One relatively new scheme that has appeared in the real estate market is the part exchange house scheme. The reason why this new scheme is gaining traction is that selling a home the traditional way is not only time-consuming but can be difficult as well. It is not uncommon to hear that buyers often pull out at the last minute for a variety of reasons, and this leads to a great deal of anxiety, anger, and frustration.
So how do part exchange house schemes work and are they worth your time?
What Exactly is a Part Exchange Homes Scheme?
A part exchange home scheme in the world of real estate hasn’t been around for long, so you may not yet be familiar with the idea. Essentially, this is where you trade the value of your current home against a newly built property. Your home serves as partial payment for the newly built home. The major difference with this scheme is that the property contractor replaces your estate agent. Instead of communicating with the estate agent, you will be communicating with the property developer who will build your new home. This mode of selling your home means you will own a brand-new home and avoid having to deal with a property chain at the same time.
Today, a fair number of property developers in the UK have started to offer part exchange home schemes, but the terms and conditions do vary among them. It is vital to read the fine print carefully and have the contract read over by a solicitor before signing on the dotted line.
There are a number of benefits for home sellers with these schemes. First, you don’t have to deal with estate agents, so you won’t pay a commission fee. The process of selling your home is far faster, and it’s a complete fee of uncertainty, too. There are also some drawbacks, though. The property developer will likely only offer you the minimum for your home. Additionally, you’re likely to pay full price for the new home. Finally, property developers don’t buy every property. If your home has real problems, you won’t be eligible.
How it Works
To begin the process, you look for new homes in an area that offers a part exchange scheme. You need to approach the sales staff at the site, and then begin searching for a new home that is within your budget. Once you find one, you begin negotiations. You’ll likely have to provide all of the details to the staff about your home so they can determine whether it’s one they’d like to purchase. To qualify, you’ll want to make sure your home is in good shape. At that point, the developer will have your home valuated. Usually, the property developer will request two independent estate agents to determine your home value. Remember, the developer will want to know the ‘asking price’ and the ‘selling price’; the latter is usually lower.
If the developer is happy with the selling price of your home, he or she will make an offer for your home. If you do accept their offer, then you need to start arranging a mortgage for your new home. Remember, the developer will conduct an inspection of your home, and the offer you received initially may change depending on any deficits in the home. If all is agreed, then the contractor will ask you for a reservation fee which is about 10% of the value of the new home.
Your next visit should be with your solicitor to help complete the sale. Your solicitor is responsible for ordering a formal check on the new home and will communicate with the developer on your behalf. If all goes well, you may be able to move into your new home within 4-8 weeks.
What Do You Need to Know About a Part Exchange Scheme?
For the seller, the key is to negotiate with the new property developer. In most cases, the property developer will agree to purchase your home for a set price in return that you buy a new home from them. In most cases, the property developer will state that he/she offers a fair market price for your home but in reality, the money you receive for your home is much less than the market value. Remember, the property developer is in the business to make a profit through this scheme; they want to pay you the least amount of money for your home and yet expect you to pay the maximum value for the new home- which generates significant profits, so the key is negotiations. In any case, expect to be paid about 70%-85% of the market value for your home.
Moreover, the property developer will also insert some clauses and rules when it comes to the type of homes the company is willing to buy. If you have been struggling to sell your home and have no finances, then your negotiation powers are limited, and it is strictly a win-win situation for the property developer.
One Final Note
If you feel that the property developer is not willing to budge and is making a lowball offer for your home, seek an alternative method of selling your home like a national home selling agency or an auction. You could even work through an estate agent to truly recover the value of your home.