Lenders rejecting single surveys for loans
The compulsorily home reports were introduced by the Scottish Government a year ago and contain a valuation commissioned by the seller from a surveyor, which is meant to be acceptable to both parties.
But "end-of-year" research by property experts has revealed that key banks and building societies – including those subsidised by the taxpayer – are refusing to accept one in four valuations as a basis for home loans. These include RBS, HSBC, Alliance and Leicester, Nationwide and the Clydesdale.
They are instead requiring buyers to commission an independent valuation of their own at an average cost of around 500. With around 50,000 house deals a year in Scotland, buyers are having to fork out almost 7m a year for surveys they were not expected to need under the new system.
The research, by the Edinburgh Solicitors Property Centre (ESPC), has also found that up to one-third of sellers have also managed to find a loophole in the system. In so-called "beauty parades", they are commissioning up to three surveys and then choosing the one that prices the house most expensively, in breach of the spirit of the home reports.
The banks and building societies reported by ESPC members to have refused home loans based on home reports are now being urged to accept them, not only to prevent homebuyers having to pay out extra but to speed up house buying at a time when it is struggling to recover from the recession.
Similar complaints about lenders have been made by solicitors in Glasgow and Aberdeen. ESPC chief executive Malcolm Cannon said the basic premise of the home reports was sound. But he added:
"If a lender operates their own standards of what is an acceptable survey, this has the potential to increase costs (for the buyer] and slow down the process. Home reports are mandatory. They need to have total buy-in from all stakeholders."
The single surveys, introduced last December, mean that anyone selling their home has to commission a pack which includes a condition survey and valuation, an energy report and basic questionnaire, at a cost of between 500 and 800. This has cost Scotland's home sellers an extra 9 million over the last quarter alone.
The aim of the reports was to speed up the transaction process, cut costs for buyers by ending multiple surveys on several properties, give consumers more reliable information, and improve the housing stock.
Originally proposed by the Labour/Liberal Democrat coalition, the new system was adopted by the SNP government despite being opposed by solicitor property centres and some property professionals, who argued that, since an English-style "subject to survey" system had already developed, house hunters were no longer paying for multiple surveys. The reports were also opposed by the Tories, who said they would not work unless all lenders accepted the valuations.
But the ESPC report says eight out of ten solicitors have had home report valuations rejected for mortgage purposes.
Scott Brown of Warners, an ESPC member firm, said around one-quarter of offers are falling through because many of the largest lenders were routinely rejecting home report valuations. "It is absolutely crucial we get 100 per cent acceptance of the valuation, at least among the biggest lenders, if this system is to work as intended," he said.
Michael Maloco, of Maloco & Associates, agreed that lenders are rejecting at least one-quarter of surveys. He said: "I recently had a case where Royal Bank of Scotland rejected a valuation. The bank changed its position after we appealed."
Michael Marwick, of Marwicks, said: "There are major flaws with home reports, not least a sharp increase in beauty parades, which completely undermines their validity. Sellers invite two or three surveyors to view the property and then choose the highest. Another problem is that any valuation is out of date within a month in the current market. This is leading to the ridiculous position where properties are being advertised at 25,000 below home report valuation. Apart from raising the obvious questions about the worth of the reports, you have to ask why has the price suddenly dropped. Is there something wrong with the property? The bottom line is the public doesn't have confidence in the reports, and they have slowed the process down by hugely increasing the bureaucracy."
Lloyds and RBS say they will only accept home report valuations if the seller uses a surveyor approved by them. An HSBC spokesman admitted the bank was seeking independent valuations in many cases. He said: "For us it comes down to the issue of liability. If we lose money because of a poor valuation, we have to have the legal right to sue the surveyor, which we believe means we have to commission the survey ourselves."
A Clydesdale Bank spokesman confirmed that the bank will require a new valuation if the home report is more than three months old or the mortgage is above 75 per cent of the property's value. An Abbey spokeswoman offered to investigate cases where loans were refused.