How does part exchange work?
If you already own your own home and want to buy a new build property, you may have the option of a part exchange.
But what does that really mean? Here’s a quick run-down of everything you need to know about part exchange.
Who can part exchange?
You can only part exchange if you already own a property, so it’s not an option for first-time buyers.
Part exchange means the developer buys your current home, while you buy a new build from the developer and pay the difference.
What are the advantages of choosing a new build property where the developer is offering part exchange?
Developers are often keen to pursue part exchange because, as the buyer of your old home, there is less chance of a sale falling through, while it has the highest potential sale value of schemes that they’ll manage.
But what are the advantages for you, the buyer?
- First, you don’t have to worry about putting your current property on the market, which makes the process a whole lot quicker and easier
- The developer makes you a guaranteed offer so there is no last minute negotiation
- There’s no chain which means there’s less risk involved for them
- You’ll save money in estate agent fees
- You can stay in your old home until the new one is ready
- Buying and selling is completed in one easy move without having to wait for other parties to complete
Are there any downsides?
Some people worry that they will get less than market value for their property, but this isn’t necessarily the case. A reputable developer will get two independent valuations of your home. They will make an offer based on the current market value, which is calculated by looking at comparable properties in the same neighbourhood and through valuations and surveys.
If left to the market by putting your house up for sale with an estate agent, for instance, you could end up with more or less than the actual valuation, depending on demand.
If you’re unsure about the terms of part exchange, make sure you ask plenty of questions or speak to your solicitor to check the details.
How does it all work?
First, you’ll need to visit the development you are interested in and speak with the developer. An adviser will ask you a few questions. They will let you know if they offer part exchange and if you’re eligible for it.
Then, the developer will get independent valuations of your house, while keeping your chosen new build home on hold. Once the developer has made an offer and the price has been agreed, the sale will get underway.
Quite often the developer will come out and take photos of your home so that they can start marketing it for sale. They will also explain how your current property must be left, such as removing any rubbish etc. The legal process should last between four and six weeks, after which point you’ll be able to exchange and move into your new home as soon as it’s ready.
This guide to part exchange was produced in collaboration with L&C, the UK’s leading fee-free mortgage experts.