Part exchange – why agents should be including it as part of their pitch to developers

It’s certainly the case that awareness of part exchange isn’t very high in the property and agency world, despite the potential advantages it offers.

Agents could be missing a trick, though, by not fully embracing it and grasping the key role it could play when it comes to pitching to new homes and retirement living developers.

An important part of many agencies’ business plan will be marketing and selling new-build homes, typically to first-time buyers, while retirement communities and senior living developments are becoming increasingly popular as the UK population ages. In fact, just the other day, McCarthy Stone – the UK’s leading developer and manager of retirement homes – announced a strategic tie-up with Homes England as well as its successful bid for grant funding to deliver 1,500 new affordable shared ownership properties over the next five years.

What’s more, official statistics released in November last year showed that more homes were delivered in 2019/20 – despite the challenges of the pandemic - than in any year since 1987, making 2020 the seventh year in a row the number of homes delivered had increased.

The figures found that 243,770 homes were delivered in 2019 to 2020, with the development of new build homes contributing significantly to this number – accounting for 90% of the homes delivered. The government has a long-term ambition to deliver 300,000 new homes a year.

With such growth in retirement and new-build homes, there are likely to be many more opportunities for tie-ups between agents and developers of new homes and retirement communities in the coming years, as the government attempts to transform social care and elderly housing provision and continues to push schemes such as First Homes.

But as part of their pitch to these developers, agents should be fully aware of the benefits of part exchange.

What actually is part exchange?

It’s designed to eliminate risk and increase a developer’s value by effectively offering a safety net. Part exchange (PX) house funding is there for customers who can’t afford a new purchase until their current property sells, with zero risk for both the developer and the buyer.

It enables developers to increase their value and break the housing chain, with flexible PX schemes suitable for retirement home builders, volume builders and smaller home builders in addition to new home agents.

PX enables a developer’s customer to move with confidence without having to go through the cost, time and stress of finding a buyer for their property, while PX house financing keeps funds free so that they aren’t tied up in managing stocks.

In addition, PX can give developers more control over meeting deadlines and greater freedom in arranging the timeframes for new and existing projects.

The main benefits for developers, which agents can put across when pitching to them, is the confidence that they can move ahead with their property development plans according to their preferred schedule, with full peace of mind that the sale of the old property is completely under control and guaranteed to go through.

There is no risk of a sale falling through and all the stress of the chain process in the housing market is eliminated. Developers could also attract more potential buyers to their building services by letting others know that they offer PX.

How does it work?

The best thing about Part Exchange is its speed and simplicity. All a developer would need to do would be to fill out an offer request form and send it to a trusted PX provider. That provider will then order a valuation of the customer’s property and send over an offer within 24 hours of the valuation. If the customer accepts the offer, the provider then sends over an Offer Acceptance Form before agreeing on the date for the sale and leaving the rest to the PX specialists.

It is all largely hands-off and a quick and easy process. But developers may not be aware of the merits of PX in helping to grow and enhance their business.

That’s where agents play a crucial role, in making clear to developers the importance of working with independent PX specialists that they are partnered with.

What are the main benefits to agents?

There are many benefits for agents when it comes to partnering with a firm offering PX services. If, for example, your customer is buying a new-build property, including retirement homes and park homes, PX allows them to progress with their new purchase without having to wait for their current property to sell.

As such, providing a part exchange service allows you, the estate agent, to attract more customers and keep sales moving when a homeowner is struggling to sell their existing property.

Perhaps most importantly, offering PX will help you to win instructions from new-home developers — an increasingly competitive and lucrative area of the market which is only likely to grow further in the coming years, for the reasons outlined at the start of this article.

It will be those agents who act now, and fully understand and embrace the advantages of PX not only to their own businesses – but to the developers they pitch to as well – who are likely to thrive in the long term.

*Chris Hodgkinson is Managing Director of part exchange specialists HBB Solutions