MP and ask him what he will do about it.

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Let us know how you get on with your MP :lol:

I still think the reports are useful to have, but based on this article I won't be offering anyone the value report price when I come round to buying.

Been looking at lots of areas in central belt recently (just checking out areas rather than having a real desire to buy now). Have spoken to lots of estate agents, new home saleswoman etc and it's been a pretty uniformly depressing picture for them. ALL the estate agents have been empty and many were upfront that business was not good. One told me that other estate agents/solictors had cosy relationships with the valuers and were over-pricing (exactly as the Scotsman article said). Of course his estate agency wouldn't get involved in that kind of thing :P

House builders have been pretty up up-beat in general, but most did say that the last months have been very quiet after a reasonable spring period. One told me almost immediately that I could get a discount on the advertised prices (even though I told them I wasn't ready to buy yet).

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House builders have been pretty up up-beat in general, but most did say that the last months have been very quiet after a reasonable spring period. One told me almost immediately that I could get a discount on the advertised prices (even though I told them I wasn't ready to buy yet).

That does not really fit with what I am hearing from a friend of mine who works in a sector strongly connected to especially new build properties. There are (so he says) big problems on numerous new build developments around Edinburgh, some are not going to be completed and most are struggling to shift those that are complete. But given the prices they are asking (even with big discounts) this should not be a surprise.

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That does not really fit with what I am hearing from a friend of mine who works in a sector strongly connected to especially new build properties. There are (so he says) big problems on numerous new build developments around Edinburgh, some are not going to be completed and most are struggling to shift those that are complete. But given the prices they are asking (even with big discounts) this should not be a surprise.

I don't think there's a difference in what we are saying. House builders are always going to be as positive as possible to potential customers simply as a bargaining position. What I was hearing was things like "the spring period was good and we sold a fair number of properties, but it's getting into summer holiday period so it's quiet again"

From my recent house hunting trip I took away the firm opinion that there are further falls to come. I think it's going to be hard getting big discounts quickly off the builders (because the land registry will show this and affect their future sales) and probably a newish second hand house would be a better deal if you can find a motivated seller.

I'll keep looking at houses because it's quite fun, but no intention of buying for at least 6 months and probably a year.

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I don't think there's a difference in what we are saying. House builders are always going to be as positive as possible to potential customers simply as a bargaining position. What I was hearing was things like "the spring period was good and we sold a fair number of properties, but it's getting into summer holiday period so it's quiet again"

From my recent house hunting trip I took away the firm opinion that there are further falls to come. I think it's going to be hard getting big discounts quickly off the builders (because the land registry will show this and affect their future sales) and probably a newish second hand house would be a better deal if you can find a motivated seller.

I'll keep looking at houses because it's quite fun, but no intention of buying for at least 6 months and probably a year.

Yeh, that's more or less our plan too. We sold our flat in Glasgow in December 2008 and completed in February 2009. We'd priced our flat at 2004 prices to get a sale but didn't foresee the big drop in interest rates coming in March 2009 or the mini house price boom that followed. So now we're just waiting for reality to reassert itself. We're renting our current place from an owner occupier who will be out of the country until August 2011 so we're lucky to have some security while we sit things out. We couldn't really believe what was happening when the house prices started rising and kept going through all of last year. But around November we decided that nothing major was likely to change until a few months after the election and locked our deposit money away in an NS&I bond paying 3.95%. Will wait until November/December this year and reassess, but having waited this long we're content to wait longer if we have to. By that time we will also have a better idea if one or both of us is still likely to have a job too. Of course if a house we want and can afford without stretching our budget comes up before then we'll buy it. Not in this for the money just somewhere we can settle down in for the next 20 years or so.

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From my recent house hunting trip I took away the firm opinion that there are further falls to come. I think it's going to be hard getting big discounts quickly off the builders (because the land registry will show this and affect their future sales) and probably a newish second hand house would be a better deal if you can find a motivated seller.

I'll keep looking at houses because it's quite fun, but no intention of buying for at least 6 months and probably a year.

I have set a time limit to buy- December 2011. I have waited long enough. I have a significant "deposit" saved. With the falls I expect this deposit is increasing in value against the houses I am after. My Mrs has just secured her first permanent teaching job and I have a secure job as well.

Just cant wait anymore and am fed up of the reckless MEW'ers being bailed out at my expense.

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Let us know how you get on with your MP :lol:

Here is my MSPs reply from last week.

[size="2]Further to my e mail of 21 July 2010, I attach a copy of a recent Ministerial answer to a Parliamentary Question (PQ) re Home Reports, which indicates that the Scottish Government commissioned a review, on

which there will be a report soon.

I have now tabled a PQ asking the Scottish Government when the outcome of said review will be reported to the Scottish Parliament.

I will keep you informed of future devleopments.

Kind regards,

Charlie Gordon MSP

Housing

S3W-34737 - Cathy Peattie (Falkirk East) (Lab) (Date Lodged Tuesday, June 22, 2010): To ask the Scottish Executive whether it will review the operation of the Home Report system, taking account of the suspension of Home Information Packs in England and Wales and the impact of this on the housing market there.

Answered by Alex Neil MSP (Friday, July 16, 2010): The Scottish Government is currently undertaking an interim review of the Home Report which aims to establish whether any alteration is required to improve its effectiveness and operation.

The review, which was commissioned in December following the Home Report''s first year of operation, will also comment on any effect the Home Report has had on the property market in Scotland. After publication this summer, Ministers will consider any recommendations arising from the review. However, there is no question of Home Reports being abolished.

The review is focused on continuous improvement of the operation of the Home Report in Scotland, and draws on evidence and feedback from buyers, sellers and housing professionals who have used the Home Report system. The Home Report is very different to the Home Information Pack (HIP) and therefore the interim review will not consider the early impact of the removal of HIPs on the housing market in England and Wales.[/size]

I've thanked him for getting back to me and sent him a link to the Scotsman piece you found. I'll post any further replies as/if they arrive.

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The introduction of Home Reports has caused untold stress in my life. The surveyor's valuation has worked against me in both buying and selling a house. I have yet to buy and can’t get over some of the outrageous valuations (mostly high) that surveyors are stamping on the home report. However, when I look up the address in nethouseprice.com I get the fright of my life when I see how little the owners paid for it not that long before the crash eg. £185,000 paid for an ordinary 70’s house in 2004 and is now valued at £310,000 in the home report. Yet in the posh suburb of Pollokshields where the tenement flats are stunning I can determine that they are selling at roughly 2004 prices. I am so confused, angry and utterly frustrated and I blame everything on the surveyor’s home report valuation which I now know to distrust completely.

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The introduction of Home Reports has caused untold stress in my life. The surveyor's valuation has worked against me in both buying and selling a house. I have yet to buy and can’t get over some of the outrageous valuations (mostly high) that surveyors are stamping on the home report. However, when I look up the address in nethouseprice.com I get the fright of my life when I see how little the owners paid for it not that long before the crash eg. £185,000 paid for an ordinary 70’s house in 2004 and is now valued at £310,000 in the home report. Yet in the posh suburb of Pollokshields where the tenement flats are stunning I can determine that they are selling at roughly 2004 prices. I am so confused, angry and utterly frustrated and I blame everything on the surveyor’s home report valuation which I now know to distrust completely.

Solicitor friends of mine tell me that they end up getting several home reports done until the valuation is considered high enough by the vendors. It's a joke system.

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It is a joke but not a funny one. I believe that when Home Reports were first introduced that surveyors were trying their best to make considered valuations (rightly or wrongly). Yet now, two years on, I can see that the home report valuations are, in 95% of the cases, working like grade inflation in universities. What happened was departments (like Economics) were losing students to Business Studies because they awarded more 2:1’s. The Economics department had no choice but to raise their grades in order to keep their students. Unless a firm of surveyor’s raises their valuations, in line with the firm giving the highest valuations, they will go out of business.

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Solicitor friends of mine tell me that they end up getting several home reports done until the valuation is considered high enough by the vendors. It's a joke system.

See the Scotsman link I included earlier in the thread - that's exactly what it said.

I have also seen valuations which strike me as very high compared to historical prices. I suppose this can have the effect of making vendors think their property can sell for that. But as I have said before, the number of houses on at "30,000 below house report" suggest that the reports are giving too high valuations. I think they're valid for 6 months so a valuation taken then may not be representative of true value today.

When I'm looking, I don't care about the house report valuation - more interested in past purchase price and the state of the current market.

As a wee anectode, spoke to two people selling a new build recently. I asked if the price had been reduced over the past year - they said no. I said I thought prices would probably come down so was waiting to buy. One told me (and I think genuinely believed it) "I think prices will go up". The other person seemed a little more realistic, though didn't necessarily agree with me.

Anyway, as soon as I heard there had been no price reduction I immediately ruled out buying it - 2nd hand houses are definitely coming down so I don't see why new builds should hold their value. Especially when they told me that things were not selling as well as before.

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People are delusional - that is all.

Now some way say those expecting huge price falls in Edinburgh are also delusional. That is yet to be seen. However history tells us that those expecting price rises from today forward are the ones most likely to be very very wrong.

Who knows what will happen. However am I worried that Edinburgh house prices will shoot back up again anytime soon ? About as worried as a Hippo attacking me on the way home from work tonight.

Will they faff along with just real drops or will big nominal falls come ? That is the only quesstion IMO. And whilst you can save a decent bit of cash and are even getting 2-3% net return on your savings ? No point I can see in even thinking about buying today.

Well unless the whole financial system goes kaput of course. But even then I don't think I'd really want a house.

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Solicitor friends of mine tell me that they end up getting several home reports done until the valuation is considered high enough by the vendors. It's a joke system.

Who pays for them?

The seller? The agent?

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