The other day, I bought a washing machine online. When it arrived, there were no surprises: before committing to buy I’d been able to check its dimensions to within a millimetre, view its full specifications, even read the entire manual.
The other day I also – as I do most days – browsed Rightmove to look for properties of interest. As always, this required a fair bit of detective work just to establish whether there was anything I was interested in thinking about buying. Often there were no floorplans, no information about the lease, or contradictory information at different points in the advert about matters as basic as how many bedrooms there were.
As for any potential legal issues or the condition of expensive elements like the roof or the electrics? Forget it, that’s the kind of thing you’re lucky if you find out before you’ve legally completed on the purchase.
It seems odd that for basic consumer items you can access every last detail before you commit, yet for a purchase at least 100 times more expensive – and for many people, the most important they’ll ever make in their lifetime – it’s more: “well, it's got four bedrooms (or actually maybe three because we've listed it wrong), what more do you want to know? Call us!”
Unpopular opinion
This frustration has recently had attention from Trading Standards, who’ve started running a consultation to determine whether more “material information” should be provided by law when properties are marketed.
The argument from estate agents against more stringent requirements is, in a nutshell, that it’s too hard. It’s a sort-of fair point: unlike with a washing machine, every item of inventory is different and there’s no manufacturer who can provide all the details. Vendors are often clueless about potentially important matters like leasehold details and planning permission – so how can the agent be expected to know?
Even for simpler aspects, the incentive is for the agent to say less rather than more. Firstly, this is because it’s their job to present the property in its best light so there’s little to be gained from unearthing and point out niggles and flaws. Secondly, buyers are more likely to take legal action against them if they’ve said something wrong rather than just omitted something.
My unpopular opinion on the matter is that, while agents should do the basics well (and often don’t), they’re generally not paid enough to coach and coax the vendor through the process of providing all the details a purchaser really wants to know. If you’ve bought properties at a range of prices, you’ll likely have noticed that the service is far better at the higher end – purely because a 1%-ish commission on a more expensive product makes it possible.
RIP HIP
Funnily enough, between 2007 and 2010 we briefly had the beginnings of a solution: Home Information Packs (HIPs). A HIP could be requested by a potential buyer at any point (including before viewing), and contained documents like the title deeds, local authority searches, a vendor questionnaire, a copy of the lease, and so on.
HIPs cost somewhere in the region of £500, and could be compiled by an estate agent (compensating them for the time it took them to get a property “sale ready”), a solicitor, or a specialist provider. Estate agents naturally hated them, because they made it slower and more expensive for vendors to start the sale process – and there was much grumbling from elsewhere in the industry too, because the implementation was far from perfect. The idea, though, was right and a decade on, it would now be trivial to make all this information available digitally via the property portals.
Unfortunately, the timing couldn’t have been worse: they were introduced just as the property bubble was about to burst, and were scrapped following a change of government as they sought to remove any friction from the sale process. As for their legacy, we’re left with just the most pointless component of the original HIP: the Energy Performance Certificate.
Scottish system
All those in the property industry who railed against HIPs would presumably be shocked if they visited Scotland, where something similar has been in place since 2008 without the world ending. The Home Report has contents similar to a HIP, plus a full survey and valuation of the property. This doesn’t quite get us to washing machine territory, but it’s much closer.
Because all the relevant information is provided upfront, all offers can be legally binding – whereas in England and Wales, having an offer accepted is often just the starting point for unearthing the essential facts about what you’re buying.
Home Reports aren’t perfect: they’ve been criticised for being unclear to average consumers, and for surveyors making broad and hedged statements to avoid liability. But whenever I speak to investors in Scotland, they seem broadly happy with the system – and sometimes shocked by how primitive things are south of the border.
Sleuth skills
Will the current work by Trading Standards make any difference? Probably not: I think the only real answer is a complete overhaul of how property is bought and sold, which there’s limited political will to do. Until that happens, we’ll need to be content with developing our sleuthing skills as part of our investment toolkit.
This article first appeared in The Property Hub Magazine.