How Does Part Exchange Work? Is It A Good Idea?
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Explaining what part exchange is, how it works and what the alternatives are when looking for a fast, hassle-free sale...
When selling a house, everyone wants to have the most stress-free sale possible. One way to get this is to make sure you don’t enter into a property chain – much easier said than done, right?
WRONG!
A part exchange scheme could be the answer...
Never heard of part exchange? No problem!
We’re going to be answering all your questions, including ‘what is part exchange’ and ‘how does part exchange work’. We’re also going to talk you through the pros and cons, whilst also giving you two other stress-free sale alternatives.
What does part exchange mean?
A part exchange house scheme involves trading your house as a part payment for a new build property. Essentially the property developer discounts the price of the new build by the cost of your current house, leaving you with a brand-new house at a reduced price with no property to sell and no chain.
A part exchange house scheme is best suited to those who want a quick sale, without the stress of needing to go onto the open market and sell their property.
Whilst a part exchange house scheme has its upsides, it also provides negatives in that you won’t get the full value that your house is worth. Also, not every house is classed as suitable for the scheme.
We’re going to give more detail on the pros and cons of part exchange a little later on, so be sure to check that out…
How does part exchange work?
A part exchange house scheme works similar to a property sale on the open market, but your ‘buyer’ will be a developer. Want a step-by-step guide? We’ve got you covered:
Choose your new home – To start the process off you will need to take a look at all the new build house developments and check that the new build you like offer a part exchange scheme
Independent valuations – Once you have decided on a property, the new build developer will arrange for two independent valuations to be taken out on your property by local estate agents
Agree a price – The independent valuations will be used to decide on the price they will offer you for your property. Should you agree on the price offered to you, the part exchange can move forward
Survey – The developer will then arrange for a survey to go ahead to check the property and ensure there are no major issues
Solicitors involved – Once the survey is done, solicitors can get involved and start the conveyancing process. In a part exchange scheme, the developer won’t cover the legal fees and so this is up to you to pay for
Reserve your new home – Whilst the survey is being completed on your current house, you can reserve your new build home. You may be required to pay a reservation fee to secure it
Exchange and complete – Once the conveyancing process is over, you’re able to exchange contracts. Once exchange is done, you’re able to move towards completion and moving into your new home
Some part exchange house schemes will allow you to stay in your current property for a few weeks after completion to allow you to have a more gradual move in process for your new build property.
Do you need a deposit for part exchange?
Yes, just like any exchange of contracts you will be required to put down at least a 10% deposit.
Do you get more for part exchange?
No, if anything you get less in a part exchange house scheme.
Your valuations will be on the ‘selling price’ rather than ‘asking price’, making it significantly lower than what you may be expecting. You won’t have to pay estate agent fees, like you would on the open market, but you will still have to pay for solicitor fees and a new build snagging survey.
It will also be harder to negotiate a price on your new build, as there’s less room for movement due to new build properties being sold at the very top end for properties compared to other properties of their size.
Pros and cons of part exchange
Just like anything, a part exchange scheme will come with both its upsides and downsides. Need help to decide if it’s the right option for you? Here’s what you need to know…
Pros:
No complicated chain as a part exchange developer is a ‘chain free’ buyer
Able to get a new build property at a reduced price
No estate agent fees
Less hassle with only two viewings at the maximum
Guaranteed sale
Cons:
Not all properties are eligible
Limited on the new build properties you can choose
You won’t get market value for your property
Not suitable for those looking to downsize
Your current house can’t be worth more than 70% of the market value of your new house
Little room for price negotiation and your new build is likely to decrease in value
Can be difficult to secure a house repayments against a new build
How do I qualify for part exchange?
When it comes to part exchange, not everyone will be eligible and able to take part in the scheme, with there being certain criteria you must meet.
The main criteria which you will be subject to when deciding whether or not you qualify for a part exchange house scheme is:
You must own your home
Your property can’t be worth more than the one you’re trying to purchase
Your property must be in a location which the developer finds desirable
Your property must be in decent condition, with no structural issues
Your property should be worth between 65-70% of the asking price of the property you’re interested in
If leasehold, you will need to have a fixed term, with usually over 80 years left on the lease
What’s a good alternative to part exchange?
Whilst part exchange is a good alternative to the open market, it doesn’t come without its flaws. If you’re looking for a fast and hassle-free sale, you do have other options besides part exchange.
Firstly you could sell your house through auction. When selling a house at auction, your property is being shown to cash buyers, who will be ready to exchange contracts as soon as the hammer comes down.
Selling through auction is chain free, just like part exchange. Also like part exchange, there will be minimal property viewings, with you needing to host a few open days, and there will be no estate agent fees.
All houses are able to go to auction, but there is no guarantee they will sell. Also, although you won’t have to pay estate agent fees, you will need to pay your legal fees, marketing fees and a commission of the sale price to the auctioneer.
At auction, most of the cash buyers there are looking for a ‘bargain’ and so it’s highly unlikely you will get near the market value for your property. Selling your house through auction can take between 6-10 weeks which, although is faster than the open market, isn’t as fast as our other alternative…
The other alternative to a part exchange house scheme is to sell to a cash house buying company. A cash house-buying company does exactly what it says, ‘on the tin’. They will buy your house for cash in a fast timescale to suit you, allowing you a speedy chain-free sale.
Not only will the sale be chain-free, you also won’t have to pay a penny, with these companies covering all the costs, including the legal fees! Also, unlike part exchange, there’s no certain criteria your house must meet to be eligible, with most cash house buying companies buying any property in any location and condition.
If this sounds like something you’re looking for, then you’re in the right place!
Here at The Property Buying Company we specialise in buying houses for cash and completing in a FAST timescale to suit you – we have been known to complete in as little as 7 days before!
We will handle the process for you making it a stress-free moving experience for you, all whilst covering all the fees. Need another reason to sell to us? We have over 50 years combined experience and we’re rated excellent by Trustpilot (feel free to check out our reviews).
Ready to get your house sold chain and hassle-free without the need of a part exchange house scheme? Fill in our online form or give us a call for a no-obligation cash offer to get you on your way to buying your perfect property…
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