Trade-in in real estate: how to exchange an old apartment for a new one

You want to move to a new building, and at the same time you have an old apartment. Traditionally, selling an old one and buying a new one requires a lot of time and effort: finding a seller, negotiating with the developer. Due to red tape with the sale, you can miss out on your dream apartment, and the process will drag on for a year, or even more. Or it can be simpler: under the trade-in program, you can use your old apartment to partially or fully pay for a new apartment in the “one-stop” mode.

We tell you what the essence of the scheme is, what its features, advantages, limitations and risks are.

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How does a trade-in work in real estate?

In the market, this scheme is often called “apartment for offset”, “offset”, but in essence it is not such, it is impossible to draw direct analogies between trade-in and offset.

Selling apartments in a new building under this scheme is not a simple exchange of an old apartment for a new one. It will not be possible to rent out your home to the developer and move into a new building - he cannot simply accept the old meters as payment for the new ones, and, more often than not, he does not buy the apartment for himself.

The developer, under the guise of an offset, offers you to sell your old apartment through an affiliated partner agency and use the proceeds from the sale to buy a new one. Everything is done through “one window,” that is, through a construction company.

Technically, a trade-in scheme is two transactions that take place in parallel: a sale and a purchase. Two agreements are concluded:

an agreement for the sale of an old apartment, which specifies the cost of sale and the amount of commission for services rendered;
a contract for booking an apartment in a new building, where you are assigned a specific apartment and its cost is fixed.

You can do all this yourself: find the owner of an old apartment, conduct a transaction and bring money to the developer. But this is often inconvenient: you need to spend time and effort searching for a buyer, searching for and booking an apartment in a new building and checking all the documents.

To sell housing under the trade-in scheme, the developer in most cases cooperates with affiliated agencies. They will evaluate the property and sell it within a pre-agreed timeframe.

There are also rare cases of the classic scheme, when an old apartment is bought directly by a developer or real estate agency and then sold through its own channels. But these are rather exceptions - traditionally, developers specialize in primary housing; there are real estate agencies for operations on the secondary market.

Yulia Dymova, director of the secondary real estate sales office Est-a-Tet (Moscow):

— The agency, which is engaged in the sale of new buildings and secondary real estate, does everything possible to ensure that the sale of real estate takes place within the time frame required by the client - within the framework of the reservation agreement or the current contract for the purchase of a new building. The possible discount will depend on the market (today it is insignificant, no more than 5%). For an agency, real estate sales are a definite plus.

Sometimes they try to compare a trade-in with an alternative deal, but they forget that the alternative deal involves the acquisition of only secondary real estate - there is no alternative with new buildings. A trade-in transaction only conditionally falls under the characteristics of an alternative transaction - the client receives money and invests it almost simultaneously. A possible problem is that the increase in prices for new buildings is not comparable with the increase in the cost of secondary housing, however, acting within the framework of one agency, the client quickly receives information on the timing of the rise in prices of objects, which allows for a much more profitable transaction.

How does the trade-in process work?

The conditions and nuances of trade-in transactions may differ among different developers, but the steps are approximately the same.

First step.

You choose a developer and find out if he has a trade-in program. If there is, then select a suitable apartment in the developer’s residential complex and fix its cost.

Second step.

The real estate agency from the developer inspects and evaluates your existing apartment within three to five days and issues an opinion. You negotiate the terms of the sale of the apartment, the lawyer checks the documents.

If you are purchasing a new apartment with an additional mortgage payment, the agency will help you choose a bank and get mortgage approval.

Third step.

If you are satisfied with the results of the assessment, then sign an agreement with the agency for the sale of your apartment, which specifies its cost, the timing of the sale (usually from two to six months) and the amount of remuneration for services provided, if any.

Fourth step.

In parallel with the sales contract, you enter into a booking agreement for a new apartment with the developer. A specific apartment is assigned to you and its price is fixed for a period of time (usually for a period of two to six months). During this time, the apartment cannot be sold to anyone else.

The reservation agreement can be paid: in the form of a certain amount (on average from 50 thousand rubles) or a percentage of the cost of the property (from 0.5 to 2-3%).

Fifth step.

The developer's partner agency is looking for a buyer for your old apartment. This usually takes from one to six months.

Sixth step.

After a buyer has been found for your apartment, you sign a purchase and sale agreement with him and formalize the deal with the developer. As a rule, both transactions are concluded on the same day. The money received from the buyer of your apartment is sent to the developer to pay for the new one.

If necessary, you can pay the difference in the cost of the old and new apartment from personal savings, using a mortgage loan or maternity capital.

What to pay attention to

An old apartment will most likely be sold at a discount. Usually two selling prices for an apartment are set: the desired one and for a quick sale, that is, below the market price. The discount most often does not exceed 15%, but can grow if the property being sold is not in demand.
The apartment may not be sold within the agreed period. Then different options are possible: extend the reservation period for a new building, reduce the sale price, return the cost of the reservation or the down payment. Everything is negotiated with the developer and the agency.

The transaction may require additional costs. You will need to pay a commission to the agency for the sale of the old apartment and support of the transaction. But some developers can fully or partially cover these costs, for example, paying a commission to the agency. You can only buy an apartment in a new building under the trade-in program.

Requirements for an apartment for sale

The trade-in scheme works if the old apartment is easy to sell. Requirements for an apartment can be obtained from a specific developer, but usually they are standard for all developers:

The apartment must be the entirety, that is, not a room or a share. Country houses are often not suitable for trade-ins.
The apartment for sale must be located in the same city where the new home is being purchased.
Legal “purity” of the apartment: it must be your property; it is undesirable if one of the owners is a minor or there were many owners in the past; the apartment should not be seized.
The apartment has a convenient location, as this affects the speed of sale and the size of the discount.
The apartment has been redecorated - this will make it easier for the agency to find a buyer./li>
The year the house was built is no earlier than 1960; the house is not in disrepair, its wear and tear does not exceed 40%; the floors are not wooden; if there were redevelopments, then they were agreed upon.
If you have an apartment in a new building, and the developer has a trade-in program, then you can easily make an exchange by choosing a new apartment from the developer’s residential complex.

The developer or partner agency will check and determine whether the apartment is suitable for sale when they evaluate it.

Necessary documents for exchanging a secondary apartment

1. Title documents with a list of people and an indication of the form of ownership;

2. Consent of all adult owners, certified by a notary, and guardians of minor owners;

3. If housing was purchased during marriage, the consent of the other half will be required, even if you are divorced;

4. Receipts for payment of state duty;

5. Information on the cadastral value of housing;

6. Certificates of absence of debts from the Tax Service and BTI;

7. An extract from the house register confirming the registration of all residents of the apartment.

If you decide to exchange without contacting an agency, be sure to make sure that the purchased living space is “clean”: there are no encumbrances, debts, there are consents from all owners, it would not be superfluous to verify the adequacy of the seller and ask for certificates of mental sanity if doubts arise. For your part, be prepared to provide the same.

In what cases is a trade-in beneficial?

Trade-in has many advantages, but the program is not always profitable. If you have savings for the down payment, then it is better to take out a mortgage for the remaining amount and sell the apartment in the “normal” mode - then you will not lose money due to the discount that exists when selling by trade-in.

Or, if it is important to sell an apartment at a higher price and deadlines are not pressing, it is better to use the standard scheme: first sell the old apartment, then choose and buy a new one.

In other cases, trade-in has a number of advantages:

Saving time, urgency and efficiency. The main advantage of the program is the opportunity to quickly sell your apartment (especially one that for some reason was not sold before) and move to a more comfortable one.
You don’t have to wait to sell your old living space and get a mortgage loan.
Buying a new apartment without significant savings. If the cost of the old apartment can completely cover the purchase of a new building, you get a new apartment without investment.
Fixing the cost of an apartment in a new building. Prices for primary housing are growing faster than for secondary housing, and in a few months the selected apartment can become significantly more expensive. A reservation agreement for a trade-in allows you to fix the price of a new apartment while the old one is on sale. There is no need to urgently look for additional funds to conclude and finalize a transaction.
An apartment in a new building is assigned to you. The apartment selected under the trade-in program will not be available to other buyers. This is especially convenient if you have chosen a rare apartment in a popular residential complex.
The program is carried out in a “one-stop shop” mode, without the participation of a large number of intermediaries, which saves time, money, effort and reduces risks. You do not have to contact different agencies to sell and buy an apartment.
The transaction is supported by specialists. You do not need to evaluate the existing apartment yourself, do pre-sale preparation, look for a buyer and negotiate with him, show the apartment, draw up documents and look for an acceptable mortgage program. All this is taken care of by specialists.
There is no need to pay a lawyer, since the partner agency that supports the transaction checks all the documents.
But you can hire an independent lawyer to be absolutely sure that the transaction is safe.

The downside of trade-in in real estate

Trade-in transactions also have disadvantages, limitations and risks:

The main disadvantage of a trade-in is the loss in the value of the apartment being sold due to the discount and payment of all commissions. On average, this is from 5 to 20% of the market price of the apartment, and sometimes this percentage can reach 30.
You need to live somewhere if the new apartment is still under construction. In addition, repairs may be required, which will push the housewarming party even further back.
Since the old apartment becomes someone else’s property, you will have to live with relatives or temporarily rent housing, and these are additional expenses.
This risk can be minimized by choosing an apartment in a new building at the final stage of construction.
Narrow choice of new housing. Not all developers or all residential complexes of the selected developer participate in the scheme. And this may not even be every apartment in the selected building.
Not all old apartments are eligible for trade-in due to the requirements imposed on them.
There is always a risk that a house under construction will become a long-term construction project.
There is no opportunity to change your mind - the money from the sale of the old apartment immediately goes to the developer’s account as the main contribution for the new one.
You may encounter unscrupulous schemes when, for example, an agency found a buyer for your apartment and you signed a purchase and sale agreement, but the developer suddenly refused to sell the new one. To prevent this from happening, carefully choose your developer or partner agency. Our materials on choosing an apartment in a new building and choosing a reliable real estate agency can help you.

Who benefits from changing an apartment to a new building?

According to Konstantin Barsukov, thinking about exchanging an apartment for a new building makes sense for those who:

owns a liquid apartment (that is, an apartment that can actually be sold in a short time);
I wanted to use the services of a real estate agency to sell it;
I found an interesting offer in a new building, which in two or three months may rise in price (as a rule, this happens at the moment of transition to the next stage of construction - for example, instead of the zero cycle, the construction of a “box” begins or the developer moves on to interior decoration) .

Let’s add to this that it makes sense to exchange an apartment for a new building when you have a place to live while waiting for construction to be completed (keep in mind that there is always a risk of facing prolonged construction). This may also be the only possible solution for growing families, who simply have no other way to improve their living conditions.

Reminder if you want to buy an apartment with a trade-in

The trade-in scheme is not one process of exchanging old for new, as happens in the automobile market, but two parallel ones.
You enter into two contracts: with the developer’s partner agency for the sale of your old apartment and with the developer for the reservation of a new apartment, fixing its cost.
The agency evaluates your apartment and sells it. The money from the sale goes towards paying for the new apartment to the developer.
All trade-in transactions are carried out in parallel, through “one window”.
You can only buy an apartment in a new building using a trade-in, and your old home must be located in the same region where you are purchasing a new one.
Rooms or shares are not suitable for trade-in sales; you must be the owner of a separate apartment, and it must not be seized.
Your apartment should be renovated and conveniently located, and the house should not be too old, built after 1960.
The main advantage of the program is that you can sell your apartment as quickly as possible, without wasting time and effort searching and negotiating with buyers. The entire transaction is accompanied by specialists.
The scheme is convenient if you do not have significant savings for a new apartment, or you do not want to take out a mortgage: the cost of the sold housing can completely or almost completely cover the cost of the new building.
The price of a new apartment during a trade-in is fixed for a long time and cannot be purchased by other buyers.
One of the disadvantages of the program is that for a quick sale, old housing will be sold on average 15% cheaper than the market price.
The choice of new housing under the program is quite narrow; not all developers offer trade-in.
Additional costs are possible: for booking a new apartment; on a commission to the agency for the sale of an old apartment; for rent until you can move into the purchased apartment.

Available options

A mortgage to offset existing housing is not suitable for everyone. A prerequisite is the availability of real estate. If it is, then you can buy a new one in several ways:

Installment and sale of housing . From the point of view of financial costs, this is the most convenient option. The idea is this: you find an apartment, agree on a deferred payment and enter into an agreement, and after selling the existing apartment/house, transfer the money. If there is a shortage of funds, the bank lends the remaining amount as a mortgage. However, you can apply such a scheme if a number of conditions are met: you plan to sell your existing home, the seller agrees to wait for the money (sometimes an advance payment may be required).
Mortgage secured by existing housing . This is a more traditional format. Many banks offer separate mortgage products under this scheme. However, when drawing up a contract, a person pledges his home as collateral, which means he risks losing it in case of non-repayment of the debt. There are some other difficulties. For example, until the debt to the bank is fully repaid, it will not be possible to dispose of the collateral housing, sell it or exchange it for another. Read more about how to take out a mortgage secured by existing real estate in our article >>.
Purchase of old housing by the developer . Such trade-in programs are usually implemented by large developers. In such a situation, each party receives its own benefit: the developer resells the apartment at a higher price, the buyer receives the desired housing in a new building. There is also a serious disadvantage for the client - the repurchase is always made not at the market value, but at the estimated value. Usually it turns out to be 10–20% lower. Therefore, the buyer incurs some financial losses. If possible, it is better to refuse such a scheme and try to sell the home yourself.
Booking an apartment and selling old real estate . Typically, the sale of existing housing is carried out by real estate companies collaborating with large developers. The scheme of work is as follows: a person chooses housing that suits him in a new building and asks to sell his old apartment, while the new apartment is booked for a while. It is important to check before selling an apartment that its value has been adequately assessed, otherwise you may lose a significant amount in the sale. You can even involve a third-party professional appraiser in the transaction. The duration of booking an apartment usually does not exceed 3 months. This period should be enough to sell old housing. Otherwise, the reserved apartment may be sold to other persons, although construction companies often meet clients halfway and enter into a new agreement with them. The advantage of this scheme is that the price of the apartment is fixed, i.e. even if the developer raises prices for other residential properties, he will have to sell the reserved one at the price specified in the contract.
Selling an old apartment after the house is completed . For future owners, this is the most convenient option, since they do not have to change their place of residence before putting the house into operation. However, not all developers can agree to such a deal. In this case, it will be necessary to conclude not one, but 3 agreements at once: for the purchase of housing in a new building with the provision of a deferment to the client until the delivery of the residential property, for the sale of existing housing (indicating deadlines and other important nuances), for the provision of an apartment owned by the client , for rent until they move to a new apartment.

When using borrowed funds (for example, the selected apartment costs significantly more), the purchase scheme becomes somewhat more complicated. Therefore, here it is better to resort to taking out a mortgage to offset the existing housing.