From Danny Lovey
The government's proposals on the house purchase process are supposed to improve matters and simplify the system. We are all aware that the current system is far from perfect but consider for a moment the potential ramifications of the government's proposals.
The theory goes that a pack will be prepared that will include a surveyor's report and legal documentation, will cost the seller £500-£600 to prepare, and after that everything will be simple.
But why should a lender accept a report that will be out of date by the time a property is sold? The lenders now insist on the valuation of a property on its current value in real time. Why should they trust any old Tom, Dick or Harry when they go to great lengths to use people they have confidence in and who are on their approved panels? And what happens when a seller does not find a buyer for a few months and the market has moved during that time? To force lenders into having to take any old valuer's report when they have not appointed them is tantamount to taking away their choice regarding a commercial decision that they will have to make.
And what happens when a buyer wishes to have his or her own report prepared?
Caveat emptor springs to mind. Why should they trust something that has been prepared for the vendor? For example, what if the buyer wants a more detailed report – one that sits between a mortgage valuation report and what is currently known as a homebuyer's report – that costs more than the standard mortgage valuation report? It seems to me that there would be an element of double charging here. Currently if a client wishes to have a homebuyer's report, it is done at the same time as the mortgage report and therefore the cost is likely to be, say, £450 instead of £250.
But in the proposed scenario this would have to be paid for again – this time by only the buyer who will thus effectively be double charged because of the need for an additional visit.
I also believe the proposal will lead to anti-competitiveness and cartels. This is already happening. The big groups in the business are discussing how they will tie clients. A major talking point is the cost of the packs – a lot of people either cannot afford the cash or do not wish to pay upfront if they can avoid it. This is human nature.
So groups are forming cartels with the intention of tying in potential vendors by effectively offering to pay for the packs. The offer is 'we will look after everything for you' which means 'but one way or another we will make you pay'.
In other words, it's code for rip-off. Solicitors and valuers will be played off against each other by these cartels and will be held to ransom if they want to do work for the big boys. Personal service will disappear and buyers will no longer be able to have that cosy chat about legal matters with their solicitors – something that is of value to those making big decisions in their lives – unless their solicitor fits in with the cartels.
The Office of Fair Trading is already looking at the role of tied mortgage companies within estate agents and the intimidation that is sometimes brought to bear to keep potential buyers inhouse. How is the currently proposed legislation going to do anything but encourage this type of practice?
My feeling is that the current system may not be perfect but technology is already speeding things up.
Currently buyers and sellers have choice and that remains important in a process that sees people making the biggest investment that they are likely to make in their lives.
The Mortgage Practitioner