Part Exchange Houses: Is part exchange on house a good idea?
Are you asking yourself, is part exchange on house a good idea?
The major benefit of a home part exchange is that it provides a simple and stress-free route to moving home.
Let’s face reality here, the process of moving home can be overwhelming and stressful.
As a family that has moved home twice to a new home in both cases, I can definitely say the home exchange is an option that is worth considering if you are thinking about moving home.
This is not an advertisement for any homebuilder but it worth mention that our own experience is with Bovis Home.
There are various reasons while someone might consider moving house. You could be trying to downsize to a smaller house or upsizing to a bigger house.
Our own experience on both occasions was upsizing.
By sharing our home part exchange experience I thought someone will find this useful.
You will find home exchange useful if you are a homeowner and want to upsize to a newly built property.
Some people already have their house on the market but struggling to find a buyer and it’s holding them up from moving.
Housebuilders can offer such people the opportunity to move by buying the house from the homeowner, the builder will then sell one of their homes to the homeowner.
The concept of home part exchange is simple. The housebuilder purchases your home from you, they then leave you free to buy one of their new houses.
What actually is a home part exchange?
Home exchange is similar to the part exchange of a car, or a phone or anything really. It means that you are giving what you have in exchanging of another thing. Usually, it will be exchanging a used item for a new item.
In the case of new home part exchange, it is mainly a case of selling your used or existing home to a developer and buying one of the developer’s new homes.
Notice the word PART in the Part Exchange. This means that you are not exchanging like for like. For example, the price of your existing home will usually be less than the price of the brand new home you will get from the developer.
What will you benefit from Part Exchange?
- For my family, we like the fact that we didn’t have to wait and worry about whether our house will sell or not. The waiting can be months sometimes.
- As soon as we receive the offer from the developer, the moving plan started for us and this was beneficial.
- The price they offer us was what we were expecting so good price for our home was a benefit.
- The cost of an advertisement, the agent fees etc. All these fees can add up. We didn’t have to pay any of that.
- My wife, in particular, wasn’t interested in getting into home selling chains. We heard about it from friends that sometimes it can be frustrating. I thought its a big benefit.
- The home exchange meant that the buyer was already available without any hassles of finding a buyer.
- After the new home was completed, we had all the time we needed to move, were not under any pressure to move out of our old home.
- People coming around for viewing from agents can be frustrating because of arranging a time for viewing. Not having to worry about schedules for a view is very beneficial.
How does part exchange work?
Obviously, there are requirements you need to meet. The housebuilders do have terms and conditions. Each builder set their own terms and conditions but the concept of part exchange schemes is similar in the house building industry.
The major requirement that most of the developers expect you to meet is that your existing home must be a certain percentage of the value of the new home you are considering purchasing from them.
The percentage differs from one developer to another.
For example, let’s say you want to buy a new home valued at £300,000, 70% of £300,000 is £210,000. This means that the value of your existing home cannot be more than £210,000.
The other way to look at it is this.
If your existing house is valued at £210,000 and you want to part exchange it for a new home, you would divide £210,000 by 70% which will give you £300,000. This will be the minimum price of a new home you can get from the developer.
Not all existing homes can qualify for part-exchange due to some reasons like
- As houses were constructed with different materials and methods, not all properties can be considered by home builders in their part exchange scheme. Some houses are unmortgageable which can disqualify them for new home part exchange
- Whether a house is a freehold or leasehold can be a factor as well in considering if a house qualifies for home part exchange or not. For example, leasehold flats with less than 80 years left on the lease or small studio flats might not qualify
- Location of the existing property could be significant also.
How does part exchange work? Our experience
The First Step
We put our house on the market. After about 3 months with 3 views with no offer.
Our fear about the part exchange was that developers will usually offer less than the market value for our house. We thought let’s try and see what offer they will give us.
We identified a site we were interested in in the City we wanted to move to. We rang the developer (Bovis Homes) to enquire about their part exchange scheme.
The Bovis Home Sales Executive we spoke to asked us some question to check if our home will qualify for their part exchange scheme. The obvious question I could remember they asked was our address.
The Sales Executes explained the part exchange scheme process for us.
Valuation of our existing home
Bovis home sent two independent local estate agents to our house. They came on two different occasions. They came 2 days apart. On the day the second agent came we received a call from Bovis Homes shortly after the agent left.
Developers usually offer the price they think is the market price that they will be willing to pay for the property.
They will not offer you the asking price of your home. It’s your choice to decide if you think what they offer is right for you.
We did not haggle but I think you can actually renegotiate what they offer.
For us, the price home builder offer for our house was the first we were hoping to accept when we first listed our house for sale.
We had about two days cooling-off period to decide we wanted to move forward with the part exchange scheme.
We rang Bovis two days after they gave us the offer to say we would accept their offer.
After the verbal offer on phone, they also sent using a written offer letter to confirm the verbal offer.
We just accepted the offer verbally.
We then proceeded to reserve one of Bovis Home.
We visited their site office to see the site layout and the house plans. For us, it was the second time we were buying a new home so there were no surprises in the process.
We made a provisional reservation at the site office. We later contacted them by phone for full reservations by making payment for the reservation. The reservation fee was non-refundable if the mortgage didn’t go through.
The reservation fee was refunded to us after the exchange of contract and completion.
Sales and Mortgage process
Every other thing was just as usual as in the normal mortgage process.
As the part exchange means they were buying our house from us. Our solicitor took over the bank transfers and liaising with the developer solicitors.
Bovis Sales office were very helpful throughout the sales process.
After the reservation, were continued to live in our house while the new home was been built.
One of the good things about the new home is the opportunity to choose some home appliances, kitchen cabinets, bathroom tiles and certain interiors.
It worth mention that while the new house was been built, the housebuilder sent estate agents to our house with potential buying for house viewing.
I think there were about 3 views after we accepted the offer the home builder gave us for our house.
After the exchange of contract and completion
One of the benefits of part exchange is that you are not under pressure to move from your existing house. Since the developer is the one that bought your house from you, they give you sometime after the exchange of contract to move at your own pace.
This is just our own experience I am not sure if they do this in every situation.