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What is Part Exchange? How to Part Exchange Your Home

Posted 26 November 2018

Want to Part Exchange your home? Here’s your guide to Part Exchange, what it is and how you buy a new home with Part Exchange...

If you’re considering buying a new build home, the developer may have spoken to you about ‘Part Exchange’. Part Exchange lets you trade your existing home in as part payment for a brand-new property.

Lots of major housebuilders offer this option, but how does Part Exchange work? How do you Part Exchange your home? And what are the pros and cons of Part Exchange? Keep reading for answers to these questions and more.

What is Part Exchange?

Part Exchange enables you to trade in your existing home when you’re buying a brand-new property.

The developer will use your existing home as part payment for the new build. It means you don’t have to sell your existing property privately or through an estate agent, guaranteeing you a sale.

Most of the major housebuilders including Persimmon, Barratt Homes and Taylor Wimpey offer a Part Exchange option.

How does Part Exchange work?

Here’s how the Part Exchange process typically works.

  1. You find a new property development in your area that offers a Part Exchange option. Speak to a local estate agent or the site staff at a development that you’re interested in.
  2. You choose a new build home that you want to buy.
  3. The developer will arrange for your existing home to be valued. Most developers will ask two independent estate agents/valuers to value your home, and they will be asked to provide a selling price, not an asking price.
  4. The developer will then make you an offer on our existing property based on these valuations. This will be subject to survey.
  5. If you accept this offer, you’ll need to arrange your mortgage on the new property. Your guide to choosing a mortgage lender
  6. You’ll also need to choose a solicitor/conveyancer. Here’s your guide to choosing a conveyancer
  7. You may need to pay a reservation fee or deposit to secure your new home.
  8. The valuation will be carried out on your existing home.
  9. Assuming the survey doesn’t uncover any issues, you will normally exchange contracts within a four-week period.
  10. On exchange of contacts you will normally have to pay a 10% deposit. A proportion of this deposit will normally be retained by the solicitor to cover the Part Exchange property.
  11. The monies will be released, and you can complete on the sale and purchase.

The benefits of Part Exchange

One of the main advantages of Part Exchange is that it guarantees you a sale on your property. As the developer buys your home from you, you won’t need to wait for months while your property sells.

This also means that you won’t have to instruct an estate agent to handle the sale of your existing home. As many agents charge selling fees of between 1% and 1.5% of the sale price of your home, avoiding estate agency fees could save you hundreds or even thousands of pounds.

Part Exchange also speeds up the buying and selling process. Everything can be organised quickly and so you could complete your move in just a few weeks, rather than waiting months for your home to sell.

You also remove the worry that your buyer could pull out or that your chain could fall through. As the developer is buying your home there’s no chance of other people collapsing the chain.

The disadvantages of Part Exchange

Part Exchange can be an easy and simple way to buy a new build home. However, there are some disadvantages that you should consider.

Firstly, there is a chance that you will get less for your existing property than you would if you sold it through traditional means. The independent valuations that the developer obtains will provide a sale price for your home, not an asking price. This means that you will generally be offered less than the market value of your home.

Conversely, if you are part exchanging you may not be able to negotiate a significant discount on your new home. The developer may insist that you pay near to the asking price if they are buying your existing property as part of the deal.

Also, not every property is eligible for part-exchange. Homes that are often excluded from Part Exchange include those with structural defects, leasehold flats with a short lease, and other properties with build or repair issues. Developers want to Part Exchange homes they feel they can sell quickly.

Am I eligible for Part Exchange?

Criteria for Part Exchange differ between developers. However, you will normally have to meet the following criteria to be eligible for Part Exchange:

  • Your existing home must be in good condition and suitable for the developer to sell (see above). Some property types won’t be acceptable.
  • The value of your existing home will normally have to be around 70-75% of the value of the new build property. Anything above this and the developer may not allow a Part Exchange.
  • Your property may have to have a minimum term left on the lease (around 80 years).

Make sure you negotiate

If you’re thinking of part exchanging on a new home, it’s worth remembering that you can still negotiate on both the price you’re being offered for your current home and the property that you are buying.

Mortgage expert Ray Boulger says: “Prospective buyers should always remember, especially if the property is outside the stronger London market, that the developer is probably at least as keen to sell the new property as the prospective buyer is to buy it and therefore they should negotiate hard, both on the purchase price of the new property and the Part Exchange price."

If the developer won’t budge on the sale price, see if you can negotiate any other benefits. Will the developer pay some or all of your stamp duty? Will they supply white goods or carpets? Or will they pay some of your associated fees, such as your legal or valuation fees?

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