Douglas Johnston, Donna Milton, Natalie Sutherland and Alan McKnight, Arneil Johnston
ISBN 0 7559 4809 2
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Introduction
An evaluation of the Scottish Executive's Single Survey Pilot programme, which took place during the period July 2004 to March 2005 was undertaken by Arneil Johnston.
Main Findings
The key function of the Pilot was to test whether there could be a market-led solution to the concept of a Single Survey. Only 74 surveys were commissioned, predominantly in Glasgow. Therefore, the clear finding of this pilot is that there has been no voluntary market-driven solution to the Single Survey concept.
This means that the views and observations of participating stakeholders in the evaluation and in this summary cannot be considered to be statistically robust. The views contained in the report are only representative of the small number of participating stakeholders.
In total 74 single surveys were completed in the four pilot areas; Glasgow - 64, Edinburgh - 1, Dundee - 4, Inverness - 5.
A single selling agent commissioned 39% of all Single Surveys, the vast majority of which were within a 14-week period. This seems to indicate that despite the lack of market response in this instance, there is potential for a greater market response.
In general the Single Survey was viewed as a good product providing useful information for potential purchasers. Purchasers indicated that the report format was well presented, easy to follow and easy to understand. In contrast, some sellers commented that the report was too lengthy and detailed, which may reflect concern expressed on extent of property defects exposed.
There were mixed experiences regarding the distribution and control of survey information to potential purchasers, ranging from freely available reports through a secure web page, to access depending on the potential purchaser submitting a formal note of interest to the selling agent. Web based distribution appeared to provide greatest customer access to the survey reports in a cost effective way.
There is some evidence to suggest that sellers anticipated a survey fee more commensurate with a Scheme 1 valuation report as opposed to the more expensive Scheme 2 survey. Any development of the Single Survey should establish effective processes to ensure that sellers with restricted resources are able to pay for the survey.
The inclusion of a valuation may have influenced the setting of asking prices, given that 57% of all properties marketed with a Single Survey established asking prices at the valuation level. A significant minority of selling agents continued to set asking prices below the known valuation despite its inclusion within the Single Survey.
Analysis appears to suggest that there may be a stronger relationship between asking price and sale price for properties with a known valuation compared to those without. On this basis, it may well be that the inclusion of a valuation within the Single Survey will exert a positive influence on the practice of setting artificially low asking (upset) prices.
The level of information provided on property condition within the Survey did appear to influence the conduct of both sellers and purchasers in the transaction process.
Selling agents suggested that information on property condition and energy efficiency was generally of secondary importance to the valuation in the decision to bid by purchasers.
The inclusion of an energy efficiency report was found to be useful, though not a determining factor in purchasing decisions.
The provision of detailed information on property condition appears to have influenced the decision-making of potential purchasers, although whether this will translate into improved maintenance for successful purchasers could not be measured.
Some evidence suggests that purchasers did consider the perceived conflict of interest arising from their potential reliance on a survey report commissioned by the seller.
Introduction
The Housing Improvement Task Force ( HITF) was established by the Scottish Executive in December 2000 to undertake a comprehensive review of housing policy as it relates to the condition of private sector housing in Scotland. In its final report, Stewardship and Responsibility: A Policy Framework for Private Housing in Scotland, the Task Force recommended proposals for a single survey approach to house purchase in Scotland. These proposals were based on the need to address three specific issues:
the current reliance of most house purchasers on Scheme 1 valuations, providing limited information on the condition of a property;
the encouragement which the existing system gives to multiple surveys and valuations, which can result in abortive costs for house buyers;
the setting of upset prices at an artificially low level by sellers in order to stimulate interest in the property.
In order to progress these proposals, the Scottish Executive established a steering group, including representatives from the Royal Institution of Chartered Surveyors ( RICS), the Law Society of Scotland, the Council of Mortgage Lenders, the Scottish Consumer Council, the National Association of Estate Agents and two independent representatives who sat on the Housing Improvement Task Force. The Steering Group's remit was to inform all aspects of the design, implementation, monitoring and evaluation of a Single Survey product.
Four Pilot areas were identified:
Greater Glasgow North & West (Clyde Valley Structure Plan Team's Sub-housing Market Area);
Edinburgh North and Leith (Parliamentary constituency);
Greater Dundee (Communities Scotland Housing Market Area) and;
Local Authority Housing Market Area 63 (broadly Inverness and surrounding area).
Methods
A comprehensive web-based Single Survey system was designed and implemented for the launch of the Pilot in July 2004. The system was based round the survey designed by the RICS. The site had a set of public pages that enabled members of the public to:
obtain general information on the background and content of the pilot;
identify if their property was in one of the Pilot areas; and
identify agents and surveyors who were registered to use the system in their area and provide contact details, including e-mail addresses.
The professional pages of the web site:
allowed agents and surveyors to register for the Pilot;
allowed agents to commission surveyors and enabled surveys to be created, amended and completed on-line in a secure environment controlled by the surveyor;
enabled the commissioning seller to examine the survey before publication;
integrated into the survey an energy report SAP rating generated by the surveyor through the Elmhurst web-site;
tracked the actions of surveyors and agents through the process; and
provided a facility to log the distribution of each survey.
A detailed user guide for the system was prepared, a helpline established and sample wording on issues such as data protection was provided to each agent registered with the pilot.
In addition full training was provided for selling agents and surveyors and the Scottish Executive launched a publicity campaign.
The qualitative and quantitative data necessary for the management and review of the pilot was agreed with the Single Survey Steering Group and gathered on an ongoing basis.
A system of monthly reporting was adopted using key monitoring criteria, which included:
number of agents registered;
number of surveyors registered;
surveys commissioned by selling agents;
surveys completed by surveyors; and
general feedback on the conduct of the pilot.
A range of survey techniques were utilised throughout the evaluation of the pilot within the various pilot locations. While postal surveys and face-to-face surveys were used, the majority of consultation data was gathered through telephone interviews. Given the potential for 2,000 transactions it was anticipated that a sample of Single Surveys of various types would be carried out during the course of the pilot to gather qualitative data. Clearly the market did not respond in this way and in the end 74 surveys were completed and stakeholder consultation conducted amongst this group.
Quantitative Analysis
The issues identified from the quantitative evaluation are:
there has been no significant voluntary market response to the Single Survey pilot;
a limited number of selling agents and surveyors chose to participate in the Pilot Scheme and these were predominantly in Glasgow;
the majority of individuals who attended the selling agent training sessions were not those using the system in each firm. For any future development to be properly implemented, training will need to reach the right people;
those who carried out a reasonable number of surveys, confirmed that familiarity significantly reduced completion time;
there is some evidence that the valuation may have influenced decisions on the asking price, although a significant minority of selling agents continued to set asking prices below the known valuation; and
the evidence appears to suggest that there may be a stronger relationship between asking price and sale price for properties with a known valuation in comparison with those without.
Qualitative Analysis - Sellers
Following consultation with sellers who commissioned a Single Survey, the subsequent key findings were identified as requiring further consideration:
consumer awareness of the Survey product has been limited. For a voluntary Single Survey Scheme to be successful substantial improvements in consumer awareness would be required;
from the limited evaluation possible it would appear that the existence of a Single Survey is not considered by sellers to improve the marketability of properties;
from the limited evaluation possible it appears that generally sellers carry out only minor/general repairs or improvements and respondents indicated they would have done this regardless of the Single Survey; and
there may be some evidence to indicate that some sellers have made use of the valuations contained in the Single Survey and as a result have not set artificially low 'offers over' asking prices.
Qualitative Analysis - Successful Purchasers
Following consultation with a very limited number of successful purchasers, the subsequent key findings were identified:
given the very limited sample it is impossible to say anything authoritatively about the experiences of successful purchasers;
respondents indicated that the inclusion of a valuation in the Single Survey report did influence the offer they submitted for the property; and
respondents indicated that the information contained in the survey, including the property condition and energy efficiency report, did influence the offer submitted on the property.
Qualitative Analysis - Non-Purchasers
Given the very limited sample it is impossible to say anything authoritatively about the experiences of non-purchasers. However the following observations may have some validity:
there is some evidence to suggest that non-purchasers preferred having access to the survey information free of charge at the time they were considering to bid;
it was inconclusive whether the Single Survey influenced the decision of a potential purchaser whether or not to bid; and
given that none of the respondents indicated that they were concerned about lack of interaction with the surveyor, it may be concluded that for most potential purchasers this might not be a major issue. However, the opportunity for the ultimate purchaser to contact the surveyor was deemed important.
Qualitative Analysis - Lenders
Following consultation with a number of representatives of key lenders, the following views were expressed:
any new system for lender information should be aligned to that for England and Wales;
the issue of the shelf life of a valuation will always be subject to the professional judgement of the lender;
in order to establish an appropriate loan to value ratio it is important that lenders have an effective means of validating the market value of a property in order to ensure effective risk management and appropriate product selection;
lenders do not envisage a return to a system of retention lending;
surveyors should be allowed to speak to potential purchasers;
there is a need for additional commercial regulation of surveyors to support their professional independence; and
there should be a section within the Single Survey specifically designed to meet lender requirements.
Qualitative Analysis - Selling Agents
Following consultation with selling agents, the following observations may have some validity:
the Single Survey may assist the sale of properties which otherwise had not sold on the market as it would act as an incentive to potential purchasers;
agents appeared to believe that purchasers were most interested in the valuation provided and that this valuation influenced the asking price determined by the sellers; and
it was inconclusive as to whether the Single Survey product had a positive impact on the transaction time for selling properties.
Qualitative Analysis - Surveyors
Following consultation with surveyors, the following observations may have some validity:
initially it took a significant amount of time to complete the first surveys but this improved as individuals became familiar with the system;
generally the individuals responsible for populating the on-line survey had not attended any of the training sessions prior to the launch;
generally the survey document was well received but it was thought that it could benefit from being shorter or re-ordered;
in order to improve the survey product there may be a requirement for some form of enhanced professional training/guidance;
the majority of surveyors participating in the evaluation, strongly believe that the Single Survey will not have a positive impact on improving the condition and energy efficiency of private sector housing in Scotland; and
a number of minor technical amendments were suggested to improve the format and content of the Single Survey report.
Qualitative Analysis - Non-Participants
Following consultation with non-participants the following observations may have some validity:
Impact in Rural and Urban Markets
Given the limited sample of surveys from each pilot area there was not enough evidence to make comment on the impact of the Single Survey in rural and urban markets.
Impact in High and Low Demand Markets
Given the limited sample of surveys from each pilot area there was not enough evidence to make comment on the impact of the Single Survey in high and low demand markets. It would seem also that during the pilot the nature of the housing market within each pilot area changed, further complicating analysis.
Conclusions
There has been no voluntary market driven solution to the concept of a Single Survey.
The Single Survey product should be amended to incorporate the improvements identified.
Consideration should be given to providing a national web-based system for the production and dissemination of reports accompanied by targeted training to the individuals who will use the system.
The development of the Single Survey concept should establish processes where survey payment is facilitated for sellers where resource issues preclude participation.
There is some evidence that the inclusion of a valuation informed the price determined by sellers. Given that there appears to be a stronger relationship between asking price and sale price for properties with a known valuation, this may limit the impact of setting artificially low upset prices on potential purchasers.
Generally the views of potential purchasers indicated that the provision of detailed information on property condition did influence their decision whether or not to bid for a property.
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