Mortgages. Home Condition Reports will not be mandatory

By: Michael Challiner

You may have heard about the introduction of the Home Information Packs starting in June 2006. One controversial part of the Pack was to be a Home Condition Report, a mandatory survey that the seller of the property would have to have carried out in order to sell the property. However, although the Packs are going ahead, the Home Condition Report won’t be a compulsory part of it.

So firstly, what exactly is the Home Condition Report? It’s the same as a survey, but instead of the buyer having a survey done after making an offer and having it accepted, the seller has to produce the Report to verify the structural state of the property. This means that buyers will have a lot more information about the property from the outset, and it should help reduce the amount of sales that collapse mid-process. In fact, it has recently been estimated that ?1 million is lost every single day in costs relating to house sales that fall apart.

Less than a quarter of all homebuyers have a survey anyway – instead choosing to depend on the valuation carried out by the mortgage company. Many purchases fall through simply because the valuation comes out lower than the purchase price – often because they pick up on property defects that could potentially develop into a serious matter.

Valuations don’t come cheap, so the buyer will be out of pocket, and the money is effectively lost. The Home Condition Reports could go a long way to alleviating this common situation.

The decision to hold back from making Home Condition Reports mandatory has not been popular in the industry. A number of home information pack providers have been set up to meet the new demand, and they have invested heavily in new computer systems and developing networks of surveyors who will be carrying out the home condition reports. They stand to lose out for the foreseeable future, especially as Home Condition Reports will be an expense to the seller. It is likely that most sellers will not be interested on taking on yet another cost.

It’s bad news for the 4,400 people that trained to be Home Inspectors too. Once assured of a decent job, the demand for Inspectors is not going to be anywhere near the levels that they would have been, had the Reports been made mandatory.

It’s bad news again for first time buyers – they will still need to fork out for the valuation and, if they can afford it, the survey.

Building societies will be happy about the decision however. 84% of those surveyed believed that the Home Condition Reports would have a negative impact on the housing market. That would cut into their profits, of course.

So why have the Home Condition Reports not been made mandatory? The Government say that by making them voluntary first, they will be able to see how well the process works, allowing them to make a more informed decision in future. They are also keen to avoid rocking the housing market from its currently buoyant state.

Sceptics suggest that it is a political decision – with the election looming, the Government won’t want to take any action that could result in stalling the market, thereby losing some potential votes.

Which? Campaigns Director Nick Stace wrote, in a letter to Ruth Kelly, the recently appointed Secretary of State for Communities and Local Government: “It seems extraordinary that the first major decision by your new department is to reduce the consumer benefits of a flagship policy because you have come under pressure from the industry, including estate agents."

According to Nick Stace, estate agents are the second most distrusted profession after politicians, and does not support the decision to exclude the Condition Reports from the Packs.

Watch this space to see what happens next.

Mortgages
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