Part exchange house scheme – What is it? How does it work?
Explaining what a part exchange house scheme is, how it works and whether or not it's actually a good idea...
When it comes to selling a house, we all want the most stress-free way of selling, which ideally has the smallest chain possible, to avoid the chance of the sale falling through.
It’s therefore hardly surprising that part exchange house schemes have become increasingly more popular. After all, it allows you to trade in your house, guaranteeing you a sale, in exchange for a new build property at a reduced price.
What could go wrong?
Well, maybe these schemes aren’t exactly as they seem from the outside…
We’re going to talk you through what part exchange is, how it works and whether it’s a good idea for you.
What is part exchange?
A part exchange house scheme is where you’re able to trade in your house to a developer as part payment towards the cost of a new build property. As a result of trading in your property, you will only have to pay the difference between your current property and new build property.
As a result of a part exchange house scheme, you’re able to completely avoid an estate agent, meaning you won’t have to pay estate agent fees.
You can also avoid being part of a chain, reducing the chances of your house sale falling through.
A part exchange house scheme is only going to be suitable for those who want a new build property, and you will need to be aware that you may have to exchange contracts with a delayed completion.
Although the basics of a part exchange house scheme are the same, each property developer will have slightly different terms and conditions, and rules about whether or not your property is eligible, so it’s key you check this out fully before getting your hopes up.
There are certain rules and criteria which your house will have to meet in order to be able to take part in a part exchange house scheme and these are:
Your property value must not be more than 70% of the value of your new build
Your property should be in decent condition and suitable to be able to get house repayments
If your property is a leasehold, you must have more than 80 years left on the lease
Your property must be in the developer’s desired area
Your boiler, heating and electrics must be in good working order
You will need to use your own conveyancer
You're willing to accept an offer that is below the market value of your property
You don’t already have your house on the market
How does part exchange work?
A part exchange house scheme is fairly straightforward once you’ve grasped the concept, but if it’s something completely new to you, then allow us to explain.
The first thing for you to do is to look around your desired area at any new build developments and find a property that is the right fit for you.
Once you’ve found the perfect property, you will need to approach the developer to check your chosen house is eligible to take part in their part exchange house scheme.
Providing the house is able to take part, the developer will then start to ask for details about your current property. Once you have given your property details and the developer is happy that your house is suitable, then they will arrange for two or three independent estate agents and valuers to view your home and give a valuation.
They will be asked to give your house a valuation based on the ‘selling price’ rather than the normal ‘asking price’ valuation you would get from an estate agent.
Next, the developer will use these valuations to give you an offer. Be aware that this offer will be significantly below what you would expect to ask for with an estate agent on the open market.
Should you accept this offer, then the developer will organise a survey on your property to ensure there are no issues. You will also need to instruct your solicitor to begin the conveyancing process.
You can expect to exchange contracts fairly quickly, with the potential for completion to take up to a year after exchange, depending on the amount of work that needs to be done on the new build.
When completion day comes, you’re able to move out of your current house and straight into your new home.
Can you part exchange to downsize?
Generally speaking, you won’t be able to participate in a part exchange house scheme if you’re wanting to downsize. This is because most part exchange schemes state your house must be no more than 65-70% of the value of your new build and if you’re moving from a bigger house, it’s more than likely your house will be a higher value than that of your new build.
If your bigger property is, for some reason, 70% or less than the value of your new build then you should be able to participate in a part exchange house scheme, unless the developer isn’t happy with the condition of your property.
Miller homes are a housing developer which actually has a ‘part exchange house downsize’ scheme, but after reading the small print these aren’t actually what they seem to be.
With this scheme, your house needs to be eligible to be able to be considered for the scheme, which is down to their opinion, and the offer can be withdrawn without notice, leaving you without a buyer with no prior warning.
Is part exchange a good idea?
Whether part exchange is the right option for you is down to personal opinion. But, to help you make your decision we’re going to detail the pros and cons of a part exchange house scheme for you…
Pros of a part exchange house scheme:
You won’t have to pay estate agent fees
You only pay Stamp Duty on the difference you pay, rather than the whole property
You're able to avoid the open market
Chain free sale
Gives you the chance to get a new build for a reduced rate
Able to live in your house right until your new build is completed
Cons of a part exchange house scheme:
You will be offered a lot less than the market value of your property
Your property may not be eligible
Your current house can’t be worth more than 70% of the value of the new build, meaning it’s not suitable for everyone
You will still have legal fees to pay
There may be problems with your house build, meaning that the house isn’t ready by the previously agreed date of completion
It'll be unlikely that you will receive a discount on the value of your new build when using a part exchange house scheme. This means it’s likely that when you come to sell the property the value of it will have dropped rather than appreciated
The developer may change their mind and withdraw their offer, meaning it’s not a guaranteed sale
Whilst a part exchange house scheme can seem like an ideal, stress-free way to get yourself a new build property at a reduced price and guarantee yourself a sale, that is often not the case.
Although you can bypass estate agent fees, you will still have to pay legal fees and be willing to accept a much lower price for your property.
Not only this, but you will also have to make sure your property is actually eligible to take part in a part exchange house scheme, so it is a scheme that may not be suited to everyone.
If you’re looking for a chain free sale, with a guaranteed buyer who can complete in a fast timescale of your choice then we do have an option that may interest you.
We’re a fast house buying company, who can buy in as little as 7 days. We will handle everything for you, as well as covering all your fees, including the legal fees! We’re also a cash buyer, so the offer we give you is the offer you will receive in full in your bank.
We’re rated excellent on Trustpilot and we’re part of the National Association of Property Buyers and The Property Ombudsman, meaning with us you’re in safe hands. We also have over 50 years of combined experience, so we really have dealt with it all.
Give us a call or fill in our online form for a free no-obligation CASH offer which we could have in your bank faster than a part exchange house scheme…