Should I consider part exchanging my house?
Should I consider part exchanging my house? In my experience buyers and sellers are always cautious about the idea of part exchanging a house. They think there must be a catch or that it is too good to be true.
Part exchanging a house can be a great alternative to selling your own home in the open market. Below is the best advice and tips to help you decide if part exchanging a house is a good idea for you?
What is a part exchange?
Part exchange is a scheme run by larger house builders. The scheme involves the house builder buying your home. which then in turn enables you to purchase one of their brand new houses. They are your buyer.
Part exchanging a house is a really great option for people who want to move quickly, who are struggling to sell their own home or just really don’t want all the hassle of moving. Everyone can benefit.
The house builder sells one of their homes and you sell your home. Ta Da!
Does is cost me part exchanging a house?
No you should not pay the house builder anything for part exchanging a house.
Part exchanging is seen as an incentive by house builders. Similar to offering you an incentive of new flooring or paying your Stamp Duty (In England & Wales) LBTT (Land and Building Transaction Tax in Scotland) or including turf in the garden.
These are all incentives to entice you to buy one of their homes.
Can you buy any home with the builder?
Part exchanging a house is not available on every property the builders have. Often you will find they only offer their part exchange scheme on their houses which are already completed or nearly completed. Likely a property you could move into within say a 6-8 week period.
Builders don’t like having completed homes which are not sold. They are sitting out of pocket.
Are there any rules with part exchanging?
You may find the part exchanging rules different with various house builders. They are looking for a 30% difference between your house now that your part exchanging and the house you are buying. If you are looking to buy a house at £350,000, they will only consider your current home on part exchange if its valued at £245,000 or less.
The reason is simple, because it has got to be worth their while. They are receiving £350,000 from you for the new house, but they are also paying out £245,000 for your house. Meaning they only receive £105,000 income.
If there was no differential in values, they would receive the same as they pay out meaning there is no immediate financial gain. It also means people cannot use part exchange to downsize.
Its all about moving up the ladder.
Your home needs to be saleable for them. The house builder is not going to hold onto your house. They are going to immediately put the house to the open market to get their money back in.
For them the house needs to be attractive, in good condition and saleable.
Whats the process of part exchanging?
Once you have found a property you would like to buy with the house builder, firstly make sure they are offering a part exchange. If they are, initially they will look for some small commitment from you normally being a reservation fee of around £200. This will often reserve the new house for you whilst they finalise the part exchange details. They will then instruct two independent estate agents to visit your home. Following their visit the house builder will then give you an offer for your property, subject to survey.
In Scotland where home reports are required, you may find the house builder misses out the two estate agent visits. They simply instruct an independent surveyor to carry out a home report or pre-sale survey. This is a good idea, because you also then know the final value of your home (even if decide later your not part exchanging your house its handy information to have).
If you are happy with the house builders offer, then the new house is fully reserved for you and the solicitors start working on all the conveyancing work. On completion day you simple move out your current house, as you have sold it to the house builder, and walk into your new home. You will not have endured the open market selling process for your home eliminating a lot of stress & uncertainty.
It all sounds very simply. There is often no catch or hidden tricks. Its very straightforward.
The main reason people don’t proceed with a part exchange deal with the house builder is because the house builder has not offered them enough for their own home. Remember to negotiate with them!
House builders are always keen to sell their completed homes and often have wiggle room to negotiate with you.
Pro’s to part exchanging a house
- Its fast – If you want to move quickly part exchange is ideal for you. You don’t have to sell your house on the open market which reduces the process time massively and simplifies the sale process considerably.
- No chain – The sale and purchase agreement is between you and the house builder only. There are no other parties or links in the chain.
- Less stress & disruption – No preparing for viewings. No preparing the house and keeping it clean & tidy. Part exchange removes this hassle.
- Less fees – No estate agency fees to pay and no survey or home report fees. You will save thousands of pounds.
- Time to move – Often house builders will give you a ‘licence to occupy’ for a few days. This means you don’t have to do all the moving in one day. You have a licence to still occupy your old house for an agreed amount of days meaning you can take your time.
Con’s to part exchanging a house
- Less of an offer – The house builders offer for your house may be less. Likely less that the market value. You are not taking your own house to the open market, so you will never know what offer you may have got.
- No guarantee – Part exchanging a house is not guaranteed. It may not be an incentive they offer on the house you are looking to buy. They may not feel your current home is a property they wish to purchase or can sell on in a reasonable time frame.
- Which house? – The house builder will dictate which houses they offer part exchange on. You may need to comprise on the your essentials like the garden aspect or less bedrooms.
- No choice – The house builders normally only offer part exchange on their completed or soon to be completed homes. Often meaning kitchen and bathroom choices have been made. Even floor coverings may have been chosen, if they are included. Its a compromise you may have to make.
Will you or wont go through with part exchanging a house?
Is part exchanging a house a good idea? Part exchange is a really fantastic scheme for those who have found their dream house and want to move quickly. Don’t over think the process, it really is simple and straight forward with the house builders keeping your right along the way. You miss out the whole process of selling your own home, and in a slow market, this can eliminate a lot of stress.
Alternatively, if you feel its just not right for you, reserve the perfect house plot with the builder, giving yourself plenty of time to sell your own home. Remember, the closer you get to completion of the new build house the more pressure there is to make sure your sale aligns. A good place to start would be How to choose an estate agent and Do I need a solicitor to sell my house?
Is part exchanging my home a good idea?