How to Trade Houses
Success in the real estate market can be tricky. Negotiating a buyers or sellers market and navigating a busted or booming economic environment can make the process of buying your dream home or selling your current one confusing and difficult. More homeowners and home buyers are investigating and participating in house swapping or permanent home trading. By using targeted internet real estate matching services that connect buyers with sellers willing to swap their properties, you may be able to find success in real estate as well.
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Things You'll Need
- Real estate appraisal
- Realtor, real estate agent, or real estate attorney
- Title agent
Instructions
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Have your home appraised by a licensed real estate appraiser. Be sure you receive a complete appraisal that includes a neighborhood analysis and a comparative study. These reports will show the desirability of the local environment and what local homes of similar dimension and type have listed and sold for in the recent past.
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Choose a real estate lender and get pre-qualified for a mortgage. You will need to inform the lender that you will be selling your current home at the same time you purchase the new home. Simultaneously buying and selling each other's properties is the way home trades are facilitated. Once a lender knows that your current mortgage will be satisfied (paid off) when your new mortgage goes into effect, they won't consider your current monthly mortgage payment as an expense or your mortgage balance when calculating your pre-qualification amount or when negotiating terms. This may save you a considerable amount in interest and qualify you for a greater loan amount.
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Locate a trade property using any of the numerous sites dedicated to finding and matching real estate buyers and sellers who want to permanently trade houses. Be aware that some sites charge registration fees (usually between $19 and $40) while others are free; some sites offer an extensive menu of services, while others offer only a listing service.
Once you have located a property, contact the owner directly to exchange information regarding both properties and negotiate a deal. Both parties should agree to use the same title company (preferably one with offices located near both property owners) to facilitate the title search, escrow process and closing. In many cases this can save money, time and confusion in fulfilling a simultaneous closing, even if the properties are in two different parts of the country.
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Consult with a real estate professional regarding the offer you want to make on the property. You can involve a competent real estate professional at every step in this process. However, even if you intend to facilitate the entirety of the transaction without direction from a professional, you should (at minimum) have your offer and relevant information regarding the home being purchased, as well as the purchase contracts, reviewed by a real estate professional.
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Exchange sales contracts (representing the offer for each party's property) and make the escrow deposits with the title company. The preliminary title report will be generated by the title company for each party.
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Submit the sales contracts and appraisals for each party to the respective loan officers to complete the mortgage application process.
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Complete the inspections and submit disclosures of the property. Both parties should schedule a walk-through of the property before closing to ensure the property is in good condition. You may want to contract with a local home inspector and coordinate an inspection to coincide with your walk-through.
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Complete both sales transactions. Once the lenders complete the loan for each party, documents will be sent to the title company for the confirmation of a clear title. The title company will sign and return the documents to the lender for final approval (also called the "clear to close"). The lenders will fund the respective loans and final escrow can be closed for both properties.
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Tips & Warnings
While professional guidance is highly recommended, a great deal of the savings involved in trading homes is found in not having a real estate agent facilitate the sale, resulting in a savings of 6% for each party.
Also, each party should be aware that the only thing non-traditional about house swapping is that both the sale and purchase of the two pieces of property take place at the same time and between only two parties. The balance of the real estate purchase process remains the same and is governed by the same laws and regulations.
