Swapping houses instead of selling can be the perfect solution for people who are facing a tough real estate market. Selling a house can be really difficult, with high prices being so common. Millennials especially are finding it harder to find suitable, affordable homes due to student loans, low-paying jobs, and other economic issues.
Sellers can often feel stuck if they are unable to sell their homes, and a lot of people even have to go through years of trying to sell their home before they are able to find a buyer.
This is why you need to consider another option for your house when you’re looking for a change. Swapping houses instead of selling them can open up a whole new market avenue for you.
Why Are People Swapping Houses?
After the housing market collapse, a lot of homeowners became more open to the idea of swapping their houses if they wanted to relocate, downsize, or upgrade their homes. You can even look for possible matches online now through dedicated websites and applications. This can make it easier for people to find suitable homes and buyers for their own place. A lot of people have even started to list their homes for possible swaps on Craigslist.
Many individuals are now looking toward swapping options rather than selling, especially if they are changing cities, counties, or states. It can be easier to look for other individuals who are moving to your location rather than find a local buyer.
Sellers who have been looking for potential buyers for a long while can also become discouraged. When a house stays on the market for a long time but isn’t bought, a lot of owners are forced to slash the price, which inevitably leads to a massive loss. Swapping houses has even been a long-used strategy by people who own vacation homes.
This is not to say that people have never swapped houses and that this concept is brand new. No, people have been temporarily swapping houses for a long time, but the idea of swapping homes permanently used to be rare.
Now, swapping houses instead of selling is an idea that more and more sellers are opening their minds to.
How It Works
Swapping houses instead of selling isn’t as complicated as it first seems. The only difference is that you have two transactions at the same time instead of just one; you are selling your home and buying someone else’s, preferably on the same day. The most important thing is to make sure that the contracts spell out the fact that closing the deal should take place at the same time.
While one swapper is signing a separate sale and purchase agreement for one house, the other swapper is doing the same for the other house simultaneously. The contracts need to include the prices of both properties. In case one home is more valuable than the other, the person who is buying the more expensive house will pay the difference to the seller. For example, if the house you are buying is worth $300,000, and your own home is worth $200,000, you will have to pay the seller the $100,000 difference to make up for it.
Similarly to a traditional sale, the existing lender will be paid at the closing if any of the properties have an outstanding mortgage. The buyer will also be able to get a mortgage to pay for their new house, just like in the traditional sales. Anyone who needs a mortgage from this swap needs to include a sales contract copy along with the application documents. The new lender will be able to see that there is only one mortgage left after the deal closes.
Advantages of Swapping Houses
There are many key advantages to swapping houses instead of selling. The first thing you need to consider is that you don’t need to have open houses regularly and deal with different buyers making you inane offers. There will be no real estate agents involved in the deal, which is why you can save money on real estate commissions.
It will also be easier for both parties to coordinate the moving process since you can do the trade the same day as well as the moves. You won’t have to deal with the fuss of putting your furniture into storage units and waiting around until the other party is ready. The seller will also not have to rush to purchase a home after the buy is closed.
For a lot of people, swapping can be the only good option as well. Keeping the house open for sale for a long time and slashing prices to get more buyers is generally not a good strategy. Swapping houses instead of selling can open up a new avenue of clientele that you hadn’t even considered before.
Downsides of Swapping Houses
House swaps are suitable for anyone looking to change their house. If you owe more money in your mortgage than the worth of your house, you will have to pay the lender the difference. You cannot pass on your debt to another buyer, just like a traditional deal. It may also work if the lender accepts a short sale.
While house swapping is becoming more popular, it is still isn’t a mainstream model of selling your home. This can leave you with limited options. Homeowners who need to move quickly or can’t be flexible about the location or features don’t have many choices to choose from. Not all sellers are open to trading their homes, which is why you will have to look for the right kind of buyer.
You have to make sure that the trade you are making is equal. The houses should ideally be of similar value, but that isn’t always the case. There can be other assets like boats or cars involved in the deal or some additional money.
The deal has to be even and fair. This is why you need to make sure that both parties get a fresh appraisal of the house they intend to trade.
If you decide that swapping houses instead of selling is a good idea, you should make sure that you do your research before getting into such a trade. There are plenty of online sources and websites where you can find the right kind of trades. You should also consider hiring a lawyer who can help you write the contract so that there are no issues later on.