If you are considering buying a new build house, the developer building the house may suggest that you ‘Part Exchange’ your current property. You might be wondering what part exchange is and how it works. Below we’ll provide you with a short explanation of what part exchange is and why it might be a good option for you.
What is a part exchange scheme?
Most of the major house builders offer a part exchange scheme when you are considering buying one of their new build houses. It is when you agree to purchase one of their new build properties, and the developer will agree to purchase your property. The developer will then subtract the value of your current property from the cost of your new home when calculating how much is due to them on the day of completion.
Why do it?
Selling a property is deemed to be one of the most stressful experiences that people go through and it is clear why. You may have to deal with many viewings, offers, counter offers, surveys, chains and potential purchasers pulling out.
Selling your property through a part exchange scheme can be seen as a very desirable option to those who want a straightforward and less stressful move. Here are some of the reasons why some people feel that a part exchange scheme is a beneficial approach to selling their property:
- As the developer has agreed to purchase your property, you will not need to put your property on the open market and therefore you will avoid the stresses of having to do viewings of your property.
- Normally, when you sell the property on the open market, you will need to put the property on the market with a local estate agent. When agreeing to sell the property through a part exchange scheme there will be no estate agents involved. This also has the benefit of saving you the additional cost of estate agents fees which you would usually have to pay.
- It is usual for you to agree to buy a new build property from a plan. This means the property has not yet begun to be constructed. As a result, it could be a while before you are able to move into your new build property. You may be worried that you will not be able to find a buyer that is prepared to wait or if there is a chain, you may be worried that the chain will not wait and that you will either lose the sale, or be forced to go ahead with the sale and find alternative accommodation. Part exchange schemes take this worry away, as the developer will not want to complete on the purchase of the property until the new build is ready.
However, not every property is eligible for a part exchange scheme. Properties that are deemed to be unmortgageable, for example if it has structural defects or is a leasehold with fewer then approximately 80 years left may not be acceptable to a developer under a part exchange scheme. This is because the developer will want to be confident that they can sell the property with ease.
How is it done?
When you have found a property that you would like to buy, you should make enquiries if the developer offers a part exchange scheme. If so, the developer will need to carry out a valuation on your current property. Most developers will carry out two valuations from independent agents and then make you an offer. If you decide to accept this offer, you can then go ahead and start to arrange your mortgage and instruct a property solicitor to begin the conveyancing process.
When dealing with the sale transaction, the process is generally the same as it would be if you had agreed a sale through an estate agent, and the developer is treated as the purchaser. You will be asked to complete the usual forms required when selling a property. However, when dealing with a sale under a part exchange scheme there are usually some additional contractual matters that need to be dealt with, so it is important that you instruct a property lawyer that has experience in dealing with part exchange transactions.
Buying a new build property, in its nature, is a more complex transaction with various additional elements that your property lawyer will need to look into. When buying any property it is usually a requirement to have searches carried out. In addition to the usual searches carried out, there are a range of additional searches that you may want to consider being carried out to ensure that you find out as much as possible about the new build property, and the area, that you are purchasing. Your property lawyer will be able to discuss the options available to you.
It is common for developers to impose a deadline for an exchange of contracts to be achieved. Your property lawyer will endeavour to achieve an exchange of contracts within this timeframe, after ensuring that they are satisfied with the legal formalities.
How can Nelsons help?
Here at Nelsons, we have a number of property lawyers that have a wealth of experience in dealing with new build property transactions and part exchange schemes who will be able to confidently guide you through the transaction. For further information, please contact Rachel or another member of the team in Derby, Leicester or Nottingham to discuss your circumstances.