Is buying a part exchange house from a developer a good idea?
New build homes have been in the news lately for all sorts of scandals – from leasehold with doubling ground rents to serious issues with build quality.
By all means, buy your newly built home, but do it by being fully informed so that you can avoid all the risks.
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What is Part Exchange on a House?
Exchange is a great way to trade some or all of the value of your current property to buy a newly built home from a private developer.
With this method, the developer will buy your home, allowing you to use the equity from the sale to purchase a home in their development.
The significant benefit of this compared to a traditional sale is that you don’t have to wait for completion before you move into your newly built property.
The developer will effectively fund the purchase, getting their money back when your current property is sold. Plus, you won’t have to pay any estate agency fees or endure the hassle of selling your house on the open market.
It’s also a great option for those who are having difficulty selling through an estate agent but have found their dream newly built property.
Due to these advantages, part-exchange has become a more and more popular offering for homebuyers, providing an alternative solution.
Part Exchange House Schemes Near You
Your ability to part-exchange will vary depending on your location in the UK. You need to check whether developers in your area are operating such schemes. Some are quite strict about what they will and won’t accept.
You can sell your property to us – if they won’t buy it.
Developers will only consider a part exchange if market conditions aren’t favourable. For example, in a seller’s market where prices are rising, interest rates are low and first-time buyers are falling in love with new build homes, it won’t be long before they sell all of them.
Part Exchange House Rules
There are certain criteria that need to be met:
- First, you’ll need to establish how much your house is worth. Start by looking at sold prices. As a rule, the value of your traded property should not exceed roughly 70% of the new build’s sales price.
- You won’t get the full market value of your old house. Expect to get around 70% of the value as a trade-in so you’ll need to ensure that you have some equity in your home.
- Your house should be in good condition and mortgageable. If the new build property is worth more than the developer’s payment for your current home, you must be able to ‘plug the gap’.
- You must have an independent valuation and survey done through the Royal Institute of Chartered Surveyors. Your house should also be in an area that satisfies the developer’s requirements of standard construction and with boiler, gas central heating, and electrics/wiring in working order.
- If your property is leasehold, anything under 85 years is likely to be rejected. Your house should not be on the market, and if it is, it must be removed.
- You must use your own independent solicitor and only pay a reservation fee after you have had a snagging survey & a Level 3 RICS survey done.
- The developer may put up a ‘for sale’ sign and work with an estate agent to facilitate viewings and encourage a sale. The part-exchanged property should have all the fixtures and fittings listed in a detailed schedule.
- On the date of part exchange, the property should be left clean and tidy.
What Will the Developer Do After the Part-Exchange?
Once all has been said and done, the developer will sell the property on the open market. They aim to profit from the difference between the lower price they paid for the property and the price they eventually sell it for.
They will have to pay the estate agency fees and the risk of selling on the open market. They also gain profit by selling one of their own homes to you.
Pros and Cons of a House Part Exchange
Pros of a House Part Exchange
- You’ll eliminate estate agency fees, saving you between 1-3% of the sale price of your property. You won’t have to deal with the stresses and hassles of an open market sale, such as viewing appointments, tyre-kickers, awkward negotiations and gazundering.
- Part-exchange is worth considering if you’re having difficulties selling or you need to relocate quickly.
- You can communicate directly with the developer, ensuring that nothing gets ‘lost in translation’. Once you accept an offer and there are no survey issues, the developer becomes a guaranteed cash buyer, meaning you don’t have to worry about the sale falling through or getting delayed.
- You’ll get a brand-new property with a homebuilder’s warranty. Remember to pay for a thorough snagging survey before completing the sale. If the new house isn’t ready yet, you can stay in your current home until it is.
- You won’t be affected by the risks and complications that come with being in a house sale chain.
- As with any new build purchase, you won’t have to wait for the previous residents to move out of your new house.
Cons of a House Part Exchange
- Buying a brand new property comes with a ‘new build premium’, meaning its value is often higher than properties of the same area, which are more aged.
- Some developers have been known to be too ambitious when it comes to part exchange offers, and though they may claim that the sale process is much faster, it often isn’t. This may mean that taking 70% of the value isn’t worth the bother.
- It’s best to use a trusted cash house buyer such as Property Saviour in order to receive a cash offer & complete in 10 days.
- The value you get from resale may be affected by the amount of people buying units in the development. However, if you plan on keeping the property for the medium term, you should be okay.
Why Not Just Use an Estate Agency?
Selling your property through an estate agency is a good option for many people. An open market sale is usually the best way to achieve the best price. That being said, there are risks associated with this approach:
- It can take months to complete the process, and there is no guarantee that an offer will be accepted; the property market can also be volatile due to factors such as inflation or higher interest rates;
- This can cause the perceived value of the property to change suddenly; if the estate agency isn’t promoting the property effectively, it can lead to a lack of interest and a need to reduce the asking price;
- Prospective buyers can make an offer and then drop out or take too to purchase; buyers may have to wait to sell their own property before they can buy yours, which can cause major delays;
- Estate agency fees can be expensive, and the contract tie-in paperwork can be stressful and time-consuming.
For these reasons, many people consider part exchanging their property. If done correctly, part exchanging can save time, hassle, and money.
Why not just sell your property for cash and then use cash to become a cash buyer for a new home?
Buying a Part Exchange House from a Developer
As you know not every property will be eligible for a part exchange. Whether or not you will be able to enter into a transaction of this kind is up to the developer, but ultimately, the decision is yours.
We would also recommend that you do the following:
- Seek independent legal advice
When undertaking a part exchange, most of the conveyancing process is similar to a regular home sale. However, there may be some extra-contractual requirements that you need to take into consideration.
For instance, the developer may place certain conditions on the value and condition of the property after the exchange. We have also heard of developers attempting to reclaim funds if they have difficulty selling the house.
If you are buying a leasehold property, it is important to check the ground rent and the specifics of the lease. A knowledgeable conveyancing solicitor will be able to read through the contracts to ensure that there are no hidden clauses.
They will also conduct additional conveyancing searches to identify any potential red flags.
- Check the costs involved in the part exchange scheme
Part-exchanging has many benefits, one of which is that you don’t have to pay estate agency fees. However, you will still need to pay conveyancing fees, stamp duty, mortgage arrangement/broker fees, and house sale/moving costs.
If you decide to withdraw from the sale, it is worth confirming what the fees would be, as we hope it does not get to that stage.
- Check the developer’s credentials
Make sure the developer you’re looking at is registered with one of the following home warranty bodies: National House Building Council (NHBC), Premier Guarantee, Local Authority Building Control (LABC), or Checkmate.
All of them have detailed technical standards that homebuilders must adhere to, and if these aren’t met, you have the right to compensation. You also have somewhere to turn if there are any issues.
Also, take a look at your local council’s planning portal. Here, you can find data on how the development was approved by the public.
Part exchanging your property can be a great way to move quickly without having to deal with estate agents or getting stuck in a property chain.
However, there is no guarantee that your property is eligible. If you would like to avoid a lengthy sale process or negotiating, why not consider a quick house sale company like Property Saviour?
Is There an Alternative to Part Exchanging a Home?
Here at Property Saviour, we can offer you up to 70% of the market value for your home, regardless of its condition and lease length.
There are no complicated contracts to sign as we like to keep things nice and simple.
Sell effortlessly and then use the cash to negotiate a better discount with your developer. You won’t have to move out straight away.
Get in touch with our friendly team today to see how we can help.
Sell with certainty & speed
Property Saviour Price Promise
- The price we’ll offer is the price that you will receive with no hidden deductions.
- Be careful with ‘cash buyers’ who require a valuation needed for a mortgage or bridging loan.
- These valuations or surveys result in delays and price reductions later on.
- We are cash buyers. There are no surveys.
- We always provide proof of funds with every formal offer issued.
We'll Pay £1,500 Towards Your Legal Fees
- No long exclusivity agreement to sign because we are the buyers.
- You are welcome to use your own solicitor.
- If you don’t have one, we can ask our solicitors for recommendations.
- We share our solicitor’s details and issue a Memorandum of Sale.
Sell With Certainty & Speed
- Our approach is transparent and ethical, which is why sellers trust us.
- 100% Discretion guaranteed.
- If you have another buyer, you can put us in a contracts race to see who completes first.
- Complete in 10 days or at a timescale that works for you. You are in control.
