HOME CONDITION REPORTS
Background
At present many buyers know little about the property they are buying. They only obtain information about its condition when an offer has been accepted and then 40% of people rely on a valuation survey, even though it is designed to tell the lender whether the property is good security, rather than its condition.
When problems emerge with the condition of the property; a sale can collapse with the buyer and seller having already spent a significant amount of money. Evidence suggests that over 40% of failed transactions are related to the results of a survey or the condition of the property. Where a transaction does fall through, the buyer's expenditure is wasted and the survey is not normally made available to subsequent purchasers.
Home Condition Reports (HCR) are designed to address these issues for the benefit of both buyers and sellers. In particular they will:
- Enable buyers to make properly informed bids;
- Reduce the chances of late surprises leading to re-negotiations and, potentially, the breakdown of the transaction;
- Cut the wasted costs when a transaction fails as the HCR will be made available to a subsequent bidder who can rely on it as if it had been commissioned for them;
- From a seller's point of view, minimise the risk of being asked to accept a price reduction at a late stage due to a fault being discovered from a buyer's survey. Often a seller will be put under pressure to accept a reduction much larger than the cost of the works required;
- The Home Condition Report has been designed to provide data that can feed directly into lenders automated valuation models; thereby avoiding the need for a separate valuation survey in most cases. However, lenders are still learning now best to evaluate Home Condition Reports and use valuation models in general. Therefore, the number of lenders willing to provide borrowing using a Home Condition Report for valuation is currently limited. In many ways the Home Condition report is ahead of its time; many think automated valuations will be common place in a few years time.
The simple fact is: homes marketed with a Home Condition Report complete more quickly and chains are less likely to collapse.
What a Home Condition Report tells you
The Home Condition Report is an independent report on the condition of the property on the day it is inspected. It is in an easy to understand format with the property broken down into separate elements each given a condition rating of 1, 2, and 3, or not inspected. It also highlights any matters that require further investigation. However, minor defects that will not affect the sale of a property are not included. A mortgage valuation is not included, but there is a buildings reinstatement cost for insurance purposes. This could be useful as insurance companies often over-estimate this figure, resulting in higher premiums than necessary. The HCR is an optional HIP document that sellers, buyers and lenders all have a legal right to rely on, as an objective and authoritative report.
In general a Home Condition Report can be compared to a RICS Home Buyers Report. However, there are important differences. The Home Condition Report considers Health and Safety issues in greater detail and can only be carried out by a qualified and certified Home Inspector, so you can be sure it will be proper and fully independent.
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Home Inspectors
All Sussex Inspections Home Inspectors are members of the Government approved Certification Scheme and will be subjected to audit by ourselves and the National Certification Scheme. A Home Inspector's licence can be suspended or revoked if they are deemed incompetent. This level of Certification and auditing is unique to Home Condition Reports. Even existing surveyors have to go though additional training before they can become a Home Inspector.
How does a Home Inspector earn their fee? There are over 1,200 possible items of data to be collected, as well as sketches, dimensions and photographs. The Home Inspector must then take a period of "reflective thought" prior to carefully and accurately compiling the Report and logging it electronically with the Central Registry. Then Sussex Inspections must store the site notes and photographs for fifteen years, plus be available to answer questions from sellers, buyers and lenders relating to the inspection.
Sussex Inspections request that before the Home Inspector visits the property to carry out an Inspection, the seller reads the Home Condition Report: terms of engagement and returns a completed Sussex Inspections Sellers Questionnaire.
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