Real Estate Investing
The Many Benefits of House Swapping
So arson is not really your thing and you don’t feel like reading over hundreds of essay entries. How else are you going to unload that house? One option is joining the thousands of people looking into house swaps. We’ve discussed temporary house swaps for vacation purposes, but a growing number of people are choosing to make those swaps permanent.
The Wall Street Journal recently published an article outlining just how popular this has become. We’re talking 16,000 listings as a combined total between house swap sites like GoSwap.org, OnlineHouseTrading.com, DaytonaHomeTrader.com and DomuSwap.com. Popular free online classified ads site Craigslist saw a 56-percent increase in “home swap” ads during 2007 with 7,392 such ads listed, according to WSJ.
These house swaps are working over short or long distances, usually with realtors or some type of transaction manager involved. It is recommended that a clause be included in the terms and agreements of each contract that final sale is pending on the same-day closing of both houses. This prevents either homeowner from getting snowed and coming up short-handed.
GoSwap.org has a fairly comprehensive Frequently Asked Questions section that briefly outlines some of the tax implications of swapping houses. If ineligible for a tax-deferred 1031 exchange, the homeowners may want to reasonably adjust the home’s asking price – say, by relying on the lowest of several home appraisers’ reports – and thus reducing their capital gains tax obligation. Obviously, the “asking price” of the home can be tweaked (within reason) because it is of little consequence in a housing swap.
The benefits of swapping houses are many. In addition to tax benefits, it can allow homeowners to skirt around broker’s fees – typically 4% to 7%. Still, roughly 13% of the listings on DomuSwap.com were listed and handled by brokers. Housing swaps also make it more possible for people to move up to bigger living quarters, provided they can find someone with a bigger house who is wanting to downsize. Under current market conditions, it may not be terribly difficult to find someone who meets that criteria but has been unable to find a buyer. House swapping is an innovative new trend that seems to provide a win-win scenario for all involved.