Property experts have forecasted a downturn in the housing market in 2021 due to the end of the stamp duty land tax (SDLT) holiday in March and rising unemployment levels. Selling homes will therefore become increasingly difficult but builders and developers are offering part-exchange schemes to help their customers move quicker. But what are they and are they a good idea?
If you plan on buying a new build property and are struggling to sell your current home, you might be tempted to look into part exchange as a possible solution.
The part-exchange house scheme enables a person to buy a new-build home without going through the traditional channels of selling their current property. The property developer buys the homeowner’s current property and deducts its value from the price of the new house.
Part exchange is a tempting option for people who want to move quickly, who are struggling to sell their existing property or simply wish to avoid the hassle of selling their home. The developer benefits too as they have a guaranteed buyer for one of their properties. Many of the well known new-build property developers offer Part exchange as it helps their reputation for customer service and attracts more customers.
Each developer will have their own process but the fundamentals are the same:
Once you have found a house you wish to buy with a new-build developer that offers Part-Ex, your current home will be valued. Standard practice is to complete two independent local estate agent’s valuations. Some developers only offer PX to buyers whose current home is no more than 70% of the value of the new-build property. If there is less than 30% difference between the value of the two properties, the sale becomes unprofitable for the developer. This is why part-ex is popular with homeowners looking to move up the property ladder.
The developer will make the homeowner an offer based on the valuations. If all parties are happy to continue, the homeowner will secure a mortgage and instruct a solicitor to complete the sale.
Some developers require a reservation fee to secure your preferred plot when the offer is accepted.
The steps to part exchanging are fairly simple:
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Part-exchange is only available on new-build properties. It’s often most suited to buyers seeking to upgrade to a more expensive home. However, there are pros and cons to Part-Ex and whether it can be considered a good idea very much depends on the buyers individual circumstances and priorities.
To be eligible for part-exchange schemes, homebuyers must:
Part-exchange can be a good solution for homeowners who need to move fast. It’s simple, straightforward, secure, and much quicker than the traditional home buying process. However, it’s not for everyone. Review the pros and cons over again and speak to the developer. At the end of the day you must make the choice that is right for you.
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