Selling your property is a quite frankly stressful experience. It is a process that can be fraught with worry at almost every turn, from wondering whether the sale will fall through, to applying for a new mortgage and trying to find a new home to purchase.
Part exchanging your house is means of purchasing a new build property without first having to sell your current property on the open market through a local estate agent. The property developer will buy your home and discount the value from the property you wish to buy.
In this blog post, we will be looking at what part exchanging means, what are the terms and conditions behind the scheme, and how to find out if you qualify.
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- Part Exchange explained
- Who is a Part Exchange scheme suitable for?
- How does a Part Exchange work?
- Pros and cons of using a Part Exchange scheme
- What are the terms and conditions for a part exchange house scheme?
- What should you ask a property developer?
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Part Exchange explained
A part exchange scheme works by trading your existing property in as part-payment for a new build property. The property developer will then buy your existing house and subtract the value from the cost of your new home. This scheme is ideal for those who want to a smooth move without the added stress of finding a buyer for their property on the open market.
Who is a Part Exchange scheme suitable for?
Using a part exchange scheme is suitable for any person who is looking to buy a new build property. It is mutually beneficial as it guarantees a house sale for the developer and it guarantees you a quick sale.
How does a Part Exchange work?
There isn’t a lot of difference between your usual property sale and a part exchange scheme. The only difference is instead of a seller on the open market, it is the property developer who is buying the property. Below is our step-by-step guide to selling a property on the open market:
1.Find a property
The first step is to find a new property that you are happy with. You should check to make sure that they offer a part exchange scheme.
2.Valuation
The next step in the guide will be to have your current home valuated. The majority of developers will ask you for two independent valuations from two different agents and will be looking for a selling price as opposed to an asking price.
3.Survey
The developer will look over the valuations you receive and make you an offer, that will be subject to a survey on your existing home.
4.Mortgage
Should you accept the offer, you should next rearrange your new mortgage.
5.Solicitor
You will now need to instruct a solicitor to assess the new property.
6. Reserve your new property
Not every developer will ask for one, but you may be asked to pay a reservation fee to secure your new home.
7.Exchange
As long as the assessment is successful, you will be able to exchange contracts in as little as four weeks.
8.Deposit
Once you have completed the exchange of contracts, you will have to pay a 10% deposit. Your solicitor will hang onto a portion of this.
9.Completion
Congratulations! Once the money has been released, you can complete the sale and move into your new home.
How long does part exchanging your existing home take?
Unfortunately, there is no straight answer to how long a part exchange sale will take. Each developer is unique and will have different timescales, but the good news is as you are selling directly it will be quicker than selling on the open market.
Pros and cons of using a Part Exchange scheme
As with any decision when it comes to selling your home through part exchange scheme, there are pros and cons.
Pros
- No estate agency fees
- No need to arrange your life around house viewings
- No need to sell on the open market
- You are guaranteed a sale
- Avoid the property chain
- Less stressful
Cons
- You can be offered anywhere between 5-10% below market value for your property
- It is only available on selected properties
- Leasehold properties are less attractive to developers
- A new home’s value can drop
- You will be unlikely to negotiate any discounts as the property is new
- Your current property must be worth about 70% of the value of the new property
Is a new build the right choice for me?
New builds make great homes however before you jump into your new build part exchange home, it is important to look at all aspects. New build homes often have smaller rooms and drives which can make them harder to sell later down the line. Another element to consider is that because of their premium price, buyers can find it difficult to get a mortgage, and it can be harder to sell if the developer is promoting similar neighbouring properties.
What are the terms and conditions for a part exchange house scheme?
Before you look into finding your new home, it is important that you look into the terms and conditions surrounding the scheme. As no two housing developers are the same, it is important to do your research. However, as a rule of thumb, in order to be eligible for part exchange, you normally need to comply with the guidelines below:
- You will need to own a property that you are entitled to sell
- The property will need to be in a good condition and should be structurally sound
- The property that you wish to use in the house part exchange should be worth around 65-75% of the market value of your new home
- If the property that you want to sell is a leasehold, then it will need to have a fixed term of over 80 years left on the lease
- The location of the property and its saleability will also be taken into account by the developer
- If your property has a flat roof, it may be excluded from the scheme
What should you ask a property developer?
Meeting with a property developer can be an overwhelming experience, especially if you are new to the concept of a part house exchange scheme. Because of this, you are likely to have a list of questions ready to ask in order to make sure you can be as prepared as possible for the process that lies ahead. Below are some of the questions you should consider asking in order to get all of the information you will need to make an informed decision:
- How fast will the house sale be completed?
- Will I be able to negotiate the price of your new home?
- What is the most that the developer will accept for a part exchange property?
- What are the costs involved with the part exchange house scheme?
- Do you adhere to the Consumer Code for New Homes?
- If your property has a flat roof, it may be excluded from the scheme
- Will I incur any costs if I change my mind after agreeing to the scheme
- Will I be able to negotiate extras such as fittings and carpets?
Selling your existing home in order to part exchange it is a great way to ensure a quick smooth sale without the hassle of a property chain, however, properties may not always be eligible and you may find that a new build is not necessarily suited to you. Because of this, it is important to do as much reading around the scheme as possible so that you can sell your home without any nasty surprises later down the line.
This covers everything you need to know about a part exchange house scheme and what it involves. If you have any questions, queries, or insight into the subject, please feel free to get in touch!
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Alexandra is a junior content producer who enjoys writing articles and finding out more about the property market. Read more about Alexandra here.
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