DEA and HI Proposition

Aureus UK Limited proposes to provide Home Inspectors (HIs) and Domestic Energy Assessors (DEAs) with a value-added service that:

Obtains and manages assignments from a wide variety of sources
Ensures a fair distribution of work and hence a fair remuneration for the HIs and DEAs
Reduces the financial costs incurred by HIs and DEAs by achieving economies of scale without impacting their independence.
Promotes the concept of Local people, Local Business, Local Solutions.

Background

Government policy has been to introduce Home Information Packs with a view to speeding up the transfer of home ownership within the UK. The concept is that, the more information a prospective purchaser has, the more likely they are to be able to make an informed decision. Because information on the property is disclosed at the outset there is a reduced likelihood of abortive transactions, gazumping and gazundering.

In practice, because the government has devalued the programme by making only Energy Performance Certificates mandatory, instead of the more informative Home Condition Reports, there is still a probability of some abortive transactions. The government appears to have taken this decision because it remains some way short of its stated objective of having 7,500 qualified Home Inspectors by 1st June 2007. Additionally, the European Directive on energy conservation requires only that an Energy Performance Certificate be prepared.

Ultimately, Home Information Packs became mandatory, with effect 1st August 2007, for residential property with 4 or more bedrooms. Properties with 3 or more bedrooms require HIPs from 10th September, 2007.

Home Inspectors (HIs) and Domestic Energy Assessors (DEAs) are new job titles for the skilled providers of essential services to the vendors of residential dwellings. In time, HIs and DEAs will be called on to work on let and commercial properties, as well. Because the market remains largely untested, other than in “dry-run” areas, market forces have yet to establish levels of work and fee structures.

Objectives of Home Inspectors and Domestic Energy Assessors

HIs and DEAs come from a variety of backgrounds and have a wide range of experiences and skills. In many cases, you have effected a career change at a relatively late stage in your working lives. For those of you, it is crucially important to achieve a high return on your investment in order to secure your futures. For others, this new profession offers opportunities for personal development and growth.

Whatever has motivated you to enter this profession; all of you are seeking to establish yourselves in your preferred operational areas, with a steady, regular and varied stream of work that provides an early return on your investment and a significant annual income.

Impediments to the achievement of these Objectives

Because most HIs and DEAs are self-employed, you will need to seek out work, and form relationships with estate agents, solicitors and HIP providers in order to obtain a regular income.

While independence is important to you, it can be used against you by enabling HIP providers and others to play you off against each other in the battle to secure assignments. HIP providers, generally, are interested in profiting from selling the HIP; they will therefore seek to minimise their costs and reducing their payments to you will help them reduce costs!

Information received from major HIP providers suggests that they see maximum payments on EPCs being set at £75 and for HCRs at £200. They also expect to be able to reduce those fees before the end of 2007.

For you to continue to receive assignments from local firms, it is imperative that those firms remain in position. The major corporate bodies are aiming to achieve a significant share of this new market. Should they be successful, local firms will disappear as they have in Denmark.

Each of you is a member of a specific certification scheme. The scheme of which you are a member was established when you obtained your accreditation. As a result, if you were accredited under the SAVA scheme, your certificates will be produced by SAVA. Most other training schemes use the BRE accreditation process. When you submit your reports, they must be accompanied by the certificate which will be produced by the scheme of which you are a member.

As most HIP providers are signing up to either Xit2 or Quest for the distribution of assignments and the production of the HIP, you will be able to receive instructions only from those HIP providers who use the system supported by your accreditation board. Effectively, this rules out half the market for each of you! In addition, when the RICS and NAEA systems come on line, the market will become even more fragmented.

In order to receive the instructions from the HIP providers, you will be required to invest in either Xit2's software or that of Quest. The costs of these systems are as below (Note: Xit2 prices are correct as of 1st August 2007; those of Quest were correct as of 22nd February 2007. Both sets of figures are provided for comparison purposes and are subject to change):

	Xit2	Quest
Installation fee	Nil	£25.00
Annual fee	£460	£265.00
Upload charge (per report)	£5.00 per HCR £1.15 per EPC	£2.30 (typically)

In addition you can expect to meet the following typical costs:

	EPC	HCR
Certification	£7.50	£15.00
PI insurance	£6.50	£10.00
Landmark Charge	£1.15	£1.25

In summary:

You will need to develop your own market-place.
The HIP providers will attempt to limit your earnings per assignment.
You will only be able to accept instructions from a provider that uses the system favoured by the organisation that accredited you.
You will incur significant charges to use the favoured system.

How will Aureus assist in the achievement of these Objectives?

Finding work for you

Aureus has established relationships with all the major HIP providers, however, we have also taken a pro-active role in developing close cooperative relationships with local teams of professionals. By working with these local teams you will ensure the future of your profession and of theirs. Additionallyh, monies that would have been transferred to other parts of the country will remain within your locale and strengthen the local economy.

Maintaining your independence

Acceptance of our proposition does not impact your independence. You will be asked to sign a non-exclusive agreement which will then provide you with the benefits we propose. You will be free to obtain work through other means; we hope to demonstrate that it is in your best interests to utilise Aureus.

Securing your income

A key feature of our proposition is that all HIs and DEAs work to a unified fee structure and set of service standards. This will maximise your income per instruction, eliminate the scope for HIP providers to drive your earnings downward, ensure reasonability of the fees being charged and, by demonstrating your professionalism, generate new business.

Local People, Local Business, Local Solutions!

For you to maintain your independence, it is critically important that the other service professionals in the industry also maintain theirs.

Those of us who have seen what has happened in Denmark (the model on which our government has based its plans) are determined that it will not happen here. We recognise that Denmark is a small country with a population of about 2.5 million, however, the introduction of Home Information Packs in that country several years ago has seen a virtual elimination of independent estate agents and legal firms. The market is dominated by a small number of corporate businesses.

According to the 2001 census, the population in Devon, Cornwall and Somerset is roughly equivalent in size to that in Denmark. Imagine the impact if their business model were to take hold here. It is for this reason we are putting our energies into the concept of local people, local business, local solutions

Certification Schemes

Each of you will have achieved your accreditation (or be about to achieve it) via one of a number of certification schemes invluding SAVA, BRE, RICS, Elmhurst, ECMK and NAEA. When you submit your reports on-line, they will need to be certified under the scheme through which you obtained your accreditation.

What you may not be aware of is that the major HIP providers are standardising on methods of delivery of instructions via either Xit2 or Quest and, because these platforms are linked inextricably with SAVA and BRE, respectively, you will only be able to receive instructions from the provider who uses the platform linked to the scheme under which you are accredited! The immediate effect of this is to limit your source of instructions to 50% of the market potential with further reductions likely when the other schemes come into effect.

Aureus has investigated the likelihood of cooperation between the scheme providers but, given their respective business interests, this seems improbable in the near future. We have therefore developed our own platform-independent method of delivering instructions through our own web-based system. This will leave you free to obtain instructions from the whole market-place and return certified reports for their incorporation within the packs.

Cost savings

From the above table, you can see that you will incur significant costs in order to install and operate the software systems for Xit2 or Quest. In addition, you will incur other fees for uploading, obtaining certificates and obtaining PI cover.

Aureus will insulate you from the majority of these fees and costs. The fee you will receive will be net of all deductions, other than your necessary expenses. We will meet the upload charge, landmark charge, certification fee and the cost of Professional Indemnity Insurance from within our overhead margin. By using our instruction system, you will not need to incur the software costs.

Professional Indemnity Insurance

We have obtained group PI cover, which will protect you when carrying out any assignments for us. We will be happy to provide you with copies of the policy details. We will ensure this cover remains comprehensive and competitive, negotiating discounts for volume turnover where possible.

Because Aureus will be maintaining this insurance policy, you will automatically benefit from run-off cover, obviating the necessity for you to obtain expensive run-off protection.

As in the case of individual PI cover, you will each, individually, remain liable for excesses on any claims against you. This will help to preserve our fee structure else Aureus would need to maintain a margin in the event of a claim.

Invoicing and payments

We will be responsible for invoicing and collecting payments due. We have established a system for paying inspectors by BACS transfer. Payments will be made to inspectors after receipt by us of cleared funds and we propose this is done on a bi-weekly or monthly basis in order to minimise the time and costs involved.

Building and maintaining relationships and volume instructions

We will be responsible for building and maintaining relationships with HIP providers, solicitors and estate agents to ensure volume and quality instructions. We already have established relationships which we are developing and will continually look for new opportunities in the marketplace. We have had a significant and positive interest from many organisations. Feedback we have so far received is that these organisations would prefer to deal with a single content provider rather than trying to negotiate and deal with inspectors on an individual basis.

Service standards

One of the most important factors which will affect HIP providers and estate agents will be the speed of turnaround from instruction to receipt of the HCR or EPC. The latest regulations dictate that a property cannot be marketed before an EPC is available.

Estate agents will be mindful of the fine (currently £200) they will incur if a property is marketed without an EPC. They will therefore demand a quick and reliable service from us. It is likely that we will have to agree to set service standards and these standards will have to be reflected in our agreement with you. We will need to consider whether there may be penalties imposed for failing to meet these agreements.

There will be occasions when we will be unable to provide reports within a set timeframe (e.g. when a vendor cannot be contacted for an appointment or an inspector is unable, for whatever reason, to carry out the appointment). We must ensure that we are not penalised in these circumstances. HIs and DEAs will be expected to make every effort to attend their appointments on time and to carry out their instructions in a professional and friendly manner.

Quality control

You will be responsible for the thoroughness and quality of your work. We may need to consider random quality audits to ensure standards are being met and maintained. We will be judged collectively on the quality and speed of the service we provide.

We propose to introduce a Quality Control System that:

Confirms the appointment was kept
Verifies vendor satisfaction
Verifies reports delivered on time and to quality standards

Scheduling and fair distribution of instructions

We are developing a system that will ensure an agreed and fair distribution of work and assigns work to HIs and DEAs based on

Work areas
Capacity
Proximity to other assignments
Appropriate distribution (levelling)
Prioritisation rules

The system will schedule instructions in accordance with the above, contact the vendor to advise the name of the inspector and time/date of the appointment and notify you of your appointments.

We intend that appointments will be communicated to you by a combination of SMS, email and secure website logins. You will also be provided witha diary function on the website wherein you can notify us of any times that you ARE or ARE NOT available for work and where you can keep track of the appointments we have made for you.

To assist you in identifying the locations for your appointments and in planning your routes, we have incorporated a mapping utility.

We have appended a few screen shots from our web-site for your information.

The first screen shot shows information that the system will carry on you. In this case it carries our Demo Inspector user information. The menu at the left provides access to your diary and assignments/appointments.

Inspector Home Page

Selecting the Diary item, shows information on days you have selected as unavailable for work and any assignments due on the current day. From this screen, you can edit your availability and access your appointment list.

Inspector Diary Page

The days marked in RED have been identified as “unavailable” for assignments.

If you select "Assignments" from the menu item on the left, the next screen shows a list of all active assignments recorded against your name. This screen currently only lists a single, dummy appointment showing that Aureus Property Services has issued an instruction for you to conduct an EPC at 8 Derry's Cross, Plymouth at 13:00 on 22nd August. The nature of the property and the owner's contact details are shown. From here, you can select a specific appointment and be taken to another page with an embedded 'Google Map'.

Assignments Page

Alternatively, if you click on a day from the diary, you will be taken to a page showing that day's appointments.

Daily Calendar Page

By selecting an appointment from this page, you again will be taken to another page with an embedded 'Google Map'.

Assignment Google Page

Reporting and record keeping

Initially, you will be responsible for managing and uploading your own reports and obtaining the certificates. Permanent records are to be kept of all inspection reports and you will upload reports using your own Accreditation Scheme’s software. However, we propose to include the upload/ certificate costs in the fee structure and will therefore be responsible for meeting these costs.

Copies of certificates/reports are to be uploaded to us so we can forward these through to the instructing organisation. Not all organisations will have access to centralised reports and have therefore requested these be emailed to them. We will retain an electronic copy of all reports/certificates and will maintain a comprehensive vendor and property database. This database will be useful for future reporting and marketing. It will also assist you in meeting your obligations of maintaining comprehensive records of all reports you have compiled.

We will maintain a flexible approach to procedures and will utilise new technologies as these become available.

Performance monitoring

We propose to develop a performance monitoring system which:

Evaluates the effectiveness of each individual inspector
Evaluates the effectiveness of our programme
Identifies weaknesses and develops improvements
Ensures efficencies of assignments and allows inspectors to carry out more instructions in a given timeframe

Complaint handling

We have developed a complaints procedure to handle complaints effectively and efficiently. Out objective is to minimise the complaints we receive by ensuring standards and performance are maintained. However, when complaints are received, these will be investigated fully and we will need to consider what level of redress may be appropriate if the complaint is substantiated.

A copy of the complaints procedure is published on the website and will be made available to you following your acceptance onto the team.

Building a quality brand

It is our objective to be a market leader in the provision of HCRs and EPCs. To do this it is vital that we maintain the quality and standards of the service we provide.

Each inspector will be required to carry a photo identity card containing the inspector’s name, qualifications and accreditation number. Inspectors will be able to issue business cards to vendors. This will instill confidence in the vendor and present a quality image.

Perceived threats to our business model

Overpricing

If we set the fee structure at too high a level, there is a danger that corporate bodies and private individuals will be attracted into the area, either to reduce their costs or to generate large income. This could easily result in overcapacity and lead to a price war.

Cost competition

If individual DEAs and HIs remain fragmented, market forces will prevail and your earnings will be reduced.

New DEAs and HIs

our aim is to provide such a cost effective and tightly controlled programme that it would be senseless for a newly qualified inspector not to come aboard. New inspectors might be able to undercut us in the marketplace but why would they want to do that when they would be reducing their earning potential?

Estate agents training to carry out EPCs and HCRs – this will undoubtedly happen if we cannot provide a cost-effective and quality service. If we can establish relationships quickly there should be less attraction for estate agents to progress into this area.

Capacity

As more people understand the earnings potential we are faced with there will be more people undertaking training and qualification. We need to be mindful of capacity to provide our services and with an overabundance of inspectors, workloads may be reduced and therefore earnings will be diminished.

Government 'U-turns'

Cannot be ruled out. The present government has shown scant regard for HIs to-date, however, we believe that they are now too far advanced on the HIP process to cancel their plans. It is more likely that some key dates may be ‘adjusted’.

Franchises

Some Home Information Pack Providers are offering franchises along with guarantees of instructions. Some of the offerings include rebates of training fees. We believe that some HIs and DEAs may, indeed, be persuaded to purchase franchises, however, we also believe that the concept of franchising is flawed.

Qualified HIs and DEAs are needed in order for house sales to proceed. Why would they voluntarily give up their bargaining position, commit themselves to only one provider, and pay for the privilege? We fully expect those HIs who commit to the franchises to recognise their mistake within a short time and seek an alternative. Aureus will provide that alternative.

Future progression and additional earnings potential

Commercial EPCs will become mandatory in the very near future. This will create a huge marketplace with significant earnings potential for us. All commercial buildings (schools, hospitals, retail outlets, let properties, council housing, offices and local government buildings) will require EPCs. It is anticipated that the fees derived from these instructions will be significantly higher than for domestic reports.

Again, we intend to be a leading provider in this area. You will be encouraged to extend your qualifications when the new modules become available.

Summary

We intend to be the market leader of services for HCRs and EPCs in Devon, Cornwall, Somerset & Dorset. We intend to extend our reach beyond this area when the time is right. We intend to build a quality brand image by maintaining high service standards at a reasonable cost.

Our objective is to maximise the inspectors’ earnings whilst minimising their costs.

About us

Aureus UK Limited (Aureus) was registered in 2002 and is wholly owned by its two directors, Clive A. Millar and Leslie W.P. Whitfield. Les is also the Company Secretary.

Over the years, the company has focused its activities on property services with a principle aim of obtaining referrals to Western Mortgage Brokers Limited, a sister company also owned by Les and Clive.

The reasons that Aureus can operate on slim margins are:

It uses facilities provided By Western Mortgage Brokers Limited (Western Mortgages).
The development work has been conducted in-house.
It is seen as a lead generator for Western Mortgages who expect to see additional enquiries for its services.