Selling the Old, Buying the New: Creative Financing for UK Homeowners

Buying and selling your house is not as simple as perhaps it used to be, with less fluidity in the housing market in general and a tightening of the mortgage lending rules, so you need to be savvy in order to get the best deal and be able to move when you want to.

Here is look at how to get the best deal when buying and selling, and an insight into some other alternatives to consider if you want to move on from your existing home.

 

Part of the property chain

If you already own a property, then you will invariably become involved in a property chain that could easily involve the house you are selling as well as the one you are intending on buying.

This prompts the question as to whether you should consider selling your home before attempting to buy a new one?

The short answer is that selling and completing before you buy again has risks attached to the idea, but it does also have its advantages too.

If you do manage to sell and complete on your existing home before finding your next property, it does put you in a stronger position when buying. This is because most sellers would give preference to someone who is not in a chain and has cash in the bank. This advantageous position might also help you negotiate a better price in return for a quick exchange and completion.

The obvious disadvantage is that you need somewhere to live when you sell your home, so you may have to end up renting for a while, which can work out to be quite expensive over time.

Consider part exchange

If you are interested in buying a new property, the builder might be offering a part-exchange scheme to help you complete quickly.

How does part exchange work?

The basic principle of part exchange is that allows you the opportunity to trade in your existing home as a part payment against the price of a new build property being sold by the developer.

The obvious advantage is that you are spared the hassle of having to sell your home yourself and all the related costs that go with that, such as estate agents fees.

You will generally find that many of the major house builders will offer part exchange at the majority of their new developments and a typical percentage would be something like 20% of their housing stock is sold in this way.

Seller beware

The idea of part exchange and a quick hassle-free move is very appealing to many, but you do have to be wary of the terms of the deal and whether the amount they are offering you is a fair price.

You should probably work on the basis that the developer or builder is expecting as much out of the deal as you are, which means they may not offer you as much you hoped for on your existing property, and they will expect you to buy a property that is more expensive than your current home, so there is a profit margin in there too.

Most of these part exchange deals are based on two independent valuations of your existing property, which are carried out for the benefit of the developer. Based on the figures given to them, they will decide whether to make you an offer or decline to proceed if the figures don’t add up for them.

Taking a lower price

You should always consider getting your own valuation before accepting an offer from the developer, so that you know what your property is worth and whether their offer is a fair price.

There are circumstances where you might feel that it is worth taking a lower price in order to allow you to move quickly. It could be that you need to relocate to a new area for work or schooling and can’t wait to sell your home in the normal way.

Weigh up the pros and cons and get all the facts and valuations before agreeing to any part exchange deal, but certainly don’t dismiss the idea if it works for you and your circumstances.

Smart buying

If you are not buying a new property and want to make an offer on an older house, there are a few simple rules that you should try to work to.

Do your research on the area and comparable house prices by checking property websites for historical sales data.

Don’t go in too high with your first offer, as it won’t leave much room for manoeuvre afterwards and don’t go in too low, as this will probably antagonise the seller and might make them think you are not a serious buyer.

Also, try to sell your position if it is strong, such as having no chain or being a cash buyer, as this might make the difference and help you get the property you want.

Bryan Faircloth is a finance consultant. He likes to share his insights on financing real estate and other investment topics. His articles appear on many finance blogs.