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What Is Part Exchange On a House?

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Trading in the old for a new home seems perfect.

With so much uncertainty, selling a property is a stressful experience.  With 1 in 3 house chains collapsing, it is no wonder homeowners are looking to part exchange.

But are you prepared to pay a newly built premium – paying more than it is worth AND having to worry about snags?  On top of that, you’d have to sell your property at a substantial discount.

Through part exchange, you can avoid most of the unpredictability that comes with a traditional house sale. You can sell your house quickly and without the stress that comes with buying a new build home.

In this article, we’ll discuss part exchange schemes and how they work.

We’ll also show you how to become a cash buyer and negotiate a better discount.

Table of Contents

What Is Part Exchange On A House?

Part exchange schemes have been around in the property market for a while. A part exchange homes scheme is where you trade the value of your current house against a newly built property, effectively using your property as part payment.

In this case, the developer takes the place of an estate agent. This way of selling means avoiding the trouble of a property chain and owning a brand-new property.

Sellers like part exchange homes schemes because they provide more assurance for the sale of their property; anyone who has been stuck in a property chain that hasn’t moved for months will understand this. Part exchange house schemes could be the answer.

Many of the major developers in the UK offer part exchange schemes; however, the terms and conditions can differ, so we advise you to read the small print carefully before going ahead with a developer’s scheme.

How does part exchange work?

The search for a new build property starts on Rightmove or Zoopla.  Or perhaps you have driven past a new development site.

You will speak with the sales staff at their showroom and hopefully find a home you can afford.  At this stage, it is worth checking the quality of the finish as newly built homes are usually riddled with snags – some of them can be quite serious!

If you aren’t in a rush, buy the showroom as they are the last to be sold, and you can normally get them for a discount.  It would be a good idea to ask what their process is for dealing with snags once the property has been sold.

At the beginning of development, there will be plenty of choice for plots – but as time goes on, there will be fewer homes for sale. 

If homeowners have moved in, it is worth asking them for their feedback or posting anonymously in your local Facebook group.  You’d be pleasantly surprised at the responses.

By now, you will have decided whether to put down a reservation fee or not.

How Does Part Exchange on Houses Work
A part exchange homes scheme is where you trade the value of your current house against a newly built property, effectively using your property as part payment.

The valuation process

Most developers will ask two estate agents to calculate the value of your home before they make you a formal offer. However, they will be instructed to provide a ‘selling’ price rather than an ‘asking’ price.

This means a value that the developer can achieve in just a few weeks of marketing by selling at a very competitive price.

If the developer is happy with the valuation of your property, they will make you an offer to part exchange your house. At this point, you will have to decide whether to accept the offer or not. If you do, you will need to arrange a mortgage on the new build house.

Note that any offer from the developer is always subject to a detailed property survey, just like any other house sale. The developer will then ask you to put down a reservation fee or deposit to demonstrate that you are a serious and committed buyer.

Choosing a solicitor

Once you’ve agreed to buy the new build house, you’ll need a solicitor to help you complete the sale. 

Making the right choice is, therefore, vital. The developer’s sales staff can also provide you with details of solicitors they’ve found to be reliable and fast.

Your solicitor will order all the usual formal checks when purchasing any house, including the Local Search, Mining Search, and any others deemed necessary for the property’s location.

They will also liaise with any lenders you have and communicate with the solicitors representing the new build developer.

At the same time, the developer will commission a formal survey of your existing home to check for any serious issues, such as structural defects. Assuming no major problems have been found, contracts are usually exchanged within four weeks.

Before contracts are exchanged, you will be asked to pay a deposit of around 10% of the new build property’s value. This can usually be taken from the current value of the house you’re part exchanging, so you don’t have to find additional money.

Once contracts are exchanged, it’s usually just a few weeks before you can move into your new home.

How do I qualify for Part Exchange schemes?

In order to participate, your existing property must usually be in good condition. Developers want to acquire properties that they can sell quickly in order to maximise their profits and maintain a steady cash flow.

For example, some developers may only offer a part exchange if the house you are trading in is worth no more than 70% of the selling price of the plot of land being bought.

Check the specific requirements regarding the value of the home you are buying for each new house developer.

What are Leasehold difficulties
With ground rents doubling every ten years on newly built homes, lenders are refusing to lend if leases contain these terms.  Get your solicitor to write a Title Report.

Leasehold difficulties

Leasehold properties, which are typically flats but can also include houses bought through a shared ownership scheme, can be a challenge.

With ground rents doubling every ten years on newly built homes, lenders are refusing to lend if leases contain these terms.  Get your solicitor to write a Title Report.

If it is a short lease of less than 80 years, this property could become problematic very quickly. 

Because once a property has less than 80 years left on the lease, you’d have to apply for a lease extension or purchase the freeholder.  Your developer will have sold their leases to a 3rd party who will charge you an extortionate sum.

Be prepared to negotiate

Developers want to sell all of the newly constructed homes on their site as soon as possible. They have done the hard work of financing, planning, and building the development and now wish to reap the rewards. Don’t be afraid to negotiate.

If you are struggling with the price or getting more money for your existing property, consider looking elsewhere. Would the developer pay your stamp duty or solicitor’s fees? Could they provide white goods for your new home or carpets?

A good alternative to part exchange

If you want to avoid the hassle of getting into a developer’s part exchange scheme, there are other options to speed up the sale of your property. While part exchange schemes can come with benefits, they can also have their limitations.

A great alternative is to find a reputable property-buying company.

Property Saviour can help if you want to sell quickly and without negotiating with a housing developer. We make an offer for your home regardless of its condition.

Once you sell to us, you’ll become a cash buyer, meaning you can get a better discount from the developer.  You won’t have to move out straight away.

Our process is straightforward, and we aim to make the sale as smooth and quick as possible.

We have been buying properties directly from homeowners for over 17 years and have received lots of five-star reviews. We’d love to earn yours too.

Get in touch with us today.

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