Part exchange your home for a new one

If you are a homeowner and want to upsize to a newly built property, one option that some house builders offer is part exchange. Joanne Atkin explains how it works

If you have had your house on the market for a while and it’s not selling, you could ask a house builder to buy it in exchange for purchasing one of their newly built homes. There is no guarantee that a property developer will buy your home but they might do if you fit their criteria.

But even if you have never put your home up for sale, you could still ask a house builder to buy your home, if you don’t want the hassle of selling it yourself.

Basically, the house builder purchases your home from you, leaving you free to buy one of their new houses.

The advantage to you is that the sale of your old home is quick and easy. You don’t have to deal with estate agents or their fees, arrange viewings and negotiate with buyers and you avoid having to deal with any property chains.

Sounds easy, but is it really that simple?

How does part exchange work?

Each builder will have their own set of rules and regulations but all part exchange schemes generally work in a similar way.

The property you are selling must usually be worth a certain percentage of the value of the new home you want to buy. This varies between builders but is generally between 65 and 75 per cent.

For example, with Bovis Homes, your property must be worth no more than 75 per cent of the new home. So if the new build is priced at £400,000, your old property must be worth a maximum of £300,000.

Redrow requires that your property is at least 35 per cent lower than the value of your new home, or looking at it another way 65 per cent of the value. So in the £400,000 example, your old home must be priced at a maximum of £260,000.

Not all properties will be accepted for part exchange as the builder must be confidant the house can be sold on. Properties unlikely to fit the bill will include those that are unmortgageable, for example, they may have structural defects. Other exclusions are shared ownership properties, leasehold flats with less than 80 years left on the lease and small studio flats. Location may also be a factor.

Bovis Homes confirmed: “The home needs to be of standard construction, in the UK and mortgageable. We reserve the right to assess the suitability of each property based on its own merits.”

What is the process?

If your house is suitable, the builder will arrange for two or sometimes three local estate agents to value your home and will tell you how much they are willing to pay.

House builders say they offer the price they think they can get for the property when they sell it themselves. You have to decide whether you think the offer is fair and you are quite within your rights to negotiate.

Robin King, managing director of property specialist Move with Us, which sells properties for house builders and is the largest outsourced part exchange provider in the UK, explained: “The house builder’s offer is based on achievable prices rather than asking prices. There is around a 5 per cent differential between the two but house builders do offer a fair price. In some areas, more so in the North, builders may even pay a higher value in order to secure the sale.”

It is also a good idea to get your home valued independently of the builder’s valuation, if you have not done so already.

If your new house is still being built, you can usually carry on living in your existing home until the new one is ready. And you may also be allowed to choose certain interiors, such as kitchen work tops.

How common is part exchange?

The largest house builder in the UK is Barratt Homes, and 15 per cent of its house completions in 2012 were due to part exchange but its figures for 2013 have not yet been released.

Between April 2012 and April 2013 data from Move with Us suggested the number of new home sales completed using part exchange had risen 11 per cent in a year.

Robin King commented: “Part exchange is still being promoted by house builders, although less so since the Help to Buy scheme was introduced (in March 2013).”

However, Help to Buy is mostly being taken up by first-time buyers, while part exchange is for people who already have a house and want to trade up.

King continued: “In the last few years, house builders have turned away from building smaller units towards creating more family homes. This means house builders are selling more homes to so called ‘second steppers’, who have outgrown their properties, want to move in faster timescales or who simply don’t have the financial ability to move via the traditional route.”

He added: “It’s important to remember that while markets such as London and the South East are booming, places such as the North East are still improving. Part exchange is more popular in these areas as property prices haven’t increased as much and some home owners’ equity is low, which makes part exchange a good option for people looking to upsize.”

Bovis Homes increased its part exchange activity, known as Home Exchange, in 2012 but it fell back in 2013, although it did say: “Home Exchange plays an important part in the purchase assistance mix and remains popular because of the money, stress and time that buyers can save on. We remain committed to providing purchase assistance schemes that reflect the wide range of buyers looking to buy a Bovis Home.”