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Part Exchange of your House – How it Works
Selling a property in the UK can be hard work at the best of time. There is a lot involved in the process, from getting a proper valuation to choosing the right estate agent. And then there is the added complexities of property chains. By agreeing to part exchange your house you could avoid all of this worry.
You may be selling your house to meet a deadline, perhaps to move elsewhere to start a new job. It can also be costly, with estate agent’s and surveyor’s fees. And there is the fear that you will lose money you put in if the sale doesn’t go ahead.
There are some alternatives to the traditional way of selling a house using an estate agent. We look at part exchange schemes, which have good points and some disadvantages, in this article.
Quick Page Navigation
- What are part exchange schemes?
- What do I need to know about part exchange?
- Advantages of part exchange house schemes
- How does part exchange work?
- Choosing a solicitor
- What to look out for when part exchanging your house
- How do I qualify for Part Exchange schemes?
- A good alternative to part exchange
What are part exchange schemes?
Part exchange in the property world has been around for a while now. This is one way that house owners who are struggling to find a buyer could make a quick sale.
A part exchange scheme is where you trade the value of your current house against a new build property.
Your property will serve as part payment for a new build. The difference with this kind of scheme is that a property developer takes the place of an estate agent.
You will be dealing with the development company that puts up the new build houses instead, to make your sale. This way of selling will help you avoid having to repair a property chain and means you will own a brand-new property.
One of the reasons some sellers like part exchange schemes is that the sale of their property is guaranteed. Anyone who has been stuck in a property chain that hasn’t moved for months will know the misery this causes.
And this selling method will surely appeal to those who need to sell their house in a hurry.
Many of the major developers in the UK offer part exchange schemes these days. The terms and conditions of each scheme can vary. You are advised to look closely at the small print before going ahead.
What do I need to know about part exchange?
Like a normal property sale, you negotiate with a buyer and, ultimately, will exchange contracts to make the sale.
In this case, however, your property buyer is the developer. They will sell your property on quickly if the deal goes through.
Developers claim to offer a fair price based on the current market value of your home. In reality, you should expect to receive less than the market value of your house. Remember, developers are looking to make a profit through this scheme.
They will also apply certain rules when it comes to choosing which houses they buy, as they are in the strongest negotiating position. There is more information about this below.
Advantages of part exchange house schemes
If you choose to use part exchange, you won’t need to deal with estate agents and pay their fees. This could be an advantage, as some agents demand fees ranging from 1% to 5% of your home’s sale price.
Because you will avoid this, you could save hundreds or even thousands of pounds you would have spent on fees.
As well as the speed of the process, you deal with the ultimate buyer (the new house developer) more directly.
There will be no hearing of frustrating developments in your property chain via your estate agent. No more agony of being told a potential buyer (who you never met and could not influence) has pulled out, so your chain has collapsed.
It is a simpler selling process, with no chain. And, assuming the developer agrees to buy your house, you will move into a brand-new property at the end of it.
How does part exchange work?
Part exchange schemes to buy new build properties typically work something like this. However, do check with the developer in question, as schemes may vary in detail.
To begin with, you would look for new build homes in the area that can provide part exchange. You can approach the sales staff on site at the development or talk to a local estate agent.
Next, find the new build home you would like (and can afford) to buy. After this comes the valuation stage.
Typically, most developers will ask two independent estate agents or valuers to value your home. Be aware, however, they will be instructed to provide a selling price rather than an asking price.
Following this, the developer will make you an offer to part exchange your house. Any offer will be subject to a property survey.
At the next stage, if you must decide whether to accept the offer. If you do, then you will need to arrange a mortgage on the new build house you will be buying. Money Saving Expert.com offers the following guide to re-mortgaging, which can be downloaded as a free PDF.
Choosing a solicitor
Next, you will need a solicitor or conveyancer to help you complete the sale. This is an important role, so make your choice carefully. The Money Advice Service has provided the following tips on choosing a solicitor or conveyancer on their website.
The developer may ask you to put down a reservation fee or a deposit. This is often needed before exchanging homes.
A valuation will be conducted on your existing home. Assuming no serious problems have been unearthed in the survey, contacts are usually exchanged within four weeks.
Once exchange of contracts has been completed you will usually have to pay a deposit. Some of your deposit will usually be retained by the solicitor for the part exchange property.
Finally, monies can be released, and you can complete the sale. And soon move into your brand new, new build house.
What to look out for when part exchanging your house
So, that is what the process of selling your house in part exchange for a new build property might look like.
It all sounds straightforward. Are there any downsides? Well, some people believe you should watch out for some aspects of a typical part exchange scheme.
An article in The Guardian newspaper said a part exchange scheme offer “sounds like a blessing if you are struggling to find a buyer, want to be chain-free, and avoid estate agents’ fees”.
“But beware that when a developer or builder offers to take homes in part exchange, there is at least as much in it for them as there is for the buyer,” said the Guardian article, from 2014.
The Guardian claims that house builders “are typically vague” about how a purchase price is worked out.
The article advises that sellers should check how much their home is worth themselves, before agreeing a part-exchange contract. So, it would be worth getting a least one independent valuation for your house before entering a part exchange scheme.
Another article by What House? advises that you could end up getting less for your property than by selling through traditional methods.
“The independent valuations that the developer obtains will provide a sale price for your home, not an asking price. This means that you will generally be offered less than the market value of your home,” says the article.
If you are part-exchanging it may be impossible to negotiate a significant discount on your new house, says What House?
Instead, the developer may hold firm on the asking price. They are in a strong negotiating position, as you need them to buy your existing property to close the deal.
Developers and house holders won’t buy every property for their part exchange schemes, either. Certain types of homes are typically excluded from the schemes – more details are below.
The full article on part exchange schemes by What House? can be read by clicking here.
Also remember with these schemes you can only part exchange your home against a brand new, new-build property.
Owning a completely new property can have its advantages. But you will have less choice of properties to buy than if you were choosing from the wider housing market.
New build houses typically have smaller rooms and come with smaller plots of land than many older houses.
How do I qualify for Part Exchange schemes?
To be able to take part, your current property must be in a good condition. Developers want to take properties they can sell on quickly in part exchange.
One leading developer will only offer part exchange when the house you trade in is no more than 70% of the selling price of the plot of land being bought.
Again, remember to check the detailed requirements in terms of the value of the home you are purchasing with each new house developer.
Properties that are leasehold can be a challenge. For these, developers may insist that a fixed term – typically more than 80 years – remains on the lease.
Leasehold properties are those that are only owned for a fixed period. Typically, they are flats. But houses, especially if bought through a shared ownership scheme, can be leasehold too.
Under a leasehold legal agreement, homeowners have a legal agreement that says how many years you will own a property.
Once a lease comes to an end, the landlord regains ownership of the property. More information on leaseholds is available on this government website.
As we said above, each developer offering a part exchange contract will apply their own terms and conditions.
The valuation stage for your existing property is vital. Once a valuation has happened, the developer may reject your property because they feel it would be difficult to sell on.
Your property will also be rejected for sale if significant issues are unearthed in the building survey. For instance, these would include structural faults.
Remember, with part exchange you are very unlikely to receive your home’s full market price. But, balanced against that, the developer will remove the hassle of selling your home. If they do take your house in part exchange.
Be prepared to negotiate
Also bear in mind that developers want to sell all the new homes they have built on their site.
They have gone to the trouble of financing and building the development, so they want to see the homes purchased. Don’t be afraid to negotiate.
If you are having problems talking the sale price down or getting more money for your existing property, focus elsewhere.
Would the developer pay your Stamp Duty or any of your fees, such as solicitor’s fees? What about providing white goods for your new home, or some carpets?
A good alternative to part exchange
There are other ways of speeding up the sale of your property, if your house is proving difficult to sell.
While a part exchange scheme can offer benefits, as you can see from our article, it also has limitations.
A good alternative is to find the right property buying company. While there are many of these businesses on the market, not all offer the same guarantees, quality and service.
If you want to sell fast and avoid negotiating with a housing developer, National Property Buyers can help as a regulated house buying company.
We will make you an offer for your home, regardless of its condition of your home. Our home buying process is straightforward, and we strive to make the sale as smooth and quick as possible.
Not only that, we communicate with our customers at every stage of the buying and selling process.
National Property Buyers has been buying properties directly from homeowners for over 10 years.
During this time, we have demonstrated a commitment to customer service. If you sell to us, we deliver on our promises every time. Nor do we make false promises.
Instead, we ensure you are kept fully informed throughout the sale all the way to your completion. We put the extra effort in, so when you decide to sell to us, it is as stress-free as possible.
Like to find out more?
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Alternatively, contact one of our team at National Property Buyers on 0115 740 1900.