real estate

Can't sell your home? Consider a trade

Steve McLindenQuestionDear Real Estate Adviser,
Is it possible to trade evenly from the home I'm in now for another of a similar financial structure and value?
-- Dorothy A.

AnswerDear Dorothy,
It is possible, although pretty rare, that a pair of traders will find mortgage terms, equity and home value that constitute a dead-even trade. However, there are plenty of instances where one owner can and will bridge the difference between two "swapped" homes by kicking in additional capital.

There are now at least 100 home-swapping sites out there. Many of those have cropped up since the housing downturn began. Just search for "house trading," "house exchange" or "house swapping" -- or go to Craigslist -- and you'll find a veritable "meet market" of the real estate world.

But not all of these sites are on the up and up or are consistently viable as trading venues. Watch out for sites that guarantee swaps within a specific period or charge exorbitant fees; most of the good ones charge less than $50.

Also, know that some of these swap sites make their numbers by selling your contact information to real estate brokers, mortgage sellers, and short-sale and foreclosure specialists who will be more than happy to besiege you with pitches. Carefully read these sites' privacy policies before committing.

These days, trading is certainly worth mulling over as an option for a relocating owner trying to move a tough-to-sell house. It addresses two main challenges simultaneously for each participant -- the home sale and the replacement buy.

In contrast to conventional selling, however, swappers typically find a much smaller universe of for-trade homes to consider. Obviously, the larger your current market (and targeted market), the more options you'll have.

Except in those rare instances where a pair of properties are owned free and clear and are similarly valued, both traders will need a new mortgage. Be warned that many sellers who have turned to trading these days are doing so as a last resort and owe more than their houses are worth. So, they may be challenged to find a willing mortgage lender.

And by all means, do not forgo your due diligence just because you perceive a swap to be a friendly transaction. You will need to carefully examine the property firsthand and its neighborhood, pay for a title search to insure ownership, and have the place inspected with your own inspector -- and probably appraised by your own appraiser as well.

You want to deal with a house trader, not a horse trader. Not surprisingly, house traders tend to exaggerate their homes' worth for optimum trade value. If there's a sizable disparity between what swappers say their homes are worth and what they're really worth, you've got to wonder if you are being deceived in other ways.

To save on commissions, some swappers proceed without agents. However, I still recommend the use of a professional advocate, whether an agent or attorney, who can help walk you through the process and structure the transaction as a simultaneous sale and purchase. Some agents will perform limited tasks in this regard for an hourly or set fee.

Do not use the seller's agent. Both swappers can, however, realize additional savings by using the same title and moving companies without compromising their positions. And be sure your contract has an escape clause saying either party is relieved of any obligations in the event the trade can't be consummated for lack of financing or other reasons.

Good luck in the swap shop!

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