Part Exchange House Schemes – What Are The Rules & How Do They Work
Part exchanging your house is a method of buying a new build property as an alternative to first having to sell your current home on the open market via an estate agent. Here, we’ll walk you through what part exchanging is, who it’s good for and what you can expect from a part exchange scheme.
In this article:
- What is Part Exchange? How does it work?
- What are the rules for Part Exchange schemes? Who is eligible?
- Is Part Exchanging your home a good idea?
- The right questions to ask
What is Part Exchange?
A part exchange scheme involves trading in your house as part-payment for a new build property. The property developer buys your existing house and then subtracts its value from the cost of your new home. Part exchange is perfect for homeowners who want to move quickly without first having to go through the stress of selling their house on the property market.
Part exchanging is suitable for anyone looking to buy a new build property. Effectively the property developer buys your property and discounts this value from the price of the new build you want to buy. This is beneficial for the property developer because they are guaranteed a buyer for one their new build houses and it’s beneficial for you as you’re guaranteed a hassle-free sale and a move to new build property.
How does Part Exchange work?
Part exchange works just like a normal property sale, it’s just that the developer is your buyer. Here’s a step-by-step guide through the process.
- Find a new property development and a home you like. Check they offer part exchange.
- Your current home will be valued. Most developers ask for two valuations from independent agents and will expect a selling price, rather than an asking price.
- The developer will then make you an offer which is subject to a survey.
- If you accept this offer, you can then go ahead and arrange your mortgage if you haven’t already.
- Instruct a conveyancing solicitor to assess the new property.
- Pay a reservation fee if your developer asks for one.
- If the assessment is successful, you could exchange contracts within four weeks.
- When you exchange contracts, you can be asked to pay a 10% deposit. Your solicitor will hang on to a portion of this.
- Once the money is released, you can complete the sale.
What are the rules for Part Exchange schemes? And who is eligible?
Each house developer has their own set of rules regarding part exchange, so it’s worth checking them out. But in general, you usually:
- Need to own a home which you can sell.
- Your existing property should be worth around 65 to 75% of the asking price of the new property.
- It should also be in good condition and structurally sound.
- If it’s leasehold, you’ll need to have a fixed term, usually over 80 years left on the lease.
- The property’s location and saleability also come into account.
- Some homes may be excluded like those with flat roofs.
Part Exchange usually suits householders who are moving up the property ladder and want to move without the unpredictability of a house chain. It tends not to suit people downsizing, as their home is usually worth more than the new property.
Is Part Exchanging your home a good idea?
As with most things, there are pros and cons to choosing to part exchange. Here are some points to help you when considering which option is right for you.
- You can avoid the open market
- No estate agency fees
- No unpredictable chains
- No constant viewing appointments
- Guaranteed sale
- Less stress
- You may be offered 5 to 10% less than market value for your current home
- You may not be able to negotiate any discounts on the new home
- Not every property is eligible
- Your current house must be worth around 70% of the value of the new property
- Leasehold flats or short lease properties are less attractive
- A new home’s value can drop once you move in. They are often priced at the top of the market
New builds are a great option, but they do tend to have smaller rooms and smaller drives than older properties and they can often be built closer together. This means many are overlooked, have problems with insufficient parking and can be trickier to sell later. Because of their premium price, many buyers can also find it difficult to get a mortgage. Once bought, it can be tougher to re-sell properties if the developer is still promoting similar, neighbouring builds.
The right questions to ask a developer
It’s difficult to cover off every detail or hurdle you may come across when buying and part exchanging a house from a developer. But being prepared with the right questions will go a long way to helping put yourself in a good place to make informed decisions.
Here’s some things to consider:
- What costs are involved in the part exchange scheme?
- What’s the top figure the developer will accept for a part exchange property?
- Do you adhere to the Consumer Code for New Homes?
- Are there any fees if I change my mind after agreeing to part exchange?
- Can I negotiate the price of the new property?
- Can I negotiate extras like carpets, fitted wardrobes etc?
Part exchanging your property is a good option if you’d like to move quickly, don’t want the hassle of estate agents and don’t want to be caught up in a property chain. But there’s also no guarantee a property is eligible. To avoid a long drawn out sale or negotiating why not consider a quick house sale company like Good Move?
At Good Move we’ll make an offer for your home that’s up to 80% of the market value, regardless of the condition the property is in and whatever its lease length. There are no seller’s fees, and we’re the only regulated quick sale company. Get in touch with the expert surveyors here at Good Move for a fast, convenient sale.