Buying a house that has been taken as a Part Exchange by developer

LallyHay

Hi,

We are in the process of buying a house through an estate agent that is one that has been taken as a Part Exchange by a property developer. We had been given the property developer's details and their solicitor on the sales letter. However, the estate agent now says (after days of them chasing up the sale with developer/their solicitor) the developer doesn't own the house yet so the draft contract and searches won't be able to start until the current residents exchange on their new build.

We were originally told that the developer wanted our sale to complete early Dec as the new build was ready end of Nov and they wanted a quick turn around.

My main question is will the developer ever actually 'own' the house or do they just act as a go between for the sale of it and therefore never legally own the house and have to pay Stamp Duty etc? My next question is at what point can my solicitor start the work involved with my purchase - is it when the exchange takes place on the new build or will it have to be after it completes and the developer takes ownership of the house we are buying?

Thanks in advance for any information you can provide.

Richard_Webster

until the current residents exchange on their new build.

They may never exchange!

My main question is will the developer ever actually 'own' the house or do they just act as a go between for the sale of it and therefore never legally own the house and have to pay Stamp Duty etc?

Does it matter? They may "own" it or simply take powers of attorney from the sellers so they can transfer it in their name to you - but it shouldn't make any real difference to you what happens in this respect.

My next question is at what point can my solicitor start the work involved with my purchase - is it when the exchange takes place on the new build or will it have to be after it completes and the developer takes ownership of the house we are buying?

When the builder's solicitors send your solicitors a set of draft contract papers which could be at any time from now on - depends on how builder and his solicitors choose to deal with it.

LallyHay

Thank you Richard. So really despite this property being advertised as 'No Onwards Chain' it does really because the sale is dependent upon the current owners going through with their purchase of the new build. We had been led to believe the developer already owned the property and the family were living there as tenants until their house was ready.

One other question if you don't mind, from your experience, is buying a property taken in part exchange from a developer more or less or equally as complicated as a regular purchase when it comes to conveyancing and time needed to do the conveyancing work?

Many thanks in advance

martinsurrey

The developer will own the house, even if it’s just for a few day’s, there is a stamp duty exemption for new build part exchanges (so the developer doesn’t pay any).

Its all down to the solicitors, the good thing about the PX is that there are no emotions from the developer’s point of view, they want their money and they want it ASAP, that’s all that matters to them, so it should be pretty straight forward.

(btw no onward chain means the cash from this house isnt being used to buy another house, which is true, it just goes to the developers bank account, it is not chain free, as thre is a chain below it.)

Freecall

We did exactly this some time ago.

The developer (Persimmon) never actually owned the house and even now there is no record at the Land Registry that they were ever involved.

The transaction itself went extremely smoothly and very rapidly.

They sold it to us for £10k less than they paid for it - effectively on the same day.

You have to remember that the reason developers do this is to give a discount on the new house that they are selling (which has loads of margin to play with) without making it public to those in the process of buying other properties on the development thus keeping overall new-build prices high.

If it is a bargain then I would grab it.

LallyHay

Freecall wrote: »

The transaction itself went extremely smoothly and very rapidly.

They sold it to us for £10k less than they paid for it - effectively on the same day.

Thank you - that is reassuring. At what point were your solicitors able to start doing the work involved with your purchase if the developer never owned it? Was it when the owners exchanged contracts on their new build?

Richard_Webster

One other question if you don't mind, from your experience, is buying a property taken in part exchange from a developer more or less or equally as complicated as a regular purchase when it comes to conveyancing and time needed to do the conveyancing work?

Not a lot of difference in terms of the amount of work involved.

Developers' solicitors tend to have a mega set of questions which they send to the solicitors acting for the property being PXd to try to cover every conceivable eventuality and issue that might come up and they may get asked about after the PX has taken place.

Having said that, things still get missed, so it is best for your solicitors to raise any points as soon as they can so that the PXing owners can answer them rather than relying on a set of answers to lengthy standard questions that the developer's solicitor has sent to the PXing solicitors. Trouble is it is difficult to ask much until papers have been sent through and there can be delays while this happens.

DiscoCat54

I am currently part exchanging my house and I agreed to a clause that said I would help to answer any queries from the new buyers or their solicitor for a period of 30 days from completion. I have also kept a copy of all documentation regarding my property just in case it should be needed.

I have also offered assistance via the EA should it be required.

Richard_Webster

I am currently part exchanging my house and I agreed to a clause that said I would help to answer any queries from the new buyers or their solicitor for a period of 30 days from completion. I have also kept a copy of all documentation regarding my property just in case it should be needed.

Sensible developer - but they don't all think of this....

Freecall

LallyHay wrote: »

Thank you - that is reassuring. At what point were your solicitors able to start doing the work involved with your purchase if the developer never owned it? Was it when the owners exchanged contracts on their new build?

The answer is straight away.

The previous owners had moved out into their nice new-build and to all intents and purposes it was like any normal purchase.

I think (but am not sure) that from a legal perspective the developer had full ownership rights granted by the previous owner (so they could sell, use as collateral or anything else) but that it was never actually conveyed to them.

As well as an EA who marketed the house, they also employed a company which dealt with all the day to day stuff of the sale (managed documents such as the gas certificate, recorded meter readings etc.).

This company also pushed like mad to get things through quickly and regularly phoned all parties to check things were moving ok. This suited us fine and we completed in 5 1/2 weeks from the initial offer.