How to part exchange your house
If you’re planning to buy a new home and have an existing property to sell, you might be interested in developer-run schemes to part exchange your house.
Property part exchange can offer a quick and convenient house sale, but there are often several eligibility restrictions . This guide will explain how home part exchange works and help you decide whether it could be the right option for you.
What is part exchange?
Property part exchange schemes give you the option to trade-in your current property as part payment for a new house.
How does part exchange work?
If you’re keen to part exchange your existing property, you’ll need to start by looking for developers in the area that are currently offering a part exchange incentive. If you find a property you like and the developer is happy to offer a part exchange service on it, the process will usually follow these steps:
- The developer will ask two independent estate agents to value your property.
- They will then make you an offer for your property, based on the independent valuations.
- If you choose to accept the developer’s offer, you’ll need to appoint a solicitor and arrange your mortgage for the purchase of the new property. You may be required to pay a reservation fee to secure the new property.
- The developer will arrange for a survey to be carried out on your existing property and will let you know if anything comes up that will affect how much they’re able to pay you for the property.
- If the survey doesn’t bring up any points for concern, contracts will usually be exchanged in around 4 weeks.
- At the point of exchanging contracts you will usually be required to pay a 10% deposit on your new property.
- On a mutually agreed date, funds will be released and the sale of both properties will complete.
What are the benefits of part exchanging your house?
House part exchange offers several benefits and can be much more convenient than trying to sell your property the traditional way. It currently takes an average of 4-6 months to sell a property using an estate agent and around 1 in 3 property sales that are agreed will fall through before completion. If you part exchange your house, you can achieve speed and certainty that the open market cannot match.
You will also have the added convenience of saving on estate agency fees by selling your property directly to the developer.
Are there any restrictions when you part exchange your house?
Property part exchange schemes are only available on new build properties and will only be offered on selected plots. There are also likely to be other guidelines surrounding the value difference between your current property and your new property. Barratt Homes and Taylor Wimpey, for example, will only offer new build part exchange if your current property is worth 70% or less of the value of the property you are hoping to buy. This means, if your current property is worth £250,000, the property you’re buying would need to cost more than £357,000. Redrow Homes will only offer part exchange if your new property is worth at least 35% more than your current home. To part exchange a property worth £250,000 with Redrow you would need to buy a property worth more than £384,000.
Can I part exchange my house?
Whether you’re able to part exchange your home will depend on several factors. This will include whether the specific property you’re interested in buying is offered under a part exchange scheme and whether the property you’re buying is considered enough of a step up from your current property.
What are the alternatives to part exchanging your house?
There may be many reasons why part exchanging your house is not an option for you. Perhaps the development you’re interested in doesn’t offer a property part exchange scheme, or the specific plot you want to buy is not eligible? Perhaps the house you’re buying is not enough of a financial step up, or you feel that buying a ‘nearly new’/older property would offer you better value for money? If you’re in that situation, it may still be possible for you to access the benefits that come with buying a part exchange house through a direct sale to a house buying company.
Home buying companies effectively offer a private part exchange service alternative to a developer-run scheme. The process is very similar to a developer-run part exchange service and will include two independent estate agent valuations.
It’s important to remember that property development companies offer a part-exchange service because it is in their financial interest to do so. As a result, there are several factors to consider. When you buy a new build property, the developer will make you an offer based on ‘realistic selling price’, which means it’s likely to be on the lower edge of the price you might achieve on the open market.
You will also need to keep in mind the depreciation rate for new build properties. Some estimate that new build properties cost around 10-15% more than similar nearly-new properties. This means your home may lose 10-15% of its value in the first few years and you may not get your money back if you need to sell the property within a year or two of buying it.
If you use a house buying company rather than a developer part exchange scheme, it works slightly differently. Instead of charging a premium on your next property, a house buying company will buy your property at around a 15% discount. Not every homeowner will be able to afford to accept less than market value for their property, but if you’re looking for the convenience of a property part exchange without having to pay a 10-15% new build premium and being limited on your choice of property, part exchanging your house privately with a home buying company can be a great alternative.
A home buying company can offer you all of the speed and certainty of a developer-run property part exchange scheme, completing the sale on a date of your choice to tie in with the purchase of your next property, but without tying you to certain homes, or properties of a certain value. Selling to a home buying company also makes you a chain-free buyer, which puts you in a great position to negotiate a great deal on your new home.
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