Breaking the Circle of Condition Surveys

30/Sep/2010
Brian Scannell

Circles are incredibly strong structures – as the wheels on my bicycle demonstrate every time I hit a pothole at speed! But sometimes, breaking a circle is exactly what needs to be done and then that very strength becomes a serious problem.

The circle that I would most like to break is the one that results in only a small minority of homebuyers having a condition report when they purchase a property.

CLG recently published the final report of a working group on condition information that I contributed to. The working group was initially set up when Margaret Beckett was Secretary of State in CLG and the final report was actually agreed almost a year ago, but has taken until now to see the light of day. You can find the report on the CLG website.

What the report highlights is that there is significant consumer detriment due to consumers buying properties without any information on their condition. A study by Which? published in May 2008 identified that buyers who did not have a condition report when buying a property spent an average of £2,500 rectifying problems. By contrast, 44% of respondents who did commission a condition report that identified a problem managed to negotiate a price reduction and a further 10% ensured the problem was fixed before completing the purchase.

A condition rating can help you tell between a house of horros and home sweet home

House of horrors or home sweet home? A Home Condition Survey can help you find out. (Photo by country_boy_shane on Flickr)

It seems like a no-brainer: spend a few hundred pounds on a condition report and save yourself thousands.

And yet, the vast majority of homebuyers make the biggest decisions of their lives on the basis of little more than 'kicking the tyres'.

Unpicking why this is uncovers the problem: a circle of ignorance, misconceptions and conflicting interests.

It seems that most homebuyers think the mortgage valuation is a 'condition report' and a significant proportion believe that the estate agent is somehow 'acting for them'. Given how rarely most of us actually buy a property, such misunderstanding is perhaps understandable.

But it does place a particular responsibility on the shoulders of the conveyancer or solicitor acting for the buyer, who needs to ensure that their client is making decisions on a properly informed basis.

Similarly, lenders or mortgage advisors share the responsibility of ensuring that the buyer understands the risks of proceeding with a transaction without a condition report.

But all of the parties – including the prospective homebuyer – have a strong desire to see the sale completed as quickly as possible. Furthermore, the referral arrangements that exist between some estate agents and conveyancers or mortgage advisors further complicate the picture.

We believe that all prospective homebuyers would benefit from getting a high quality condition report – such as a SAVA Home Condition Survey - prepared for the home they are considering purchasing. It addresses the key elements of the property in a clear and comprehensible manner and will help them make a more informed decision – and to negotiate a fair price for the property.

We think that getting solicitors to understand the detriment their clients risk by not having a condition report is the key to breaking this particular circle. What do you think?

Comments

 

Getting mortgage advisers to understand the benefit for condition surveys would be useful to. After all, should a condition survey result in a decrease in the offer amount, the result is likely to be a lower loan-to-value percentage to the lender. This makes the transaction less risky in these troubled times and the mortgage adviser is also more likely to actually earn an income for their efforts. Many mortgage advisers only getting paid after the successful completion of a transaction and are suffering with a high level of aborted transaction at the moment.

I support the SAVA Home Condition Survey, it will be a long journey to get the public to realise the benefit of condition surveys, but by pushing their 'financial buttons' by explaining that spending £500 on a survey that could give them a £3,000+ reduction on the price of the property they are buying by demonstrating the condition is not acceptable seems a great angle. Time to get publishing and promoting those case studies please SAVA!

 

The reason that it's hard to break the circle is that the 'advisors' that home buyers listen to have no interest in giving the buyer an opportunity to stall a sale that's been agreed or is in process. Estate Agents & Mortgage Brokers only benefit once a sale is complete, so they are likely to avoid highlighting the potential problems that a condition survey might discover.

Solicitors should, I believe, recommend that a survey is carried out in many cases, but the low cost conveyancing model that is becoming so widely used is unlikely to benefit from these delays either. Perhaps it is an opportunity for the more thorough Solicitors to demonstrate their value - I will talk to some of the firms we use to gauge their opinion & see if we can get them to recommend the HCS.

 

While I agree with this comment with regards to Estate Agents, I am not so sure about Mortgage Advisors. True, if a sale falls through they won’t get the commission – for that particular sale – but if their client is a serious purchaser then they should get the commission for the next property instead.
We are just piloting the HCS with a local IFA who is recommending the survey to some clients (particularly investor clients) as a way to ‘add value’ to his service. His initial reaction was exactly as Simon expressed it – why would I potentially jeopardise a purchase? But it did not take long to see beyond this, to the idea that suggesting an HCS could be a ‘value added service’. The reason that this is important is that it seems IFAs do focus on customer retention and providing a real service in order to be recommended new customers.
It is early days in the pilot – with the initial property dogged by problems completely outside anyone’s control (the vendor had to attend a big family funeral – abroad!) but we think that there could be some real opportunities here. We will come back to everyone as the picture gets clearer.

 

As a residential chartered surveyor I fully endorse the points raised by Brian and the failure of the industry as a whole to move this issue forward is indicative of the various self interests involved.

I was accredited by the old SAVA to carry out Home Buyer surveys and that scheme offered a vision of how the residential survey sector could move forward. I was also then heavily involved in training non RICS entrants to the industry as Home Inspectors before the U turn on the HCR.

Having been in the corporate survey sector for most of my career I became disillusioned at the lack of options for house buyers and for the past 2 years have successfully offered an alternative with the majority of my customers choosing an independent survey rather than relying solely on their lenders valuation.

There is a growing demand amongst the public that surveys can offer good value for money and there is a huge opportunity to market a customer friendly report.

Rightly or wrongly however, there remains a lack of understanding regarding Home Inspectors and they are not as yet seen as a natural provider of home condition information.

I don't want to get involved in a debate on the relative merits of RICS versus Home Inspectors and within the longer term I believe there is room for both. Some new entrants to the HI industry have done little to progress the cause of the non RICS condition surveyor and this is unfortunate.

The HI qualification has much to commend it for. It remains however that whatever the qualification, the diverse nature of the UK housing stock and the challenges facing the surveyor or Home Inspector on a daily basis means that there is no substitute for experience.

I am looking seriously now at offering the HCS as a viable alternative to the RICS Homebuyer report - if other RICS surveyors were to do the same I believe this would have a significant impact on raising the profile of the HCS and allow it to become recognised as a leading product in the market place. In time the focus of the public then moves away from the qualification of the individual carrying out the inspection and shifts towards the product itself. If this happens then the Home Inspector and residential surveyor will be viewed as one and the same.

 

It was great to hear from someone from the old SAVA accreditation days. It is now over 10 years since the original ‘Raise the Roof’ and ‘Watchdog’ programmes highlighted certain failings in the surveying industry – not least a complete misunderstanding on the part of consumers as to what it was they were buying when they ‘ordered a survey’.

All credit has to go to Christopher Legrand (assisted initially by Stephen Callaghan) for having the vision to try to address the problems inherent in the residential surveying profession.

I joined SAVA very shortly afterwards and I believe we did much to improve the standing of residential surveyors. But it was not easy. Because it fell into the ‘too difficult’ pile, RICS failed to address the competency issues highlighted by the SAVA Accreditation scheme (I remember to this day reading the HSV by a chartered surveyor telling their client that the house they intended to buy had rising damp at the first floor!).

The Home Inspector qualification arose for two very simple reasons – there were not enough chartered surveyors doing residential survey work to cover demand had the HCR been implemented fully, and the shortcomings SAVA identified meant that government simply was not able to rubber stamp RICS members as approved home inspectors. I believe that the HCR was a missed opportunity all round – but that is history.

What I do know is that a number of residential RICS members qualified as Home Inspectors. They offer the HCS alongside other products. Some prefer it to other products because it is simply a report on condition and does not muddy the water with any reference to valuation – a very contentious and emotive concept as far as the public is concerned. Others tell me that they prefer it simply because it gives them a route out of the profession – by using our insurance they are not locked into the endless cycle of working to provide for run off cover. Others again like it because they recognise that the Home Inspector qualification is a badge of technical competence alongside other badges of professional competence – I’m a valuer by background and would never claim technical surveying competence, yet it is through valuation that many people fall into doing residential survey work.

Our big challenge, however, is to get the home buying public to recognise the Home Condition Survey for what it is. RPSA has an initiative with conveyancers and we have a new initiative starting with IFAs. We also know that some members are very successfully selling through estate agents. So I am very confident that Condition Reporting has a future.

 

Interesting reading the comments about the HCS. I am one individual that is managing to undertake HCS's and just about make a living from it (albeit by the skin of my teeth!)

One serious point I would like to make to anybody reading the above comments.

It has been raised before at various meetings that I have attended. If anybody is marketing the HCS, please call yourself something along the following lines:

1. A Surveyor
2. A Building Surveyor
3. An Accredited Building Surveyor.

In fact anything but Home Inspector.

Unfortunately the Home Inspector is still likely to be tarnished with the old HIP industry and probably best forgotten!

Obviously this is a personal opinion, but I have managed to keep relatively busy by informing prospects that I am a Building Surveyor.

Good luck.

 

My own experience is that:-
1. There is no barrier to acceptance of the HCS as a reliable survey for the general public.
2. The fact that I am a non-RICS Surveyor puts me at no disadvantage when offering my services.
I get an average of 3-4 orders a week for Home Condition Surveys. It's true that about half come from recommendations by my conveyancing solicitor wife to her clients, but the other half are a mixture of referrals from estate agents and follow-ups from EPC's or through the web.
What I've found essential is:-
a. Demonstrate to estate agents that you are empathetic to their position in the conveyancing chain - I explain how, unlike other surveys, my HCS's focus on the 90% of the property that is perfectly fine and put the 10% of issues in perspective. We're out to inform the buyer, not to turn them off the property. Yes, report the issues, but where something is fine then say so.
b. Never describe yourself as anything other than a "Surveyor". Tony is right, the "Home Inspector" title is the kiss of death and the sooner it's consigned to history the better.
c. Above all be positive, reliable and professional. Selling surveys is like selling anything else. You need to demonstrate to the client that you are the best person for the job, and that the job you do for them will meet their needs and offer good value for money (and that doesn't have to mean cheap!).
The RPSA and SAVA initiatives represent a major step forwards for residential surveying as it is probably the first time that an attempt has been made to bring a marketing led approach into the sector.
I am completely convinced that there is a worthwhile career for those who hold the DipHI and I know of several colleagues who are already making a decent living from their qualification.

 

I have canvassed every Estate agent and conveyancer/solicitor within a 20 mile radius,but the take-up of the SAVA HCS literature was derisory and I am still eagerly awaiting for my first commission (ha ha)
The response I recieved was at best indifference to downright rude which has decided that my career choice was a waste of valuable time and money.Until having a survey becomes compulsory by law ,historically housebuyers will not part with money they do not have to.Which in the depressed housing market we are in (and will be for the foreseeable future)begs the question,why are people still being trained as surveyors when there is work only for a lucky few at the end of it.I know this sounds like a rant but I am trying to be realistic.

 

Some really good points are being made and thanks to everyone who has contributed to the debate so far.

Michael, I agree that it is not easy, but Alan and Tony are just two examples where people are managing to sell surveys.

We are looking at IFAs as routes to market. There may be something here and we will report back when we know more.

We are also hosting a seminar for conveyancing solicitors next week (Part of the RPSA initiative). I will be attending and it will be very interesting to try to understand where their objections to surveys may lie. But Alan has a good point - this is not about putting the buyer off but about giving them some solid information.

Finally, like Alan I really believe that the DipHI qualification is a passport to a very worthwhile career.

 

I have just seen this thread and thought I would add my experiences.
I have been reasonably successful selling HCS through my contacts with estate agents and from leads from EPCs. I have been doing a couple of HCS per week this year and have found that the lack of RICS membership is rarely an issue with buyers though it can be a roadblock with some agents and soliciors. I think this is only so that they can feel assured that they have recommended an acredited surveyor and there will be no come back on them.

Buyers are always focused on the product in my experience, and 9 times out of 10 I am able to satisfy them by describing what I will report on and the level of detail involved. I often mention that I will spend at least 2.5 hours on site.

I totally agree that unfortunately the HI name does not help and I call my self a surveyor. I would also say that at present I am successful selling surveys because the agents know me (from EPCs and HIPs). I would expect it would be somewhat different if I was unknown to these agents and not in possession of the 'RICS badge'.

I have been informed of numerous occasions of my customers negotiating large discounts on the basis of my findings and I feel this is a terrific selling point.

 

I would like to share my experiences with everyone;
I have found that there is a market for the HCS but the only way to break the circle is to MARKET,MARKET and MARKET again.By delivering a consistant and regular message to conveyancers and solicitors i am starting to see a more regular flow of referrals from them.
Of course once you secure a flow of work then delivering a high quality service is an absolute neccesity to secure further commissions.
I can only add to previious comments;
Introduce yourself as a Building surveyor.
Explain the limitations of the "valuation"
Explain that you are acting in the interests of the buyer.
Emphasise the PII cover.
AND (this has been the key for me) offer some kind of guarantee.Here you need to be creative but be prepared to stand by it...Take a look at other products to get ideas. ie Dominos Pizza "fresh hot pizza delivered to my door in 30 mins,guaranteed". Ive got mine and it works!!!
Finally and oddly the easiest barrier to overcome is price.Dont go the EPC route of underselling.Pitch your price within the realistic parameters for your area.This means some market research but its well worth it.Be confident and pitch your price alongside or higher than the homebuyers.I have secured work at a higher price than that of a homebuyers report.When i have been questioned i emphasise the time i spend on site AND the time i spend on mature reflection to ensure the accuracy of the report.Often having a well constructed answer is enough to secure the commission.
I am not saying it is easy to sell,its a hard slog.We have not been helped by the dramatic increase in price of the HCS brochures.(I have had leaflets printed and can recommend a printer with my template to hand)We need assistance from SAVA/RICS and RPSA but dont rely on them.If you market locally YOU WILL benefit when the message is endorsed by these organisations.

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