In short
- With part exchange, the builder buys your current home and you pay the difference, so there is no chain to break.
- The New Homes Quality Code says the builder must explain how it reached a fair market valuation, from more than one independent qualified source, and any deductions.
- The price offered can be below the market valuation, so get your own local valuations to compare.
- You pay stamp duty on the full price of the new home, not just the cash difference.
How does part exchange work?
With part exchange, the builder agrees to buy your current home as part of the deal on your new one. The value agreed for your home is put towards the price of the new build, and you pay the difference with savings, a mortgage or both. Both sales complete together.
Because the builder is the buyer, you do not depend on finding a buyer of your own, and there is no chain above you that can collapse.
The steps
| Step | What happens | What to do |
|---|---|---|
| 1. Check you qualify | The builder sets the conditions for its scheme | Ask how you qualify, in writing |
| 2. Valuation | Independent valuers assess your home for the builder | Get your own estimates from local agents too |
| 3. Offer | The builder makes a written offer with its terms | Check the price, deductions and the deadline to accept |
| 4. Reserve | You reserve the new home, with the part exchange written into the reservation agreement | Make sure the agreement lists the part exchange as a condition |
| 5. Legal work | Two sets of legal work run together: your sale and your purchase | Your solicitor handles both |
| 6. Exchange and completion | The sale of your home and the purchase of the new one complete together | Move out of the old home and into the new one on the same day |
How builders value your home
Builders do not simply pick a number. The New Homes Quality Code, which builders registered with the New Homes Quality Board must follow, says the builder must tell you how a fair market valuation has been decided, and that the valuation must be independent and come from more than one suitably qualified source. The builder must also tell you about any deductions it will apply to that market valuation.
That gives you two numbers to understand:
- The market valuation: what the independent valuers think your home would sell for.
- The price offered: what the builder will pay, after any deductions.
The builder is taking on the cost and risk of selling your home later, so the price offered can be lower than the market valuation. The builder records how far the agreed price sits above or below market value on the UK Finance Disclosure Form, which goes to your mortgage lender.
What the builder must tell you
Under section 1.4 of the New Homes Quality Code, the terms of part exchange and assisted move schemes must be clear, fair and not misleading, and must not be used to pressure you into a sale. The builder must give you enough time to consider the information.
Before you commit, the builder must tell you:
- The full terms and conditions, including the price offered for your home and how long the offer is valid.
- How the fair market valuation was decided.
- Any deductions that will be applied to the market valuation.
- How you qualify for the scheme.
- The date you need to accept the offer by.
- What will happen if you do not accept by that date.
- The date or dates the part exchange and the purchase of the new home are expected to complete.
The Code also says a reservation agreement must set out any matters the sale depends on, such as the details of a part exchange.
The advantages
- No chain. The builder is a guaranteed buyer, so you are not waiting on other buyers and sellers.
- Certainty. You know the price for your home and the date you will move.
- One move. You go straight from the old home to the new one, without renting in between.
- No estate agent. You do not usually pay agent fees, arrange viewings or deal with offers.
- Simple timing. Both sales are designed to complete on the same day.
The disadvantages
- A lower price. The price offered can be below what you might achieve on the open market. On a £250,000 home, a price 5% below market value would be £12,500 less.
- Conditions. The builder decides who qualifies, which can depend on the plot or on the value of your home against the new one.
- Deductions. The builder may take off costs for repairs or other items found in the valuation or survey.
- Less room to negotiate on the new home. If the part exchange is the incentive, the builder may be less willing to cut the price or add extras as well.
- A deadline. Offers last for a set time. If the build is delayed, check whether the offer and the valuation still stand.
Stamp duty and part exchange
For stamp duty, the tax law treats a part exchange as two separate purchases. You pay stamp duty on the new home based on its full price, or its market value if that is higher, not on the cash difference you pay after your old home is taken into account.
On a £350,000 new home in England where your old home covers £250,000 of the price, you still pay stamp duty on £350,000: £7,500 for a home mover.
The builder may be able to claim a relief on buying your old home, but that is the builder's tax, not yours. Because the sale of your old home and the purchase of the new one happen together, ask your solicitor to confirm the higher rates for additional homes do not apply to you. The stamp duty guide explains the rates, including LBTT in Scotland and LTT in Wales.
Part exchange and your mortgage
If you need a mortgage for the new home, your lender sees the part exchange on the UK Finance Disclosure Form: the price agreed for your home, how far it is above or below market value, and any fees paid. Your lender bases its lending on the new home's price and valuation, so the equity in your old home, after its mortgage is paid off, acts like your deposit.
On a £350,000 new home with a £250,000 part exchange on a home with no mortgage, you would borrow up to £100,000, if your lender agrees, less any savings you add. If you still owe money on your old home, you would need to borrow more. Check that the remaining mortgage on your old home will be cleared from the part exchange price on completion, and that there is enough left over. A qualified, regulated mortgage adviser can confirm how your lender treats the deal. See the new-build mortgages guide.
The alternatives
| Option | How it works | Best if |
|---|---|---|
| Part exchange | The builder buys your home | You value certainty and speed over the top price |
| Assisted move | The builder helps you sell on the open market, often paying the agent | Your home should sell well and you want a market price |
| Sell yourself first | You sell through an agent, then buy from a position with no chain below you | You can wait, or rent in between |
| Sell and buy at the same time | A normal chain, with your sale and purchase linked | The new home completes on a date you can match |
Assisted move
With an assisted move, the builder helps you sell your home on the open market, usually by choosing and paying an estate agent. You may get closer to full market value, but you are relying on a buyer, so the chain risk remains. The Code's rules for part exchange apply to assisted move schemes too: clear, fair terms and enough time to decide. Ask who sets the asking price and what happens if your home does not sell in time.
Selling yourself
Selling on the open market means you set the price and choose the buyer, but you pay agent fees and take the risk that the sale falls through or does not fit the build date. If you sell first, you are a stronger buyer, and you may be able to negotiate a better price on the new home.
How to decide
Compare part exchange with the alternatives in cash terms:
- Get the builder's market valuation and price offered in writing.
- Get two or three estimates from local agents.
- Work out the difference between the price offered and a realistic open-market price.
- Take off the agent fees, storage and any rent you would pay if you sold yourself.
- Weigh what is left against the value of certainty and a single move.
- Ask the builder whether you can have a price reduction or other incentive instead of part exchange, and compare.
Use the cash you need calculator to see the cash needed on the new home, as an illustration, not advice, and read new-build incentives explained for how part exchange compares with other offers. When you are ready, search new homes or browse homes by builder.
Questions people ask
How does part exchange work?
The builder agrees to buy your current home as part of the deal on your new one. The value agreed for your home is put towards the price of the new build, you pay the difference with savings, a mortgage or both, and both sales complete together, so you do not need a buyer of your own and there is no chain above you.
How do builders value part exchange homes?
Under the New Homes Quality Code, the builder must explain how a fair market valuation was decided, from more than one independent, suitably qualified source. It must also tell you about any deductions from that valuation.
Do you get full market value with part exchange?
Not always. The price offered can be below the market valuation, because the builder takes on the cost and risk of reselling your home. Get your own valuations to compare.
Do I pay stamp duty on the full price with part exchange?
Yes. You pay stamp duty on the full price or market value of the new home, not on the cash difference.
Can I negotiate a part exchange offer?
You can ask. Showing independent valuations from local agents gives you evidence, and you can also ask whether a price reduction on the new home is available instead.
What is the difference between part exchange and assisted move?
With part exchange, the builder buys your home. With an assisted move, the builder helps you sell it on the open market, often paying the estate agent, so you may get a higher price but still rely on a buyer.
What happens to part exchange if the new build is delayed?
Check the offer terms. The builder must tell you how long the offer is valid and the expected completion dates, so ask in writing whether the offer and valuation still stand if the build slips.
Sources
- NHQB: New Homes Quality Code Part 1, selling a new homenhqb.org.uk
- UK Finance: Disclosure Form (version 1)ukfinance.org.uk
- HMRC: SDLTM04020 exchanges and chargeable considerationgov.uk
- HMRC: SDLTM21020 relief for house-building companiesgov.uk
- GOV.UK: Stamp Duty Land Tax: residential property ratesgov.uk
A guide, not advice. NewHomeSearch is independent: it does not sell homes, arrange mortgages or take payment from builders. Rules change, so the stamp duty figures and live counts here come from the dated tables and today's listings. Take independent legal and financial advice before you commit.