The Pros and Cons of House Part-Exchange Schemes

Pros and Cons House Part-Exchange Schemes

What Is House Part-Exchange?

House part-exchange (PX) schemes have been around for years, yet a surprising number of homeowners are unaware of them or don’t fully understand what PX is.

House part-exchange means trading your current property for a discounted price on a new-build property. Not all developers offer PX, but if it is an option, the developer will buy your existing home and deduct its value from the asking price of their new property. 

Sell and buy in one swift transaction!

How Does Part-Exchange Work?

The house sale process for part-exchanging a property works in the same way as a traditional sale. The only difference is that the developer of your new home is your buyer. Some property developers run a PX scheme in-house, others partner with a specialist part-exchange provider either way, the process will follow the same steps:

  1. Find a new home you like. Part-exchange is only available for purchasing new builds.
  2. Ask the developer if they offer a house part-exchange scheme.
  3. The developer will send a surveyor to value your home.
  4. Accept the offer and arrange a mortgage.
  5. Instruct a solicitor or a conveyancer, who will assess the new-build home.
  6. Some developers will require a reservation fee to secure your new home.
  7. Exchange contracts and pay a deposit (typically 10% of the purchase price).
  8. Complete the sale.

Part-exchange is a much quicker way to sell a house than selling and buying separately via an estate agent. 

Who Is Eligible for Part-Exchange?

Part-exchange is only available for purchasing new-build properties, and not all developers offer this service. If you’ve found the perfect new home and the developer offers PX, you will need to meet certain eligibility criteria. This varies between developers, but typically you will need to fulfil these requirements:

  • Own your current home.
  • Your property cannot be worth more than the one you wish to buy.
  • The property you want to sell should be worth 60-70% of the asking price of the new-build home you want to buy.
  • The property should be in good condition (the developer will decide if your current home meets their standard requirements, and these will vary between developers).
  • Your home must not be a type that the developer refuses to accept, for example, a non-standard construction
  • Most developers will have specific criteria regarding your home’s location.
  • The developer must feel confident that they can sell your property.

If you’re looking to move up the property ladder, PX can be a relatively straightforward way to sell your house fast

Pros and Cons of Part-Exchanging Property

Part-exchange can be a fantastic solution for homeowners who need to sell their property to buy another. But it is not right for everyone. 

Pros of House Part-Exchange

  • A Guaranteed Sale — avoid the risk of a buyer changing their mind or a property chain collapsing and your house sale failing.
  • Cut the Cost of Selling — there are no estate agent fees to pay, and often you can avoid legal fees too (this depends on the PX provider’s terms and conditions).
  • No Property Viewings — avoid the inconvenience, stress and hassle of multiple property viewings.
  • Speed — selling and buying in one transaction is much quicker than a traditional on-market sale.
  • Less Stress! — an on-market sale often involves delays, inconvenience and a lot of stress. Selling and buying in one transaction is much less hassle.

Cons of House Part-Exchange

  • Below Market Value Sale Price — the developer’s survey will value your property and set a sale price, not an asking price. This typically means that you will receive a lower valuation than you would if you choose an on-market sale.
  • New-Builds Are Not for Everyone — new-build homes generally have smaller rooms and gardens than older properties. They may also have less privacy and be noisier to live in as many developers build new homes close together to make optimum use of the land. Some buyers will struggle to get the mortgage they need as new properties tend to be more expensive than older ones.
  • Your Property May Not Be Eligible for PX — if your home is in poor condition or a location that doesn’t interest the developer, PX may not be an option. Ask the developer about their eligibility criteria.
  • New-Builds Depreciate in Value — unlike older properties that typically increase in value over time, a new house, a bit like a new car, begins to depreciate in value as soon as it is no longer new, i.e. when you move in.

Consider your personal circumstances, finances and preferences, and way up the pros and cons outlined above to decide if part-exchange is the right choice for you. Be sure to discuss your options with the developer you have chosen as PX schemes are not all created equal, and you should have a firm understanding of the offer before committing. 

Download our guide on “5 Reasons to Sell Off-Market” to explore alternative options for selling your house fast.

Part-Exchange: Things to Consider

Make sure that you speak to the developer of the house you want to buy and find out everything you can about their PX offer so that you can make an informed decision about whether to proceed or not.

  • How does the developer calculate the value of your home?
  • What is the most they are willing to offer you?
  • Do you meet their eligibility requirements?
  • Is the price of the new-build negotiable?
  • What input can you have on the design and finish of your new home?
  • What time scale can you expect for exchange and completion?
  • What experience does the developer have in offering part-exchange?
  • Can the developer or PX provider prove they have sufficient funds to buy your house fast?

If you need a quick house sale but PX isn’t for you, contact us to find out more about selling your house for cash.

House Part-Exchange FAQs

Is part-exchanging a house a good idea?

There are pros and cons to house part-exchange. If you’re eager to buy a new property and selling your current home fast with minimal hassle is the top priority, PX could be a great choice for you. However, if you’re not a fan of new-build homes, need to get top dollar for your current property or you have a “problem property” to sell, PX may be neither desirable nor possible. Check out the “Pros and Cons” and “Things to Consider” sections of this blog to help you decide if part-exchanging is a good idea.

Do you lose money when you part-exchange your house?

New-build homes tend to be pricier than properties that have been lived in. The so-called “new-build premium” can be around 10-15%, so if you decided to sell your home after moving in, you may lose money — buyers will not pay the same premium for an almost new home. Furthermore, part-exchange providers and developers typically pay below market value for the properties they buy. However, depending on your circumstances, a quick, hassle-free house sale may be more important to you than pounds in the bank.

Do you need a deposit if you part-exchange your house?

Developers often require a “reservation fee” to secure your new home, and there is typically a 10% deposit to pay when contracts are exchanged. Your solicitor or conveyancer will probably keep a proportion of the deposit to cover the part-exchange property.

Do you pay stamp duty on part-exchange properties?

Stamp duty land tax (SDLT) is payable on any residential property sold for more than £125,000. However, when you buy a new-build home from a developer, the amount of tax due may not be as clear as it is when buying an older property. For example, some property developers will offer to pay the SDLT (or subsidise it) to secure the sale. Speak to the developer of the property you want to buy and make sure that you allocate a sufficient budget to cover the stamp duty.

Can you part-exchange to downsize?

Part-exchange allows people to sell their homes quickly with less hassle and fewer costs than those associated with an on-market sale. Because of this, it is a popular choice for retirees looking to downsize. However, if your current home is worth more than the new property you want to buy, you may not be eligible for PX.

If you’re interested in learning more about alternative ways to sell your home other than putting it on the market with an estate agent, contact us to discuss your needs. We have the funds to buy your home for cash in as little as 7 days. Ask for your free, no-obligation offer today.

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