How Does Part Exchange House Work & Is It Worth It?

A guide to part exchanging your home & how it all works

Selling your home via estate agents and the open market can be a rollercoaster of stress and uncertainty. Broken chains, unpredictable buyers and long waits can turn your dream move into a nightmare.

That’s why part exchange schemes are becoming so popular; just like you might trade in your car for a new one, you can do the same with your house. Imagine selling your home quickly and smoothly, without the hassle of open houses or the fear of deals falling through. 

In this comprehensive guide, we’ll break down everything you need to know about part exchange house schemes. We’ll explore how they work, their benefits and whether this option is right for you. 

Many property developers offer part exchange programs to streamline the buying and selling process. But before you jump in, there are important factors to consider. We’ll weigh part exchange against alternatives like traditional estate agents and quick cash buyers, helping you make the best decision for your situation.

What is Part Exchange on a house?

Part exchange streamlines your move into a new build home. Trade in your existing property as partial payment, saving time, reducing stress and eliminating the risk of a broken housing chain. 

It is a smart way to use the equity in your existing home, in order to gain a convenient and increasingly popular way to upgrade your home. 

While many major UK developers like Taylor Wimpey, Barratt Homes, Persimmon, Bellway, Redrow and Berkeley Homes offer part exchange schemes, availability varies based on your location. 

Don’t hesitate to inquire about part exchange options with both large and smaller regional developers in your area - even if they don’t advertise it wisely. Developers are often more willing to consider part exchange once you show serious interest in purchasing a new build from them. 

Part-exchange schemes offer a streamlined way to buy a new-build home. Instead of selling your current house on the open market, you trade it directly to the developer building your new property. 

To qualify, your house typically needs to be in good condition and worth roughly 65% to 70% of the new home’s price. Two independent estate agents will assess your home’s value to ensure it can be easily resold.

While the offer you receive might be slightly below full market value, many homeowners appreciate the convenience and certainty of part exchange. No estate agent fees, no unpredictable buyers, and the potential to move into your brand-new home before your old one is even sold!

After completing the part-exchange, the developer will aim to resell your old house on the open market. Their profit comes from the difference between the price they paid you and the final sale price.

Of course, they assume the costs of estate agents and the risk that the market might change before they find a buyer. Importantly, the developer also profits directly from selling you the new-build home.

How does Part Exchange on a house work?

Part exchange house schemes simplify upgrading your home by letting the developer buy your current property as you purchase a new build from them. Unlike selling your home yourself, the developer handles finding a buyer for your old property. 

While certain steps are still necessary like conveyancing and the actual move, part exchange often means faster timelines and less uncertainty. Here is a step by step process of how part exchange on a house works:

Step 1: Eligibility assessment - Do you qualify?

Start by checking if you’re eligible for part exchange house. This usually involves either:

• Online form: Many developers have simple questionnaires on their websites.

• Phone consultation: A representative will ask you key questions. 

Expect to be asked about:

• Property value: Your estimate (they’ll also check official records) Part exchange usually requires your home to be worth less than 70% of the new build’s price. 

• Property condition: Age, major renovations, heating/electrical systems etc.

• Purchase history: When you bought it, and for how much.

• Mortgages/loans: Any outstanding debts secured against the property. 

• Equity: The difference between the home’s value and what you owe on it.

Step 2: Home visit - assessing condition & suitability

The developer (or estate agents they hire) will inspect your property, in order to confirm its overall condition and ensure there aren’t major issues that would make it difficult to resell.

This visit is about the property’s general suitability, not determining its exact market value but if your home’s worth does exceed the 60% to 75% of the new build’s price, this will often disqualify you from the part exchange. 

Short leases (under 80 years) can also be a problem unless you are willing to extend the lease yourself before the sale. 

Step 3 - Provisional offer

You should expect a verbal offer, which will be followed by a professional survey to confirm the property’s condition. The developer will aim for a quick sale of your home (often within 8 to 10 weeks) in order to streamline the process on their side. 

But, you shouldn’t assume that the initial verbal valuation is set in stone - you do have the right to challenge it if it doesn’t meet your expectations. You are also free to decline the offer without penalty, just make sure in the T&C’s of the developers contract say “no-obligation” valuation. 

It is important to note that delaying your decision could lead to the developer revising their offer and lowering their amount. 

Step 4 - Financial & legal checks

Once you’ve provisionally agreed to an offer, the developer will conduct essential checks like:

• Credit checks: They’ll assess your financial situation to ensure you can afford the new build purchase.

• Legal review: Their lawyers will verify ownership of your current home and identify any mortgages or debts attached to it.

• Equity gap: If your home’s value doesn’t cover enough of the new build’s cost, be prepared to show how you’ll make up the difference (e.g. additional cash or a larger mortgage). 

Step 5 - Choose your home & secure it

Your options will depend on what the developer has unsold and the project’s current phase; Not all new builds may qualify for part exchange, so you will need to research local prices to ensure you’re getting value for money. 

New builds can be tricky to value, so carefully compare the size, garden, location within the development etc. Start arranging your financing, having pre-approval can make things smoother.

The developer may ask for a fee to “hold” your chosen property while the part exchange house proceeds. This amount can vary, but you should always ensure this fee is 100% refundable if the deal doesn’t complete. The fee is usually taken off the final purchase price if it all goes through. 

Step 6 - Valuations

The developer will arrange for a RICS surveyor to value your home, and they should cover the cost. This valuation influences the offer you receive. 

Always review the report to understand the valuation and check for any issues highlighted by the surveyor. If the RICS valuation shows serious defects, the developer might not accept your property without a larger discount. 

Consider instructing your own RICS surveyor for the new build. This ensures you’re paying a fair price and aren’t overpaying due to the “new build premium.” 

You will also need to be prepared to cover the cost of up-to-date gas and electrical certificates for your current home as these are often required. 

Step 7 - Offer, negotiation & your options

The developer will offer you a formal offer which you can expect to be around 80% to 90% of your home’s valuation. In exchange, you should have no estate agent fees, a fast and more predictable sale, and freedom from slow chains or buyers pulling out.

But, don’t feel pressured to accept the offer straight away - take your time to consider the offer and push for a better deal if possible. You will still need to cover conveyancing fees and Stamp Duty for your part in the house purchase. 

In terms of negotiations, consumer law supports your right to negotiate, don't let the developer tell you otherwise. If sales are slow or the market weakens, you may also be able to negotiate additional incentives like the developer covering moving or legal costs, or adding in appliances. 

At this stage, you should inquire if the developer offers any cashback if your home sells for more than the original valuation. This could mean that if the original RICS house valuation was £125,000 and the house sold for £134,000, then you would be able to get £9,000 in cash back. 

If maximising speed is your top priority, companies like The Property Buying Company offer a faster process (and cover your fees), though potentially at 75% to 85% of the market value. 

Step 8 - Securing your financing

The developer will need confirmation that you can afford the gap between your old home’s value and the new build price. This includes:

• Equity in your current home: How much you own outright.

• Savings: Any additional cash you have available. 

• Mortgage capacity: How much you qualify to borrow based on the new build’s price.

At this stage you should get a mortgage agreement in principle (AIP) early. This demonstrates your financial eligibility. A good mortgage broker can access a wider range of products and secure the best deal for your needs. 

Don’t rely solely on the developer for mortgage advice as they’re focused on their own sale, not finding you the absolute best rates. 

Step 9 - The legal side

The conveyancing process is largely like a standard sale, but your solicitor might recommend additional searches specific to new builds and the surrounding land. Expect 7-8 weeks, but efficient conveyancing is essential. 

The exchange and completion part of the process follows the usual process including a 10% deposit. If the new build isn’t finished, the developer might require a ‘delayed completion’. This means a longer wait before you can move in. 

With deposits, typically, you’ll need to pay a deposit on the new build. Some developers might waive this until the home is complete, offering a more flexible arrangement. 

Be prepared for potential delays in completion if the property isn’t ready on time and factor this into your moving plans. You should make sure that when you move into your new build property, that you have a snagging survey completed. 

Step 10 - Handover & property marketing

Leave anything agreed upon in the contract (usually outlined in the TA6 form), but your home should be left in a good condition. 

You may be contractually obligated to complete minor repairs like filling holes, repainting or tidying the garden. The developer might hold back a small amount of money until they’re satisfied with the property’s condition. 

In terms of marketing your property for sale, you should be prepared to grant the developer reasonable access for viewings while you’re still living in the home, and also expect a For Sale sign to be placed outside your property.

Is it a good idea when selling a house?

In a challenging market with high mortgage rates, part exchange house schemes can be tempting. Here’s a breakdown of what to consider:

Is it ideal for hard to sell houses?

Part exchange can be a lifesaver if you’re facing a hard house sale. Whether it needs major work, has unusual features or is in a less popular area, part exchange makes selling possible when the open market struggles.

You can skip the frustration and uncertainty of a collapsed sale. Part exchange offers a guaranteed outcome. If you need to sell quickly and streamline your move, especially into a new build home, part exchange simplifies the process significantly. 

Do I pay Stamp Duty when I sell my house through part exchange?

Don’t expect any special treatment when it comes to Stamp Duty with part exchange. You’ll pay the same amount as you would with any other home purchase. 

Thankfully, the current rules (in England and Northern Ireland) mean you won’t pay any stamp duty on the first £250,000 of the property’s value. 

While developers sometimes offer to cover or subsidise stamp duty to make a sale, they might be less likely to do so if you’re using their part exchange scheme. However, it never hurts to ask! Always inquire about any potential incentives they might offer.

What are the pros & cons of part exchange house?

Part exchange schemes offer a tempting mix of speed and simplicity when buying a new build. You’ll trade in your old home directly to the developer but it’s important to weigh the potential pros and cons before making the leap.

Advantages of using part exchange

Disadvantages of using part exchange to sell your house

What do I need to know about part exchange?

Considering a part exchange house scheme as a method to sell your property? It’s essential to grasp the unique nature of negotiations involved in such transactions. Unlike the typical property sale where you deal with individual buyers, part exchange means you negotiate between you and a property developer. 

In this section we will cover all the things you need to know before you start the part exchange process.

Understanding the intricacies of part exchange

Thinking about selling your property through part exchange? Understanding how negotiations work is important. Unlike traditional selling, where you negotiate with individual byers, part exchange involves you and the developer. 

Developers prioritise selling their new builds quickly. Their offers may reflect a desire for a speedy transaction, not necessarily maximising the value of your old home. 

The part exchange valuation process

To initiate the part exchange journey, most developers will enlist the services of two independent estate agents who will conduct a comprehensive evaluation of your home.

This crucial step must be completed before the developer can present you with a formal offer. However, it's essential to exercise caution, as these agents are instructed to provide a "selling" price rather than an "asking" price.

In other words, they will determine the value that the developer can realistically achieve within a few weeks of marketing by selling at a highly competitive price.

Once the developer is satisfied with the valuation of your property, they will extend an offer to part exchange your house. At this stage, you will face a significant decision: whether to accept the overall offer or explore other avenues.

If you choose to accept, you will then need to arrange a mortgage specifically for the purchase of the new build property. MoneySavingExpert provides a useful guide on remortgaging, which can be downloaded as a free PDF resource.

It's important to note that any offer made by the developer is subject to a detailed property survey, akin to any other conventional house sale. It is during this phase that the developer may request a reservation fee or deposit from you.

This requirement serves the purpose of demonstrating your commitment as a serious buyer.

By understanding the intricacies of the part exchange valuation process, you can navigate this stage with confidence, armed with the knowledge necessary to make informed decisions about your property transaction.

Intricacies of developer's selection process

Developers don't accept all homes for part exchange. They have specific rules to ensure they can easily resell your old property. Before you get too far down this path, find out:

• Their property limitations: Your home’s type matters. Ex-local authority properties, or those in less desirable areas, might be ineligible for part exchange house schemes. 

• Location is key:  The developer needs to be actively building in your area for your hold home to qualify.

• Mandatory upsizing: Many developers require your new build purchase to be at least 30% more expensive than your old home. 

Always ask the developer for their full list of part exchange criteria before getting too invested in the process. Knowing upfront if your home is a good fit saves time and prevents frustration. Part exchange isn’t right for everyone. 

How do you calculate part exchange

While you won’t find a calculator giving you the exact offer a developer will make, they’re still valuable when considering a house part exchange. This is because the calculators factor in current market trends and the developer's need to resell quickly. This gives you a semi-realistic range to expect, and not the absolute final selling price. 

This is an important tool because it can help you manage your expectations, as the offers will usually come in below full market value. The calculator helps you gauge the potential trade-off between price and convenience. 

The part exchange calculator could also be used to see how the scheme compares to estate agents or cash buyers. If you enter your postcode into the box below and fill out our online form, then you will receive a cash offer. This could then be compared to your part exchange calculation - but our’s will be better.

Can anyone part exchange a property?

There are different sets of rules for each developer when it comes to eligibility, however we've put together a list of a few that you usually will be subject to:

• You can’t part exchange a property you rent or online partially own, you must be the owner.

• Your old home needs to be worth 60% to 70% or less than the new build’s price.

• The developer needs to be actively building in your area to resell your old home.

• Significant repairs or issues might disqualify your home.

• Non-standard materials or flat roofs can be rejected by some developers. 

Developers like any business will want to turn a profit on your property. Don’t assume you’ll get the full price you might achieve selling traditionally. Part exchange works best if you’re upgrading to a more expensive home, downsizing might require other selling options…

Does it get more money?

Part exchange trades a potentially higher sale price for speed and convenience. Before choosing this route, consider the costs involved:

• Below market value: Developers aim to profit on your old home, so expect offers below what you might get on the open market. 

• The hidden costs of convenience: While you avoid estate agent fees and lengthy sales processes, that saved money might not outweigh the difference in your final profit on the sale. 

• Uncertainty vs lower price: Part exchange is appealing if you’ve struggled with broken chains or unpredictable buyers. However, it sacrifices some profit for that certainty. 

One house selling route which offers similar (or even faster) completion times and convenience is cash buyers, who will usually offer below market value but often beat part exchange offers due to the developer’s need for a greater profit margin. 

Fair price considerations

While developers may claim to offer “fair” prices in part exchange, remember their goal is profit, not maximising what you get for your old home. Developers need to quickly resell your old home. This means their offer needs room for their own profit margin.

They make money by paying you less for your old home and the price they charge for the new build. 20% below true market value isn’t unusual in a part exchange. 

If you wish to look at part exchanging your home, then get independent valuations or financial advisors before talking to developers. You could also check out our postcode form below, where we can give you a free, no-obligation cash offer for your home - what do you have to lose?

Should I part exchange or sell my house?

House part exchanges offer speed and certainty, but there are downsides. It;s best for those who want a quick move into a new build and are willing to accept a potentially lower price for their old home. 

But, you should carefully scrutinise the fine print of the developer for unexpected fees, taxes and legal terms, all while preparing yourself for a less negotiating leverage than in a traditional sale on the open market. 

If part exchange seems risky or doesn’t suit your needs, then you could consider either selling with an estate agent with the right help, or selling to a reputable cash house buyer (like us). 

A skilled estate agent, or online estate agent (we can help), may be able to achieve a faster sale than you anticipate, potentially netting you more than part exchange. 

If you want to find out about our online estate agency branch, who can help you sell your house in as little as 28 days but for closer to full market value. Then enter your postcode below and receive a free cash offer, and consultation where we can explain our service more. 

Alternatively, if you are looking to sell your house fast for cash, then you could choose a cash buyer like ourselves. We can offer you fair, competitive below market value offers and help you sell your house in as little as 7 days - far faster than that of part exchange schemes.

Not only are we faster, but by using our service over a part exchange, you get cash to use however you choose, not just for a specific developer’s new build. While we offer below market value, it might still beat the developer’s part exchange offer due to their need for a larger profit margin. 

We are one of the UK’s leading cash house buyers, and have over a century of experience helping people sell and buy properties across England and Wales. Our team is made up of over 35 skilled property professionals and can help you with all aspects of your house sale. 

Get a no-obligation offer from The Property Buying Company today. There’s no pressure, just a chance to compare options and see what makes the most sense for your situation.

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