Part exchange is becoming an increasingly important part of buying and selling, boosting sales when sluggish or keeping transactions flowing in a fast-moving market. Rory Wilkinson looks at what it can offer.
While part exchange might once have been seen as a solution to a sluggish market, it’s now becoming a fundamental part of the housing industry, offering that one thing prized by both developers and their potential buyers – certainty.
Chris Hodgkinson, managing director of HBB Solutions says: “You might expect a more stable housing market would lead to less need for part exchange, but we’re seeing exactly the opposite.
“From the customer side, there remains lots of uncertainty over how long a transaction will take, along with the risks from getting stuck in a chain, so we’re seeing rising levels
of interest from small and medium housebuilders wanting to offer their customers the convenience and certainty of PX.”
Stephen Shaw, director of PX Partnership, says: “More and more developers are turning to part exchange as a way to create more sales, gain control of their pipeline and provide stability for their business. In the current market, it is an essential tool for housebuilders and a great incentive for attracting buyers to developments.”
Spring co-founder, Cormac Henderson, puts the recent boom in popularity of PX in no small part down to the drawn-out property transaction system and the impact that has on developers and customers alike.
“The high rate of fall-throughs and long conveyancing times mean developers and consumers have little visibility on when and even if a transaction will go through on their existing home, which would then allow them to move into their new build.
“Once seen as a niche route for those in specific circumstances such as downsizers, PX has become more mainstream and widely adopted by a broader range of consumers and housebuilders alike who realise the value of a seamless and guaranteed sales process.”
As the popularity of the service continues to rise, Neil Knight, divisional director for Spicerhaart Part Exchange and Group Clients, says the PX market is growing too: “There are a number of suppliers in the market, including a few new entrants, as the market for part exchange remains strong. Part exchange is a service expected by most buyers nowadays and forms an important part of the overall proposition on offer. Years ago, it was generally the case that only the larger companies and PLCs with deep pockets offered part exchange. In more recent years, however, a number of specialist buyers have entered the market allowing the smaller developers to compete. As a business, we facilitate these ‘funded’ part exchange schemes, which continue to prove popular along with other incentives such as assisted move.”
As PX becomes more commonplace and popular in the industry, the tools on offer evolve to meet the needs of the buyer and the demands of the developer, keeping sales on track and everyone involved happy.
Russell Smith, sales & marketing director, Silverbridge Properties, says: “The biggest help we can provide developers is to remove the stress by purchasing their clients’ properties and making the whole process simple, transparent and hassle-free. As such, our PX schemes not only provide housebuilders with a guaranteed sale but also improve their cash position.”
“We’ve also introduced a Chain Break service. Any break in the chain poses a huge problem for developers, resulting in costly delays and even lost sales. We can step in and repair this, anywhere in the chain, meaning that we can buy the developer’s customer’s property or even the property of the customer’s buyer or vendor.”
“We can now also offer a profit share scheme for the developer’s customers. This means that, after we’ve bought their property and then sold it on, we will share any profit with them. This is proving a huge incentive to use PX, as it now not only guarantees a sale but could also mean that customers benefit financially from any upturn in house prices.”
The growth in the PX market, coupled with the growing willingness of buyers to use it, presents housebuilders with a choice of how they adopt and offer part exchange.
“The challenge for many housebuilders is how best to fund part exchange,” says Rebecca Tait, head of sales at HBB Solutions. “If they do it themselves, then they must commit capital to it that can’t then be used to buy land or fund new projects. They also then must have the in-house expertise to manage the resale and carry the balance sheet risk of property prices changing.”
“By outsourcing the part exchange scheme, the housebuilder benefits from offering a scheme with no cost or risk to their balance sheet. And outsourced specialists typically have more relaxed criteria, meaning part exchange can be offered to more buyers.”
Neil Knight of Spicerhaart, adds: “Spicerhaart Part Exchange and Group Clients offers both funded and non-funded part exchange. With funded part exchange, Spicerhaart works with specialist PX buyers. They will buy all properties, even those with structural or other problems, while Spicerhaart works closely with the housebuilder to ensure a seamless sales process. Contracts will usually be exchanged within 28 days of enquiry and completion can be delayed for up to six months.”
“Spicerhaart’s non-funded part exchange is useful when the housebuilder offers a part exchange solution in-house. In these circumstances, the team will arrange for one of Spicerhaart’s estate agency branches to carry out the valuation on the property to be sold, before providing appraisals, comparables and valuation information to give the housebuilder the confidence to buy at the right price. Spicerhaart will then manage the sale from start to finish via its specialist part-exchange division in Sheffield.”
For all involved, the guarantee of a sale that part exchange provides is reason enough to offer the service, but the benefits for housebuilders don’t stop there. Zoe Sturgess, divisional sales director for the New Homes Group, explains the plus sides of working with a PX provider: “Housebuilders know that, by working with us, we will perform for them, ensuring everything fits their timeframes and taking the hassle away from their teams.
“Providing that visibility is key, and we do that through communication and building relationships to keep all parties focused and working towards the goal everyone wants to achieve. Relationships with the customer, the development, sales directors, estate agents, and everyone in between. We also provide the onsite team with the training they need to confidently talk to potential buyers about topics like part exchange and resale.”
Stephen Shaw of PX Partnership, adds: “PX providers offer a professional end-to-end service for both housebuilders and homeowners. Our fully funded PX scheme gives housebuilders all the benefits of a PX service yet without having to fund it or operate it themselves.”
“The other benefit that part exchange brings is the removal of barriers for those with a house to sell and the elimination of delays caused by chains. That means a considerably faster buying and selling process with both developers and purchasers in control over completion dates.”
Cormac Henderson of Spring says: “Regardless of the company or types of home a developer sells, the benefits to them remain the same: speed, certainty and customer satisfaction. Our own research has highlighted how local authority searches are taking up to 60 days in some areas, despite a government target of just 10 days. When combined with other factors such as slowing offers, increased mortgage due-diligence times, under resourced conveyancers, inefficient processes and potential chains, this causes significant delays to the overall moving process, which can take
over a year. With part exchange, a company like Spring or the housebuilder will take total responsibility for the purchase and onward sale of a customer’s existing home, freeing them from all of these issues.”
With the combination of an improving market, renewed buyer confidence and a new government looking to kick-start housebuilding and tackle the housing crisis, the future is looking bright in the PX market, according to Chris Hodgkinson of HBB Solutions.
“We have seen an immediate ‘bounce’ following the change of government. There has been more front-end activity in the housing market, with more properties going on the market and more prospective buyers. This has boosted housebuilder confidence and the signs are that this will lead to more new houses being built.”
“Everyone will have an important part to play in addressing the housing shortage in the way Labour intends to, and part exchange will continue to be an influential tool for housebuilders to use to manage their cash flow and offer their customers certainty and convenience where they need it.”
Russell Smith of Silverbridge Properties highlights the key role that downsizing can play in addressing the shortage of housing, but there is still a long way to go: “The crucial part of solving the UK’s housing crisis, we believe, lies with the older demographic. Two-thirds of over-65s have at least two empty spare bedrooms in their home. Many of these would dearly like to downsize and then use the capital to fund a more comfortable retirement. The biggest obstacle, however, is the availability of suitable housing.”
“If the government actively provided more support to retirement developers, by making planning easier, for example, and incentivised seniors to move then this would go some way to freeing up homes for families. Groups, such as ARCO, have been lobbying government for some years on this point but nothing yet suggests that they are being heeded.”
Cormac Henderson says that Spring has seen the green shoots of growth appearing as confidence returns to the market: “Both the Nationwide and Halifax house price indices recorded accelerating growth in July while fixed rate mortgage deals were already falling before the BoE’s base rate cut in August. A cut, which although small was significant, marking the first cut since the start of the pandemic in March 2020. Aligned to this, our own business is seeing enquiry levels up despite the summer typically being the quietest period for activity.”
“Labour has made all of the right noises, aligning itself as the ‘party for the builders, not the blockers’. From funding more planning officers to help drastically under-resourced local departments to taking a ‘brownfield-first approach’ with the potential of new ‘grey belt’ areas that could be built upon, it all sounds promising and will reassure housebuilders that government and policy is on their side. However, as we have seen from successive governments, the devil is in the detail and it takes time for the noise to translate into real change. All things considered, we as a business are positively optimistic, which also appears to be reflected by our industry partners.”
