Will Property Log Books Improve Market Efficiency?
A recent report has claimed that one in 6 housing transactions are failing to complete and costing the seller on average £1,945.
As many buyers are increasingly worried about the condition of the property they are about to purchase, in many cases they would rather pull out than risk being lumbered with hidden housing costs.
The idea of launching property log books was levied by the ministry of housing at the end of last year to stem the flow of failed transactions that are costing the UK housing market £270 million every year.
Whilst many are worried that a logbook would end up replacing Home Information Packs (HIPs), many feel that too much information is being withheld from the buyer and a clearer, more transparent system is needed.
Stuart Young, managing director of Etive Technologies, a company producing property log books for new build and public sector homes, has considered the role of log books in the property market.
What are the main distinctions between HIPs and property log books?
A property log book should be seen as a tool that stays with a property for life, that is passed on between owners. A log book has a life beyond just supporting the sales process. HIPs were designed for only supporting the sales process and as such no one saw the long-term benefit or value against the cost.
As technology has evolved, a digital property log book can support many purposes for a home owner and can contain as much information as you want about a home. And this goes beyond just documents and information, think of educational videos, links through to DIY and material suppliers for when you want to carry out work on your home.
The HIP was only a snap shot in time with a short shelf life unlike a digital property log book which has a lifetime value to a property.
Why are property log books important documents for the property sector?
The buying and selling of a home can be quite complex and can often require vast amounts of information and confirmations relating to the purchase. This is a time consuming and costly process. The information often sits in multiple places and bringing all the information together in the one place, that can be accessed and reused multiple times, will help reduce further time constraints for all those involved in the transaction process. This also supports the ability to share all the information with as many relying parties at once, introducing greater transparency as all relying parties see the same information at the same time.
It will also help reduce duplication of effort and by default associated costs. We know from experience that documents can be lost or misplaced. This holds up a sale and it is often left to the seller to try and source these documents, such as a warranty that relates to a new build home. Again, there are financial implications to consider.
Putting together a secure repository of information that stays with the property will help reduce the time, effort and costs associated with capturing, storing and sharing of information.
We need to look beyond just conveyancing information. Other important documents may relate to repair, maintenance and improvement work, warranties and guarantees as well as information relating to the internal design of the property. This is information that buyers may want such as kitchen and bathroom specifications, central heating, communal area management, in fact anything you can think of, as different information will be important to people at different times. We need to look at this in terms of the lifetime of the property, not just the selling part.
As one home buyer said “Every piece of information you would need is there. If we were replacing things in the future for example. Information for prospective buyers is very good too. When we sold our house, our solicitors lost some of our information which was very costly but that wouldn’t happen with this system. It all looked very straight forward and easy to use.”
There are also examples of properties being sold that have their own water and energy supplies so brings into the mix the complexities around ‘green’ homes and energy efficiency and management. Property log books were also used by Scottish Water on the two largest water and energy efficiency projects in the residential sector. Having a property log book supported the whole smart meter technology infrastructure that was put in place to better monitor these homes through these 5 years projects. For this reason, a digital property log book should be viewed as a platform for a range of different purposes within the lifetime of a property.
How could property log books improve the home buying process?
When making any large purchase buyers want confidence in what they are buying. A similar analogy can be drawn with a car, you want to know that what you are buying is safe and sound.
Experience confirms that the more information you provide from the outset inspires greater buyer confidence, which will help reduce the decision-making time.
Providing fuller information about the property will help identify any potential blockers to the sale enabling the relying parties to focus on more committed buyers/sellers. By getting a seller to commit from the outset to provide all information about the property will also help the seller’s agents to determine levels of commitment to sell i.e. is the seller really committed to selling and spend the time and effort to get all information together?
In relation to a new build home for example, one buyer commented “Professionalism is what everyone wants from their builder and this is. Our move went very smoothly – the transfer of information etc.”
How do you envision property log books will be used in the future?
For such a large investment as buying a home we know that people often complain that when they are trying to carry out any future repair, maintenance or improvements one of the hurdles they have to overcome is the lack of information. This is information about the current state of their home, how it was built, what materials were used, what guarantees might still be in place or what work was carried out in the past.
For an owner, who might carry out regular maintenance of their home, keeping a record of all information will help them better manage the home and when they come to sell in the future will make the process a great deal easier and reduce perceived stress levels. When buying a second hand car we always look for a record of the annual service records and MOT certificates, these have a value.
Work already being carried out in one London Borough, where all the residential housing stock has a property log book against them, will also support access to local authority services based on the property’s address. For example, a person can go into their property log book and be able to access council services, such as organise a bin collection, make council tax payments or support a planning application. The wider scope of a property log book is to enable house holders to access their local authority services available to them and becomes a wider management tool for running a home.
We also have to consider how people interact with information these days. People now expect to be able to access information across multiple channels and devices, mobile phones being the prime example. When you might need instant access to your property information you can access your property log book from your mobile phone, rather than having the inconvenience of waiting until you get home and searching through loads of documents. As one homeowner said “You are overloaded with paper when you first move in – you don’t have the time to trawl through everything you are given. It is a very good way to access the information – especially the emergency information”.
Current work being carried out has enabled the use of technology to digitally link a person to a property which becomes important in times of disaster, such as a fire or flooding. The owner then only has to provide their insurance company with access to their property log book to support a quicker and more efficient resolution to their insurance claim. I wonder if there are insurance cost implications to having a property log book for your home enabling you to evidence all property and contents information?
Standards are a key consideration and this is where the likes of the MHCLG and other relying parties have a role to play. Building an eco-system of trust is important in ensuring people come to trust the information they access. This is where further demonstration work is required and requires the input from the likes of HMLR, Law Society, NAEA and CML.
Do you think that the property market could benefit from detailed log books to create a more efficient system? Do you envision any difficulties in adopting a log book system? Will it create an holistic system?