Experience of buying a part ex from builder

sheffield_soldier

Hi, 

I am part way through purchasing a house from a builder that they have taken on part exchange for a new build. Ive just had my mortgage approved which is a relief. The Builders state they require exchange within 4 weeks which I am not at all complaining about. Completion at the moment is December but I understand there is potential for this to perhaps move to January realistically. 

I'm curious to others experience with buying a part exchange house.
-Anything to be aware of that can go wrong?
-do I need to push on dates?
- is it a good experience?

Once we have got to this stage are the current occupiers who are moving to the newbuild contractually bound to go through with the sale?

Any comments much appreciated. 

Thrugelmir

Treat the purchase the same as any other. Though remember the developer will know little about the property. Do thorough due diligence yourselves. 

TheJP

I bought a part ex house in March although there were no conditions on exchanging quickly. As @Thrugelmir says do your due diligence, part ex houses are often inflated as the developer wants to make a little profit and cover costs. I offered £10k below asking and also asked for money on a new boiler (22 years old) plus a contribution to make good the walls which the previous owners left in a shocking state. I just had to provide some quotes, they want a quick sale and if it covers costs and they gain something from it then i suggest trying to negotiate after a survey or if there is anything you think could do with replacing.

ACG

How long has the builder owned the house for? 
I did an application with a lender last year, their stance is that they will only accept properties that have been owned for less than 6 months by "large national builders". There is no definition of large national builders. I ran it by my account manager and we agreed that a company which has sold 2,000 houses over whatever period in 3-4 counties would be classed as a large national builder... The underwriter did not agree. Eventually on appeal we got it through, but it is definitely something to check. 

user1977

ACG said:

I did an application with a lender last year, their stance is that they will only accept properties that have been owned for less than 6 months by "large national builders". There is no definition of large national builders. I ran it by my account manager and we agreed that a company which has sold 2,000 houses over whatever period in 3-4 counties would be classed as a large national builder... The underwriter did not agree. Eventually on appeal we got it through, but it is definitely something to check. 

That sounds very unusual, I can't see any lenders who have such conditions listed in the CML Handbook. I don't really see a logic to the size of the builder being relevant anyway (other than perhaps eliminating fraudsters pretending to be bona fide developers).

https://lendershandbook.ukfinance.org.uk/lenders-handbook/englandandwales/question-list/1813/

ComicGeek

sheffield_soldier said:

Once we have got to this stage are the current occupiers who are moving to the newbuild contractually bound to go through with the sale?

We exchanged on a new build a few years ago, and part exchanged our current house. For a combination of reasons that I won't go into, we decided not to proceed after exchange. 

We had to pay 10% of the property value and wrote off the money that we had paid upfront for extras. We were lucky that the developer managed to resell it quickly for the same value, otherwise we could have had to pay the difference in value as well.

I don't think it's very common, but nothing is ever guaranteed. I don't know what the contractual requirement was between the developer and purchaser of our house, but I know that they ended up paying them some compensation. 

princeofpounds

You will probably get a whole lot of 'not known' on the property information form, so your own due diligence is likely to be even more important than usual. 

4 weeks to exchange? It can take 4 weeks for searches to come back sometimes! What if follow-up enquiries need to be made (as they almost always are)? These deadlines are of course totally made up, but it does indicate they are the sort of seller who will put pressure on as soon as they can, which is often very annoying. Especially when they aren't really answering enquiries properly. 

Given the current occupants are waiting on the new build, I suspect the developer will also look to mirror the completion with that of the new build. So things like long stop dates will also be important.

Basically, have a strong mind as to what works for you during the process. And don't panic if they start trying to scare you into rushing.

eddddy

sheffield_soldier said:

Once we have got to this stage are the current occupiers who are moving to the newbuild contractually bound to go through with the sale?

Once you've exchanged contracts, you and the seller are both contractually bound by the contract.

In most cases, the terms of the contract would be that the buyer and seller have to go through with the sale on a specified date

But with a newbuild sale contract, there are often differences:

• The completion date is usually not specified - it usually says you will be given 10 days notice
• If there are significant changes to the spec of the new house - the buyer can usually back-out of the contract
• There may be a long-stop date - if the house isn't ready by that date, the buyer can back out.

So I imagine those terms might be in your contract as well (even though you are buying the part/ex, rather than the newbuild). i.e. If your seller backs-out of buying the new build, they can back out of selling you the part/ex.


(In the post above @ComicGeek is saying that on one occasion, they were contractually bound to buy and sell properties but they decided to breach the contract. It's very unusual for people to breach the contract in that way, because the financial losses associated with that can be very high. But perhaps it's a slightly bigger risk, if there is a long gap between exchange and completion.)