A way out of the trap

Builders are persuading owners to part exchange their difficult- to-sell houses for new ones, just like trading in a car. So why aren't estate agents doing the same? By Anne Spackman
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The Independent Online
Estate agents may wince at the idea, but they could well profit from being more like the second-hand car dealers to whom they are often disparagingly compared. If you want a new car you are very likely to trade your old one in part-exchange. If you want a new house, it is increasingly possible to strike a similar deal with a builder. Why then, in the second- hand property market, where one third of all sales collapse and buyers find themselves stuck in long chains, don't estate agents adopt the same tactic?

Some already are. Halifax Property Services, for example, will allow their branches to take a house in part-exchange as long as it fits certain criteria. But they are not exactly shouting this from the rooftops. Meanwhile, independent agents cling loyally to the tradition that they are acting as agents for the seller, for whom they must achieve the best possible price, rather than acting to achieve a deal and get the whole system working.

Part-exchange has proved to be a crucial weapon in the house builder's armoury over the last few years. Many expect it to continue beyond the recession. It attracts buyers who might otherwise ignore a development and offers a solution to the many thousands of home-owners who find it hard to sell. They may lose a bit on the price of their old home and be forced to pay full whack for the new one, but that has always been the deal with cars and thousands of drivers have felt it was a price worth paying.

The ground rules for part-exchange are common to most builders. They will only take on houses worth less than the one they are selling and in most cases the minimum price gap is about 30 per cent. So for a new house costing pounds 150,000, they may take on a pounds 100,000 house in exchange, but not one worth pounds 200,000. Few builders will touch any property with structural defects, or those previously owned by a local authority or part of a sheltered housing scheme. They also prefer to take on homes in the area of their new development. Barratt and Try Homes are two of the few builders willing to do part-exchanges across country.

Terry and Susan Maskell had the sort of complicated arrangement many builders might baulk at. They had two houses to sell, one near Glasgow, bought when Mr Maskell's job moved north, and a house in Heathfield, Sussex, where his family stayed. Try Homes took on both in exchange for the Maskells buying a new five-bedroom house in Heathfield. They sold the Maskells' old Sussex house immediately.

"The convenience factor decided us," Mr Maskell said, "even though we were potentially losing a few thousand pounds. Also, if we hadn't done it we might have lost this house and there are very few houses like this around here."

Brenda Grover and Tom McGuire from Reading did a typical part-exchange deal. They traded in their pounds 36,000 one-bedroom flat - which had been on the market for 18 months - for a three-bedroom house costing pounds 104,995 on Barratt's Saxon Chase development at nearby Caversham. "It was our only way out of the trap we found ourselves in," said Brenda Grover. "Without part-exchange we wouldn't have been able to move."

But not all buyers who opt for part-exchange are in such desperate circumstances. For many it is an option of choice. Sue and Darren Marshall part-exchanged their one-bedroom flat in Brighton for a two-bedroom Barratt house in Hove without trying to sell. "We were convinced we would not have much luck trying to sell our flat on the open market," said Darren. "It could have taken years."

David and Sue Blair were looking to trade up from their two-bedroom terrace in Taunton but found nothing they liked on the second-hand market. They narrowed their choice down to two new developments and rejected the one that did not offer part-exchange. "We'd only had our house on the market for a few weeks," said David Blair. "The part-exchange made the deal a lot easier and quicker. It was hassle-free and - most important of all - we liked the house itself."

The Blairs' home was on the market for pounds 47,000. When Admiral Homes accepted it in part-exchange it was valued by two estate agents, including the one who had originally been selling the house. This time he valued it at pounds 45,000 "for a quick sale". The Blairs received 97 per cent of the valuation from Admiral and were able to negotiate a few thousand pounds off the pounds 84,950 asking price of the new house.

The issue of part-exchange valuations is a thorny one on which the Royal Institution of Chartered Surveyors is about to produce new guidelines. The key to the part-exchange deal is the price. If a builder wants a house valued "to sell quickly", it normally means knocking a few thousand pounds off. For the seller there is the benefit of saving on estate agency fees, which for an average house means around pounds 1,200, but they still have to look at the sums and decide whether or not it is a good deal.

Barratt is the most confident exponent of part-exchange. Last year the company sold 3,200 second-hand homes, the same as the average estate agent. Half of all their sales now involve part-exchange deals - even on their most up-market developments such as Royal Thames Crescent in Chiswick, west London, where the houses cost more than pounds 400,000.

In the case of Brenda Grover and Tom McGuire, their home had been on the market 18 months and Barratt sold it within a week without lowering the price. David Pretty, chairman of Barratt Southern Region, says it is not just a question of money, but of hard sales technique. "Our offices are open seven days a week, unlike most estate agents," he said. "If we can't sell someone a new house we will try to sell them a second-hand one. If it's looking a bit tired, we might do it up. We get it surveyed. And the buyer can take advantage of all the incentives we offer buyers of new homes, like help with their deposit."

It certainly seems to work. Ben Smith, who runs Halifax Property Services in north and west Leeds, sells plenty of homes that builders have taken in part-exchange. The property details are branded with the builder's logo and the fact that it is a part-exchange is flagged up. "Buyers see this as a house that has got to be sold," Mr Smith said. "They know it will be keenly priced and as a result it sells quickly."

So will the practice extend to estate agency in general? In the United States realtors act for the deal rather than for one of the partners involved. In practice many British estate agents do the same. But the long-established names feel their reputation depends on maintaining the status quo. If volumes of sales stay down, it will be interesting to see whether some decide to break rank.

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