Selling your home isn't always the smoothest journey. After a few unsuccessful months and zero developments, a potential sale can begin to feel like a lifetime away. While it's normal for every road to have a couple of hitches, it's natural to wish for a smoother and more efficient method.
While new build part exchange schemes have been around for decades, in recent years, more and more people have come to view part exchange as a more viable method of securing a buyer and selling their property. But just what is part exchange and is this service really a stress free solution?
A part exchange home scheme is where you trade the value of your property against the value of a brand new property. This means your current home is sold and used as partial payment for a newly made home - hence the term ‘part exchange’.
For example, a typical scheme begins with a private builder buying your current property. You then use the money from this sale towards the purchase of one of the same builder’s newly built homes. The private builder will effectively fund this transaction on the basis that they will sell your current property on and make their money back.
Instead of working with an estate agent, selling through a part exchange scheme relies on you dealing with a property developer or house builder to sell your home and complete the buying process. On paper, this appears to make the transaction much quicker and cheaper.
For one, you don't have to pay estate agent fees. Secondly, the sale of your property is pretty much guaranteed if the property developer likes your existing home. Third: you’ll get a brand new property to live in at the end.
While this deal may sound pretty exciting, there are a significant number of things to consider first - including whether your home will even be eligible for part exchange.
Most people who’ve decided to go down the part exchange route begin by searching for new builds in their area that offer a part exchange scheme. You can do this by enquiring with local estate agents or through an on-site sales team.
Once you’ve found a new build property you like, and can afford, you can begin discussions with the developers about your existing property. This is where things get a little more complicated.
First of all, part exchange is only available for certain kinds of properties. For example, if your current home is a flat, it may have a short leasehold that prevents it from being sold on. Or your existing property could be located in the wrong part of the country for the development company you've chosen.
You’re unlikely to qualify for a part exchange scheme if:
Your property has structural defects/build or repair issues
Your home is a leasehold flat with a short lease
Your property’s value is below 70% of new build property
Another reason developers are selective about which property they choose is that a part exchange scheme is designed so they can make a profit. If your home can’t be renovated, or extended easily, it’s unlikely to appeal to a developer.
Generally a developer will ask 1 or 2 independent estate agents to complete a valuation of your current property, with instructions to calculate a selling price rather than an asking price. This is usually 80% of a true valuation. New build part exchanges aim to make substantial gain, which is why you'll never get the full price for your valuation.
Because you’re not getting full price for your home, you may find that the amount you save in fees is actually cancelled out by the amount you lose by accepting a lower sale price.
This is why we always recommend booking independent valuations of your existing property yourself before you commit to a part exchange scheme. This will give you a sense of how much your home is actually worth, so you can make an informed decision about whether to accept the developer’s valuation.
Estate agents will be able to give you the most accurate valuation - and our comparison tool can help you find the agencies with the best track records - or you can try a free, online valuation tool to give you a less accurate, but reasonable estimate of your home’s value.
If the developers are happy with your existing property, they will make you an offer.
It's important to note that, when they do make you an offer, they will not negotiate on the asking price for their new home. Unlike with an agent, where there is usually more scope to negotiate, a part exchange scheme is designed to put the developers in the best position possible.
If you choose to accept the offer, you will have to arrange a mortgage on the new build to cover the difference. The developers will also ask you to put down a deposit. This will not only reserve your new property, but show you are committed to part exchange your home.
Not quite. Once you’ve accepted the developer’s offer, it’s time to start the conveyancing process. This process involves legally transferring ownership of a property from one party to another. You'll be asked to fill out a range of forms, negotiate the final details, and you may wish to conduct additional surveys and checks - such as a snagging survey.
Unfortunately, there's another thing to consider. too Your part exchange house may not actually be built yet. While developers always provide a completion date for when the home is ready, a report by the New Homes Review found that around 37% of new builds are not completed on schedule.
Now we've looked at the entire process, let's review the pros and cons:
No estate agents fees
You don’t have to do lots of viewings so you can save time and hassle
If your home is a good fit for the developer, selling it might be quicker
The transaction will be chain free meaning there’s less chance of it falling through
You will own a brand new house
Developers are very selective about which houses they buy
You’re unlikely to receive more than 80% of the true value for your home
Developers are less inclined to negotiate on asking price for new build
New builds aren’t perfect: 42% of movers find at least 10 issues with new home
Clearly there's a lot to think about if you're considering a scheme like part exchange, which is why it's important to weigh up all the pros and cons first. Many people think they're saving time with a service like this, but there's actually a lot more to consider.
While initially it may be appealing to choose a 'stress free' service that implies a quick sale of your current property, the fact developers have the final say means that no sale is ever guaranteed. Independent valuations are always an excellent first step towards selling your home, no matter which service you decide to go with.
Ultimately, selling with an agent will mean you’re more likely to achieve the best price for your home. The amount of money you make through an established selling price is likely to be larger than the amount you’d ‘save’ by negating estate agent fees in a part exchange scheme. If an estate agent can sell for 20% more, they will, as it’s in their interest to boost their 1.5% take. It’s fair to say then, that the cash difference between estate agent selling price and developer sale price more than makes up their fee.
Indeed, while some may feel selling through an estate agent is slower, there are agents that can sell as fast, if not faster, than through a part exchange scheme. See which fast-selling agents are near you, here.
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