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Part exchange: the key to a new home

January 26, 2024

finance, news

 

With the hard times we are going through right now it looks like part exchange is the best option for those interested in buying a new-build home.

Part exchange is a type of contract that allows you to trade in your home as part of the payment for your new home, avoiding the stress, costs and delays of selling.

Image by Bohman via Flickr

Housing developers Barratt Homes were pioneers in offering this service in the UK. According to the house builder the part exchange market has seen a 42% rise during the past 6 months, Barratt spokesman Patrick Law attributes this rise to several factors:

“In the current market there are a lot of homeowners who want to move and for the past few years have been putting it off. One of the big reasons is the difficulty of selling, finding a buyer, hassle, chains, eroding values during the process and so on. So a PX service which offers a guaranteed buyer, no chain, nor last minute changes of mind is therefore attractive.”

Apparently changes in the mortgage market are influencing the type of homes that are currently being built. Second-time buyers usually want family homes so house building companies are focusing on this type homes instead of apartments, which are usually more appealing to first-time buyers.

Better for everyone…

Part exchange seems beneficial for both parts. The house owner can avoid the process of selling his or her home via an estate agent, which in most cases is slow and uncertain due to the current poor market conditions. Part exchange helps the builders secure buyers for new builds in a slow market and gives them the chance of selling part-exchanged homes at a profit.

Apart from these benefits there are some barriers to part exchange. The home builder usually arranges at least two independent valuations of the existing home and makes an offer based on these, which will usually be less than the market value of the house. Ray Boulger, senior technical director at mortgage broker John Charcol says that the house developers normally have two ways for making money:

“They can sell the new property at list price and give the purchaser a good part exchange price, maybe even close to 100 per cent of value, depending on how toppy the list price of the new property is. Or they can give the buyer a discount on the new property but offer a lower price for the part exchange.”

Part exchange seems like the perfect option for those who need to move to a new house in a short period of time and can’t wait to go through the process of selling their old house via an estate agent.

Do you have any thoughts on part exchange? Do you think it is the best option for buying a new house? Let us know in the comments section below.

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  • Van

    This sounds like lunacy.

    So the housebuilders are going to take these empty houses on their books? Why would they do that? Obviously to facilitate the sale of their new homes at rediculously inflated prices, they will have to buy these old homes for similarly inflated prices.

    What are they going to do with them? Sell them or rent them? Who’s going to buy them? Can you imagine the conversation - “Oh, this is a lovely house we’re selling. We didn’t build it, we bought it off the last person we sold a newbuild to because they couldn’t sell it for the price they wanted, so we’re trying to flip it for them.”