Trying to do a complicated Part Exchange

dslator

Trying to buy a house which is up for £350k which is a 6 bed Victorian house redeveloped by a builder. Our house is a 4 bed detached up for £250k which has been up for sale since 10th June.

A few weeks ago we asked the builder if they'd be interested in a part exchange but they declined because the difference in prices wasn't enough.

We have now found a buyer for our house, but they haven't sold theirs which is up for £170K, so we have asked the builder if they would part exchange our buyers house to complete the chain.

We are currently waiting for a reply from the builder.

I just wanted advice from anyone out there that's done something similar. Have we done the right thing and is it likely to work?

dslator

Any advice?

Doozergirl

Big developer or little developer? A small one might be more keen to do that deal, the big ones I think wouldn't like the additional risk of something falling through - ie your buyers pulling out on yours perhaps.

I'd consider that sort of thing, but I'm a little developer.

dslator

Doozergirl wrote: »

Big developer or little developer? A small one might be more keen to do that deal, the big ones I think wouldn't like the additional risk of something falling through - ie your buyers pulling out on yours perhaps.

I'd consider that sort of thing, but I'm a little developer.

It's a little developer. So I'm crossing my fingers that they'll go for it.

GDB2222

How does that work in practice, cost-wise? By my reckoning, the costs to the builder are:

1% stamp duty on the £170k = 1.7k
Remarketing expenses = 3.5k say
Holding costs on the house whilst unsold = 4k say (Interest, insurance, Council Tax, maintenance)
Legals = 0.8k say
Discount to get it sold = 10k to 20k say (If it were a bargain at 170k it would have sold by now, and this is assuming the 170k asking price is realistic.)

So, overall, that's worth around a £20k - £30k discount, on a £350k house, where the price has already been negotiated. Why not just sell the house for £325k and perhaps have a stream of buyers? Or pass £30k discount down the chain to the £170k house, where it would make 20% difference to the sale price?

I can see how it could work on a new house where the margins tend to be massive, but on a refurb?

zzzLazyDaisy

And that's the problem - even if the developer agrees, the px offer is likely to be significantly below the asking price, so your buyer will be looking to reduce their offer on yours by a similar amount, which means, in effect, that you will end up paying more for the new house.

Doozergirl

zzzLazyDaisy wrote: »

And that's the problem - even if the developer agrees, the px offer is likely to be significantly below the asking price, so your buyer will be looking to reduce their offer on yours by a similar amount, which means, in effect, that you will end up paying more for the new house.

Which is what would happen in a regular part ex as well!

dslator

zzzLazyDaisy wrote: »

And that's the problem - even if the developer agrees, the px offer is likely to be significantly below the asking price, so your buyer will be looking to reduce their offer on yours by a similar amount, which means, in effect, that you will end up paying more for the new house.

Surely our buyers can't just reduce their offer by the same amount as the difference between the p/x and sale price? I have found them a seller they need. I am expecting to pay extra but they should as well.

dslator

GDB2222 wrote: »

So, overall, that's worth around a £20k - £30k discount, on a £350k house, where the price has already been negotiated.

The house is up for offers around £350k and a price hasn't been negotiated yet.

geoffky

dslator wrote: »

Surely our buyers can't just reduce their offer by the same amount as the difference between the p/x and sale price? I have found them a seller they need. I am expecting to pay extra but they should as well.

why should they??

zzzLazyDaisy

Doozergirl wrote: »

Which is what would happen in a regular part ex as well!

Yes, of course it would.

But it seems from OP's posts, that they haven't factored that in since they seem to want their buyer to bear the cost of doing the deal with the developer.