Property Part Exchange
What it means and how it works ...
Are you on the lookout to move to a new home and sell your house fast and with as little stress involved as possible?
Or have you been trying to “palm off” your property for far too long, so you can buy a dream family-sized house with no success?
It’s frustrating not to be able to get further up on the property ladder, once you family needs have changed, especially if the reason behind is not so much the ever-growing real estate prices but the lack of prospective buyers for your home.
Then, this article by Yes! Home Buyers may help you consider another way of upsizing to a bigger house. We’re talking about part exchange, which can remove a lot of the headache, associated with the property buying/selling process.
Property Part Exchange: What is the Definition?
Let’s explain what part exchange means and learn about the different scenarios you can find yourself in when trading in your old property against the value of a new house or exchanging your home with different circumstances attached.
Property part exchange means selling your home to a person or a building company and in exchange, get the chance to move to a new property by paying the difference in price. In other words, the value of your house or apartment is usually lower than the one you intend to buy.
So, if in essence, your original house becomes part of the payment. In the case of dealing with a property developer, you generally acquire a newly built house that is larger than your old one. That’s why to have a third party value your property is a must.
Property part exchange is also known as a chain-free property transaction process, because there are no other parties involved but you and the “provider” of your new property. You both buy and sell from and to each other.
Types of Property Exchange:
- Purchase a brand new house from a homebuilding company.
As mentioned above, the process involves approaching a company and depending on your eligibility, you trade in your house to get a newly built house, which is larger and about ⅓ higher in value than the one you sell. This is one of the most common house part-exchange procedures. However, it’s not a good idea to keep the property empty for too long.
- Buy a home from a private owner.
It’s slightly rarer but you can be lucky and part-exchange your property for a dream home in a desired location by finding a counterpart house hunter who has reciprocal relocation needs. The part-exchange element in such transaction could be due to upsizing/downsizing or simply because one of the property is located in a more expensive region. In such occasions, Yes! Home Buyers can buy in cash too.
- Downsize in a property developer’s property.
It’s not unpopular for property developers to attract a fair share of retirees with an equity release offer when downsizing into one of their purposefully built properties - usually, a functional and energy-efficient flat. However, downsizing is outdated and rightsizing is the right approach.
- Move to a smaller home privately.
Naturally, when one party upsizes, the other one downsizes. So, if you’re selling your large family home in exchange for a smaller one, you could be getting a nice lump sum of money on top, unless you’re moving to a much more expensive area than your original location.
- House swap within the family.
In this case, the part-exchange aspect and any monetary transactions are usually missing because two properties are exchanged by close relatives. For instance, the parents pass on the large family home to their son and his new family, and move into the latter’s smaller property. Of course, a family house swap has its advantages but there are also some considerations you need to carefully think about.
How Does the Part Exchange Process Work?
Here, we’ll focus on the process of buying a brand new home from a house-building company against the value of your home, as the procedure may not be always the appropriate choice for you.
- First and foremost, you’ll need to find out whether your property is a good fit to enter into a part-exchange scheme. Each developer has their own criteria, such as the house has to be in good state of repair and valued at around 70%-75% below the value of the new property.
- Once you get in touch with the building company about part-exchanging your house for a new one in the property development of your choice, you can expect an independent surveyor to come and evaluate your home, first.
- Then, soon after, the developer will make an offer to you, which is once again always below the market value (about 90-95% lower). With this said, the company will be hesitant to buy any house, regardless of its condition.
So, you can only count on them making you an offer if your property doesn’t suffer from major structural issues. Provided that the developer has been satisfied with the state of your house, you’ll be looking at signing the exchange contract within one month. A 10% deposit is usually required to seal the deal.
Why Part Exchange May be the Best Option for You
If you are in a rush to sell your old and buy a new property for whatever reason, part exchange can be the fast solution you’re looking for. Below, we list the pros of part-exchanging your home for a brand new house.
- You save time by not having to deal with putting your house on the market;
- You won’t have to put up with a string of prospective buyers viewing your property;
- Part exchange involves less stress as it is a quick, chain-free property transaction;
- Once approved, you can count on a guaranteed sale without any “change-of-heart” issues;
- Some developers provide removals assistance and offer you plenty of time to vacate your old home;
- A quality built new home comes with no repairs problems or refurbishment needs;
- You don’t pay any estate agency fees.
What About The Drawbacks of Property Part Exchange?
Well, part exchange is not suitable for everyone, especially if your property has some drawbacks and doesn’t meet the building company’s requirements. There are also some disadvantages that you need to consider before entering into such property scheme.
- You’ll have to choose from a limited list of available houses;
- New residential buildings usually come with small gardens that could use a revamp, consider new plants such as hedging and garden trees;
- The increased number of rooms you’ll be getting is often at the expense of their size;
- If you are downsizing, you’re likely to be moving into a new development of flats;
- You may be saving money by not paying estate agency fees but you’ll be selling your old home for 5%-10% below its market value.
- The abode might have damage unseen to the eye. Professional Fantastic Plumber Shem Bruce points piping as one of many weak spots that people often fail to thoroughly inspect. Under-maintenanced plumbing could cost you a fortune if not spotted on time. The same goes for electrical wiring, gutters, and even drainage.
Additional Part Exchange Considerations
Now that you understand the part-exchange process, you still need to get prepared by planning out carefully every aspect of your house move before agreeing to entering into an exchange scheme with a developer.
For instance, you should enquire about whose responsibility it is to pay the stamp duty. It is not unusual for the property developer to cover this tax. Also, you can try to negotiate a deal with the company either about the price of your new home or the value of your old property, especially if the transaction is taking place during a slow time of the year, with regards to house sales.
To use external legal advice aside what the builder/seller has provided is absolutely mandatory not to mention that you should always compare your conveyancing quotes. To buy a newly-built abode comes with its own legal specifics and you should not trust a contract lightly. While buying or selling a house can be an incredibly arduous process, leaving the process of conveyancing in the hands of professionals makes sense.
Don’t forget to ask about the type of fittings and finishes your new home is coming with. As part of the deal, you may be able to move into a fully carpeted house with already fitted appliances, for example. Still, for any other handyman jobs, associated with settling into a newly built property, you’ll have to make provisions yourself.
Last but not least, try to mutually agree on a convenient time frame of moving out of your old house. After all, the idea behind part exchange might be a fast property transaction but this doesn’t mean that the process should involve a lot of stress.