§ Lord Oakeshott of Seagrove Bayasked Her Majesty's Government:
What would be the estimated cost savings for sellers of properties (a) in pounds per pack and (b) in total on an annual basis, if the compulsory home condition report were omitted from the proposed seller's pack. [HL518]
§ The Parliamentary Under-Secretary of State, Department of the Environment, Transport and the Regions (Lord Whitty)We estimate that anything up to 2 million homes were marketed in England and Wales last year, and that a home condition report (HCR) will cost, on average, around £280. This would suggest the total cost of HCRs would be £560 million. But this does not represent a potential cost saving for sellers if HCRs were omitted from the pack because:
Up to one third of transactions currently involve a condition survey, and in these cases the home condition report does not represent an additional cost to the transaction.
It is not envisaged that seller's packs for first sales of new homes sold with a National House Builders Council or similar warranty will include a home condition report.
We are working with lenders to ensure that the HCR can be relied on as part of the valuation process in as many cases as possible, which would reduce mortgage valuation fees.
Most sellers are also buyers and will receive commensurate benefits from a condition report on the property they are buying.
28 per cent of transactions currently fail after an offer has been accepted, and 43 per cent of these are due to problems revealed by a lender's valuation or survey report. Failed transactions cost consumers on average £1,000.
109WACost implications of condition-related problems which currently cause delays in transactions: 12 per cent of all sellers report such problems between the lender's valuation inspection and exchange of contracts.
Research by a major estate agency chain has shown that 18 per cent of buyers who relied on their mortgage lender's valuation and did not commission a survey faced unexpected repair bills within the first four months of moving into their new home. In 48 per cent of these cases, the repair bills amounted to £500 or more, and in 17 per cent of cases over £1,000.
Cost implications for other transactions in chains. About 60 per cent of transactions involve a chain, and industry estimates suggest the average chain has four transactions. On this basis the effects of condition-related problems could be felt by over half of all transactions.
These factors indicate that for a high proportion of sellers the omission of a home condition report from the seller's pack could result in net additional costs rather than savings.
A regulatory impact assessment was lodged in the House Library on introduction of the Homes Bill. This included a table showing illustrative costs under the present and seller's pack system.