How Does A Part Exchange Work?

What are the pros and cons of part exchanging a house?

Part exchanging a house sounds great to some sellers and can be a really good option for those looking for a quick cash sale. There are some pitfalls to be aware of however. We’ll walk through some of the pros and cons of part exchanging here.

Pros

• Fees: you won’t be subject to the same fees and commissions that you incur when selling through a more traditional route such as an estate agent.
• Chains: you avoid the stress and uncertainty of property chains.
• New Property: you’re able to move into a brand new property with a homebuilders warranty.
• Stress: part exchanging a property is much less stressful than selling on the open market.
• Communication: you deal with the developer (and therefore buyer) directly. You won’t have to communicate with your buyer through third parties like estate agents or solicitors.
• Speed: you won’t have to wait for residents to move out of the property. Once you’re ready to move in you can get straight in.

Cons

• Price depreciation: new builds tend to depreciate more quickly in value than older properties. This puts off some lenders and can make getting a mortgage more difficult.
• Developer greed: obviously not all developers are like this, but it has been known that developers will make lowball offers on part exchanges to maximise their margins.
• Time/price trade off: given the time that it takes for a part exchange to go through, there are other more effective ways to get cash for your property. Our SmoothSale investor marketing service requires just 30 days and can achieve between 90-100% of the market value for a property.
• Regulation: check that your developer is part of The Consumer Code for New Homes. If they’re not then they’re not properly regulated and so can’t be upheld to the same professional standards as other developers.
• Uncertainty: if your property is accepted for part exchange then there’s obviously peace of mind. It’s not guaranteed however, and so there’s uncertainty around whether a property will be accepted.

How can I part exchange?

Once you’ve weighed up the pros and cons of a part exchange of your property you’re probably wondering: how does it work? The process of part exchanging a house is very similar to any other property transaction with some slight differences. We’ve given a brief overview of the key steps here.

• Finding a developer: the first step is to identify a home that you like the look of. Once you’ve found a property, you’ll need to check that the developer offers a part exchange scheme. If they do, you’re free to crack on with the rest of the steps.
• Valuation: the developer will need to value the property. To do this they’ll typically instruct two local independent agents to put together a valuation pack. They’ll ask the agent to give a selling price rather than an asking price, which will be a lower price than the one at which an agent would place the property on the open market.
• Offer: once the developer has had the valuations done on the property they’ll make you an offer. This will be subject to a survey.
• Conveyancing: if the survey assessment is passed then you’ll need to instruct a solicitor to assess the new property and work on legal particulars of the purchase.
• Exchange of contracts: you can exchange contracts in as little as four weeks if all of the above is in order. You’ll be asked to pay a 10% deposit on the new property.
• Release of funds: the last step is the release of funds, at which point you can complete the sale and go ahead and move to your new home!

Tips for part exchanging a house

If you’re set on part exchanging your home and moving into a new build property then here are some tips that you should bear in mind.

• Get independent legal advice: whilst the process should be broadly similar to a normal house sale, there are some extra contractual elements to consider. A good solicitor is invaluable to navigate this and so we suggest instructing one that you trust.
• Check the costs: before embarking on any financial transaction it’s a good idea to make sure you have a strong grasp of all of the costs involved.
• Do your due diligence: check your developers credentials and confirm that they adhere to the Consumer Code for New Homes. Make sure that the developer is registered with a home warranty body.

If you’ve gotten this far then you’ll have grasped that part exchanging your house can be a good solution to sell your house fast and secure a quick sale. Assuming your property is acceptable to the developer then it provides an alternative to selling on the open market.

If you’re looking for other means to get quick cash for your house and secure a fast sale then SmoothSale could be an option. We buy any house in any condition and in any location. Our cash house buyers service is perfect for sellers looking to sell fast. Alternatively we offer an investor marketing route to sale which can secure between 90-100% of market value for your property within 30 days. Get in touch with us today on 0800 368 8952 or get a cash offer.