Consider Home Swap in a Tough Market

After spending two years trying to sell her Florida home, Pam Farley decided it was time for a new strategy. She quit looking for a buyer and went after sellers who were interested in trading homes with her. A few months later, she signed the closing documents and swapped her house in Sarasota for a house in New Mexico.

"Nobody has to feel stuck if they can't sell their homes," she says. "There are a lot of options if you are willing to trade."

Since the housing market tanked, homeowners wishing to upgrade to bigger homes, downsize or relocate have become more open to the idea of making a home swap, says Sergei Naumov, CEO of Naumov founded the website where owners list properties, ranging from real estate to cars, for trade. Since it was founded in 2006, the site has grown from a few dozen users to about 36,000 active registered traders and has 60,000 to 80,000 visitors a month. In addition to other similar sites, many homeowners also list house swap deals on Craigslist.

The house-swap strategy had long been used by owners of vacation homes who often trade temporarily. But the idea of a permanent home swap, although more popular than a few years ago, isn't an option that most sellers consider.

But they should, Farley says. "Everything is a little scary when it's unknown, but it was the best decision we ever made," she says. "When we had our house on the market (for sale), we kept having to reduce the price until I finally said, 'This isn't working, and it's getting scary.' And that's when I found various house-swap sites."

How it Works

A home swap is not as complicated as it first sounds, says Naumov.

"It's just that instead of one transaction you have two transactions happening at the same time -- one selling your house and a second buying the other party's house," he says.

Simply put, swapping properties is like selling your home to a person and buying another home from that same person, ideally on the same day.

The key is to spell out in the contracts that the closings should take place simultaneously, says Rafael Castellanos, an attorney and managing director at Expert Title Insurance in New York.

The swappers sign separate purchase and sale agreements for each of the houses being traded. The contracts spell out the price of each property. If one home is more valuable than the other, the buyer of the more expensive house pays the seller for the difference at closing. In other words, if you swap your $200,000 house for a house worth $300,000, you would pay the seller $100,000 at closing.

If either of the properties being traded has an outstanding mortgage, the existing lender is paid at closing, just as in a traditional sale.

And as with any traditional purchase, the buyer in a house swap can get a mortgage to pay for the new house. Anyone needing a mortgage in a home swap should include a copy of the sales contract with the application documents to show the new lender there will be only one mortgage once the deal closes.


There are many advantages to trading versus selling, says Bob Boole, who wants to trade his town house in Treasure Island, Fla., for a home in North Carolina.

"For one, I don't have to deal with a bunch of people walking through the house giving me silly offers," says Boole.

If no real estate agent is involved in the trade, the buyer and sellers save on real estate commissions.

It's also easier to coordinate the moving process when you do a trade because the moves can occur simultaneously. Both seller and buyer can save the trouble of putting furniture into storage as opposed to a seller in a traditional deal, who has to rush to find a home to buy after the closing.


Doing a home swap isn't for everyone. As with a standard home sale, if you owe more on your mortgage than your house is worth, the only way a home swap would work is if you pay the lender the difference of whatever you sell the house for and what is owed on the mortgage. It also could work if the lender accepts a short sale.

Homeowners who are in a rush to move or who are not flexible regarding the location or features they want in the new house, may have limited options. Not every house on the market belongs to a seller who is open to trading.

Boole says he was surprised that despite being "picky" about the type of house and location he wanted, he received five responses days after he listed his place for trade. And based on the prices of the houses he liked, he would likely get some additional cash out of the potential deal.

Fair Trade

While traders sometimes agree to swap homes of similar values and call it even, there is often additional money or assets such as cars and boats included in the closing, says Naumov.

"The trade has to be even," says Bruce Knapp, who has traded a couple of properties including a condo in Pensacola, Fla., plus some cash and a car, for a lot in Georgia.

That's why it's important for both parties to order fresh appraisals for the homes being traded.

Ready to Trade Your Home?

If you decide to go for a home swap, the more moving parts you have in the deal, the more you should consider hiring a lawyer to help draft the contract, Castellanos says. Many traders use a standard contract and simply add a clause that the deals must close simultaneously.

"But as much as you would like to save a few dollars, it's not worth the potential downsides" of not hiring a lawyer, he says. "(Traders) should protect their rights as any other buyer would."