About a year and a half ago, Tom Runge and his wife, Cathy Woods, put their Auburn, Wash., home up for sale. Woods had taken a new, telecommuting-friendly position and the couple planned to move to Portland, Maine, where they could more easily afford some investment property.
The situation seemed ideal, but there was just one problem: Their four-bedroom Washington house didn’t sell.
That was no surprise in this tough market. According to the National Association of Realtors, the rate of existing home sales in June 2008 was 15.5 percent lower than it was in June 2007, while median existing-home prices fell by about 6 percent compared to the previous June.
So in an effort to facilitate their cross-country relocation, Runge made an unusual move. He began contacting people through the “housing swap” section of Craigslist to try and broker a permanent home trade with someone who wanted to move to the West Coast.
The idea behind swapping is to find someone who lives in the area where you want to move who wants to buy a home where you live. You then sell each other your homes simultaneously.
So far, Runge says, he hasn’t had any takers — and he’s not that optimistic that he will. But he has become one of the thousands of home sellers who are trying to unload their houses by way of swapping.
This new type of real-estate transaction has become another option for people who are struggling to sell their home in a market that has slowed to a virtual standstill.
“It’s just another alternative to find a buyer,” says David Moskowitz, owner of the online house-trading site DomuSwap.com. “It’s another advertising venue.”
Recent months have seen the proliferation of sites like DomuSwap, such as OnlineHouseTrading.com, GoSwap.org and TrySwappingIt.com. Most sites offer their services for free, but some charge one-time listing fees. Others offer listing “upgrades,” like premium placement on the site, for a fee.
Even if you don’t pay to jazz up your ad, the appeal of advertising your home to thousands of trade-friendly homeowners is obvious. DomuSwap has almost 9,500 members, who have exchanged 33,000 messages among themselves.
“Once people post, they are talking, usually via e-mail, to a good number of other parties,” Moskowitz says.
It’s not just homeowners getting in on the trading action. A brief search on several sites revealed listings from Realtors and even builders trying to move the last few unsold homes in a subdivision.
“Developers are now looking at trade-ins the way a new car dealer looks at trade-ins,” Moskowitz says. “They might want to refurbish (the home they trade for), or knock it down and use it for the land.”
Which raises the question: How is it possible to trade a small 1960s rancher for a brand-new, modern-day minimansion? When two swappers find each other, the person with the less-expensive home will usually even out the trade by forking over some cash, either from a lender or from their own bank account.
“It’s relatively rare that you have two properties with exactly the same value,” says Matt Battiata, owner of Battiata Real Estate Group in San Diego.
Then there’s the matter of the actual sale. A home swap is essentially two closings that occur simultaneously. Swappers will want to make sure that their closing is contingent on the closing of the other property, Battiata says, so one party can’t back out and leave the other on the hook for two homes.
Before contracting to trade homes, swappers should perform the same due diligence that they would if they were buying a home the traditional way. Home inspections and full disclosures of any structural deficiencies ensure that both parties know exactly what they’re getting.
“It’s the exact same thing as a regular real estate transaction,” Battiata says. “Nothing else changes.”
Battiata warns that a swap deal doesn’t automatically release homeowners from paying commissions to their real estate agents. Most people who swap have already listed their home with an agent and may be obligated to pay them, even if they find the buyer themselves.
“Usually, that seller is still going to pay commission if he’s under contract with an agent,” Battiata says. “It all depends on the agreement with the agent. I have a program with sellers that if I list your home and you find a buyer, we charge you much less in the way of commission. But most agents charge a standard percentage, regardless of where the buyer comes from.”
The listing agreement will usually outline what happens in case of a homeowner-arranged sale.
But if you haven’t already listed your house with a real estate agent, it’s up to you to decide whether to hire one. While Moskowitz says he doesn’t tout DomuSwap as a way of bypassing agent fees, those that trade without an agent may have more wiggle room as far as negotiating prices.
“That commission is going to come off the listing price and make the house easier to move, or it’s going to go in your pocket,” he says.
Battiata, however, says it’s unwise to proceed without some kind of expert help.
“Where people get into problems is when they’re trying to do for-sale-by-owner transactions,” Battiata says. “There’s tons of liability when transferring property.”
At the very least, he says, an attorney specializing in real estate issues should be retained to make sure the sales agreements comply with local laws.
All of these concerns are moot, however, if you can’t find someone to trade with — and negotiating a successful trade can be tough. Runge says he’s exchanged e-mails with many homeowners about swapping, but found that they only wanted certain types of houses, or homes in specific neighborhoods.
“Nobody’s flexible,” he says. “They’re just desperate and don’t want to drop their price, so they try and swap to get what they want, but they still want what they want … Sometimes I think you have less chance of swapping a home than you do of winning the million-dollar lottery.”
Moskowitz says he has no way of tracking exactly how many trades have been brokered through DomuSwap, but he knows of about four that have taken place. The slumping real estate market is making it harder to swap, he added, because most traders want small, affordable properties, rather than the high-dollar homes that seem to be everywhere on the site.
“We’re seeing a lot of users who are really looking to downsize dramatically,” Moskowitz says. “When you have a large percentage of people who are only looking to downsize, you can’t arrange trades. Right now, a lot of people might have foreclosure in the backs of their minds. That’s not the ideal scenario for trading.”
One thing that might help generate more successful real estate trades is simply having more homes listed on swapping sites. There are more than 4 million homes for sale in the U.S., but only 5,000 on DomuSwap, which is “a drop in the bucket,” Moskowitz says.
Runge is still skeptical.
“Say there’s a million houses listed,” he says. “You have to want the one they have. They have to want the one you have. I think the probabilities are a million times a million.”