Perhaps the biggest factor in why house-moving is one of the most stressful things you can ever do, is the uncertainty and delays that you will inevitably encounter. Part-exchanging a property is one solution to help alleviate that, but it is not necessarily a brand new concept. Part exchange on a property has been around for some time, but the increase in new-build properties initiated by the Government’s commitment to build 300,000 new properties per year, and people wanting to find creative ways to save money and time in the house-buying process, has brought part-exchanging property sharply into focus.
What is property part exchange?
If you understand how part exchange on a car works, then part-exchanging a property is almost exactly the same. With a car, to save hassle and cost you might choose to part exchange your current car when buying a brand new car from a motor dealer, so you deduct the value received for the old car from the cost of the new car, and you just owe the remainder of the cost of the new car. And in the meantime you have saved time and cost of advertising the vehicle and finding a private buyer.
Part exchange of a property works the same way in that the property developer who is building your new home, agrees to buy your current home and then makes arrangements to sell it. And the value the property developer gives you for your home is traded off the cost you owe them for your new home.
What are the benefits of part-exchanging a property?
- You avoid becoming part of a property chain and hence avoid the delays in the sales transaction this can bring.
- You avoid dealing with estate agents and putting your property on the market, so the sales process is quicker and cheaper and you are only dealing directly with the eventual buyer.
- Unlike with a property chain, the sale is pretty much guaranteed as it is unlikely the property developer will pull out of the deal once it is agreed.
- If you are struggling to find a buyer for your home then this is a good way to circumnavigate that, but you should also be aware that the property developer is not guaranteed to agree to part exchange your property, they do of course need to be comforted that they can sell the property on.
- You are left owning a brand new property.
Considerations when looking to part exchange a property
As well as the many benefits of part-exchanging a property, there are also some things you need to be aware of:
- The terms and conditions of a part exchange deal can vary between property developers, so read the small print carefully and take professional legal advice in checking the deal over.
- Some property developers may offer a below market price to ensure that they can sell the property on and not lose money. This is not always the case though and some offer very competitive deals.
- In order to qualify for a part exchange deal your current property cannot be worth more than the property you are buying, and usually it will be worth 60-70% of the new-build property price. In other words, part exchange is aimed at people climbing up the property ladder, not those looking to downsize.
- A property developer will value your home and carry out surveys on it, just like a standard property transaction.
- You will still need a mortgage to fund the remaining amount of the new-build property price that is not covered by the part exchange.
- There can be delays in the new-build scheme completing, which is not unusual in property construction, and this can cause issues if your property is being sold and is going through as normal. In this respect, part exchange can be very convenient as you essentially stay in your property until the new one is ready.
Professional advice on part exchange of your property
The legal process of part-exchanging a property is the same as a normal property sale, there still needs to be searches and conveyancing and communicating with lenders and the seller’s solicitors etc, so contact Ison Harrison’s new-build conveyancing team, and we can advise you on the part exchange process and assist with the purchase of your new-build property, so get in touch today.