What is Part Exchange?
When looking to move house, especially if browsing newly-built properties, you may be faced with the term “part exchange” (PX). Unlike the typical open market experience, part exchange involves no estate agents, viewings or online property portals. In its place, you’ll sell your house directly to a property developer as partial payment for one of their newly-built properties; you’ll then cover the remainder of the cost yourself. It’s a relatively quick and easy method of selling a house, and one that can benefit both the homeowner and property developer alike, although not without caveats.
While part exchange sales are relatively quick and hassle-free, they’re still subject to some legalities and waiting periods. Independent valuing agents will need to assess your property and determine its value (it must be at around 60-75% of the new build’s value); likewise, you’ll want to hire a professional to assess the new property.
If the properties and sale price are deemed acceptable by both parties, a mortgage can be arranged and your solicitor can finalise the sale. After 4-6 weeks, the money should be in your bank account and you can purchase your new house.
Why Would You Partake in a Property Part Exchange Scheme?
Property developers offer part exchange because it helps them entice buyers to their new properties, but how can it benefit you?
If you’re struggling to sell your current house and want to move into a new housing development, part exchange can help by offering a quicker, hassle-free and more reliable method of selling your home that doesn’t depend on a successful sale from another set of homeowners (it’s chain-free). Considering that roughly 1 in 4 house sales fall through in the UK, this reliability can’t be overstated.
Part exchange also completely cuts out estate agents and the expensive mistakes you may face when selling this way, including any fees, paperwork or negotiations that are associated with the estate agency process. This can not only save you time and money, but significant amounts of stress too. Moving house ranks among the most stressful events in a person’s life—avoiding that stress can be incredibly appealing.
Finally, part exchange can also be a good method of securing a more valuable property and climbing up the property ladder.
Reasons to Avoid Property Part Exchange
There’s little room in the way of negotiation when it comes to selling to or buying from the property developer. It’s generally accepted that the price they give is more or less final on both ends of the transaction. On top of that, the developer will almost certainly offer you less for your house than it’s actually worth, and that’s if your property is eligible for part exchange in the first place. Often, if your home does not fall in the range of 60-75% of the new home’s value, the property developer will reject the sale.
New builds are also less secure in their value than older, established properties. Your new build may rapidly depreciate in value, leaving you unable to climb any higher up the property ladder.
With short-term advantages and long-term disadvantages, part exchange schemes might seem like a bad choice in the long run. Thankfully, Residential property buyers like LDN Properties offer the same quick, hassle-free sale without the drawbacks of part exchange schemes. Plus, these services will offer cash for your property, not credit towards a specific new property. If you’re looking to sell your house without the fees, fuss or frustration of the estate agent, they’re very likely a better choice for you.
Property part exchange schemes are a good idea if you were already considering moving into a new build and want the sale completed as soon as possible. For most other homeowners, it’s a far more difficult choice. While the convenience and speed of a part exchange sale can be enticing, you’ll also be unable to negotiate, receive less than market value for your original property and be faced with a new property that rapidly depreciates. Consider your situation and how the advantages stack up against the disadvantages before you agree to a part exchange scheme.