House trading: an alternative to selling in a slumping market

THE REAL ESTATE WONK

August 03, 2008|By JAMIE SMITH HOPKINS

Try to sell a house in this down market, and you might start fantasizing about what-ifs.

For instance: What if you could tap into the large pool of people who, just like you, would buy if only they could first sell? What if you could find someone with a place you want who in turn wants your place?

Actually, you can. You can give it a shot, anyway.

It's called "house trading."

"It's a very viable alternative if it's a tough market, if you're literally unable to sell your home," says Danielle Babb, an author of real estate books, including Finding Foreclosures.

You can handle a trade more or less like any home sale. It might be easier if each of you has a mortgage that's assumable, because then you can swap loans as well as homes. But Babb says there's no reason Person A can't get a new mortgage to buy a house from Person B, who gets a new mortgage for A's house.

I checked with Bank of America, which said traders should coordinate with their lenders to close on both sales the same day. It also suggested using one settlement agent.

"Make both contracts contingent upon one another," says Daniel Westbrook, chief executive of OnlineHouseTrading.com.

Westbrook co-founded the site last year. Roughly 47,000 homeowners have signed up, he says.

You also can find traders at Pad4Pad (pad4pad.com), GoSwap.org, DomuSwap (domuswap.com) and Craigslist (baltimore.craigslist.org/swp).

Westbrook, who calls it "reciprocal selling," got the idea for his site while working as a real estate agent. He kept running into coincidences, like the client from Michigan who had to move to Florida while another client had to move from Florida to Michigan.

"I thought, 'God, these people could buy each other's homes,' " says Westbrook.

The traded houses don't have to be the same price. The key is whether each party can qualify for a mortgage on the other house. You might need space while your co-trader wants to downsize.

Statistics on trading are thin, so it's hard to say how many are doing it or how quickly people are finding takers. At last count, OnlineHouseTrading.com had about 720 Maryland homeowners looking to trade and about 540 people wanting to buy in the state.

Babb's suggestions, should you decide to jump on board:

*Send any deposits to an escrow company, not to your co-trader. Make sure that company is legitimate. "Some scammers are creating their own fake escrow companies just to get the cash," Babb says.

*Get the house inspected and hire a title company to make sure there are no surprise liens on the property.

*Don't skip the walk-through of the house before settlement, even if it requires a trip out of state. "I'm recommending the buyers do it themselves," Babb says.

Find more information at Jamie's blog, baltimoresun.com/realestatewonk.

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.