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What is Part Exchange?
Part exchange is swapping your present property to a housebuilder as full or part payment of a new build home. After the housebuilder buys your present home, the cost of that is taken away from the purchase price of your new home.
How does Part Exchange work?
To take part in this scheme you need to own your own home and be willing to buy a new build home. As indicated, the housebuilder buys your present home and takes the value of it off the purchase of the new build. You don’t have the worry about some parts of the selling process (eg dealing with estate agents, the risk of the buying chain breaking. All you have to do is wait for the building of your new home to be completed.
Different housebuilders have different terms and conditions for taking part. When dealing with Bovis, for example, the value of your present home must be no more than 75% of the cost of your new house. For Barratt Homes, the cost of your present property is not allowed to be over 70% of the new build house you’re wanting to purchase. If Taylor Wimpey were building your new house, then they wouldn’t accept a flat as part exchange if there were fewer than 85 years on the lease.
However, there are undoubted benefits from part exchange and these must be weighed against the terms and conditions that come with each housebuilder or developer. Buying your new house this way is a means of getting a much sought-after new build property with already having a set amount of capital ready through the sale of your present home. You’re also not part of a chain and, as such, avoid all the problems that can arise with that.
If you list all the advantages together, it’s easy to see why this is a popular type of transaction for house buyers:
- You save paying paying out on estate agent fees
- You’re moving into a brand new home
- It’s significantly less stressful than ‘traditional’ methods of moving
As with any other property transaction, treat Part Exchange with the same thoroughness, care and attention. It’s possible to negotiate all parts of the deal, from the part exchange offer given for your home to the price of the new build home you are wanting to buy.
Housebuilders are generally honest yet want to make as much profit as they can with every sale. It’s why if you’re offered the full market price for your present home, you should double-check the price of your new build home hasn’t been inflated.