A part exchange is a common option when purchasing all manner of things - from white goods to a car, and even to property. But what exactly does part exchange mean, and how does it work?
Starting with the basics, a part exchange is where you offer up a current possession towards the purchase of a new one. So in the case of a car, you would offer your current car in part exchange against the cost of a new one. The same applies to property: you would offer your current home in part exchange against the cost of a new one.
Your current property will be valued and that amount will be taken off the price of the new home. Part exchange makes purchasing a new property and getting rid of your old one much quicker and easier - which is why it's a popular option amongst homeowners.
A part exchange will normally have several steps involved.
The first step is to determine the value of your current property. A few questions will likely be asked of you to get an idea of the sort of value it could be worth. This will usually involve asking about your property's location, layout, number of rooms, and overall condition.
Certain letting agents might have a limit about the percentage value of a new property they're willing to accept in part exchange. There is no baseline figure - some will accept only part exchanges of 75% or more of your desired property, others 70%, others 50%, and others still will accept any part exchange.
If you want to part exchange your property against the price of a new one, it's best to confirm with your letting agent as soon as possible if they have any minimum requirements for acceptable part exchange properties.
With some general information, it will be enough for a letting agent to give you a provisional acceptance or refusal of your property for part exchange. However, they aren't going to take your word for its overall condition and its location, and nor will they use nothing but their own discretion.
This is where they will likely bring in the services of other letting agents, surveyors, and property specialists to provide a valuation of your home. If those tally with the figure determined from your initial consultation, this will be the part exchange value of your property and what will be taken off the cost of your new home.
If, for any reason, the second opinions on the valuation come in lower than the initial value, it's more than likely that that value will be revised downward. This could be for any number of reasons, including the property being in a poorer state of repair than described, or having previously undiagnosed structural issues.
With all this information in mind, a final part exchange valuation will be put onto your home and you'll be made a verbal offer. Following this, if you accept the offer, it will be confirmed in writing and ready for approval from both your legal representation and that of the organisation you're part exchanging your property with.
With that, you'll be ready to start the process of signing over the ownership of your previous property, and purchasing your new one. You will have advice and guidance every step of the way to make the process as fast and smooth as possible.
Many people choose to part exchange their current property when they seek to buy a new one, so there must be a reason for them to do it.
The main benefit of part exchanging your property is that you get to be rid of your previous property without the hassle and strain of putting it on the market. Selling your home privately can be a time-consuming and highly stressful process.
You will still need to have your property valued, but with a private sale, you will need to wait for a buyer. This could take weeks, months, or even years. For all that time, you either need to buy your new home, which could be financially crippling without the money from the previous property's sale, or you risk your preferred new property being snapped up by another buyer.
With a part exchange, the process is simple and straight-forward. You have your home valued and if the value is agreeable to you, then that's the price you'll get. You don't need to worry about arranging house tours or haggling house-buyers. The price you're given is the price you'll get off your new home's purchase price.
You will always be able to get more money for your property if you choose to sell it privately. The same is true for part exchanging your car, or anything else for that matter, in that you will always be able to get more for it selling yourself.
The issue is that unless you find a buyer at that price, you'll get nothing. And you have absolutely no indication of how long your property will take to sell. The slightly lower valuation you'll get from a part exchange will be offset considerably by the speed with which you'll be able to be rid of it, and the convenience of the whole process.
There are several reasons for a lower part exchange value. There may be administration costs, for example, which need to be accounted for, as do the services of outsourced valuation specialists or surveyors.
The main reason, however, is that your old home will likely be re-sold when it's part exchanged from you. This is why part exchanges always garner a little less than true market value, because you need to take into account the fact that the property needs to go back on the market and be sold at a reasonable profit.
Take all of this into account, and part exchange is always a compelling choice.
read our useful guide to getting your dream home.