If you are considering buying a new build property, then you may have come across the term “part-exchange.” But what does part-exchange mean in the context of the housing market?
What Is A Part Exchange Scheme?
A part exchange scheme on a home works similarly to part-exchange of your motor vehicle. Part-exchange allows you to trade in your existing home when buying a new one, giving you money off the total purchase price. The building company then sells your property on to another private buyer, netting themselves a small profit.
Part-exchanging your home is relatively straightforward. All you need to do is find a building company that offers customers the option of part-exchanging their current property and then begin the process. The building company will then come to your house to have it valued. Based on the valuation, they’ll make you an offer and then discount the new build that you want by the amount of the estimate.
The purpose of the process is to allow customers to sell their home quickly, without having to go through the usual expensive channels. The responsibility for selling your old house falls to the builder; all the buyers have to worry about is moving into their new property.
The Advantages Of Part-Exchange Schemes
- Guarantee the sale of your property. The most significant benefit of part-exchange schemes is that they guarantee the sale of your property. The home builder will buy your property from you immediately (so long as they are satisfied with the survey), meaning that you won’t have to wait months for payment.
- No estate agency fees. Because you sell direct to the builder, you don’t have to pay estate agent fees. Many estate agents charge between 1 and 1.5 per cent of the total sale price of the property, but by part-exchanging, you avoid these costs.
- Move out of your existing home quickly. Some home sales can take months to push through, but with a part-exchange scheme, you could be living in your new property in a matter of weeks.
The Disadvantages Of Part-Exchange Schemes
- You may get less money for your current property. Part-exchanging is convenient, and so builders will offer less than the price your home could fetch on the open market.
- You may be excluded from part-exchange schemes. Not all properties are eligible for part-exchange. These houses include those with structural problems, serious repair issues, or a short amount of time remaining on the lease (in the case of leasehold properties). Before investigating part-exchange, therefore, you need to check whether a builder will accept your property in part-exchange for another.
- You may have to pay the full price of the new home. If you go on a part-exchange scheme with a builder, then they may insist that you pay the full asking price for the new build. Usually, buyers can negotiate a few percentage points off the total asking price. But builders may want you to pay the full amount to compensate them for the inconvenience of having to sell your old property.