Be a Real Estate Matchmaker
In a tight market, real estate pros are finding hot opportunities in house swaps.
March 1, 2009
It was love at first sight in November 2007 when Steve Benton came across the online listing for a 2,600-square-foot home in Longwood, Fla. The home was much closer to his job, fell within his price range, and had plenty of space for his growing family.
But before he could seriously consider making an offer, he would have to sell his 1,300-square-foot home in Southeast Orlando. "With the market the way it was, I didn’t have much hope of that happening," Benton recalls. "In fact, my house wasn’t even listed."
Nonetheless, Benton contacted the listing agent, Malte Strauss, broker-associate of Southern Realty Enterprises Inc. in Longwood, and explained his dilemma. It just so happened that Strauss’s client was looking to downsize in Southeast Orlando, and Benton’s home would be a perfect fit. Strauss proposed a trade.
Six weeks later, with inspections done and agreements signed, Strauss shepherded simultaneous closings on both properties.
Originating in the vacation rental and commercial investment sectors, property swaps—usually two separate sales with simultaneous closings—are becoming more popular with residential buyers and sellers. It may be an especially attractive option in a weak economy for sellers seeking to downsize.
Finding a perfect match isn’t always easy, but the growth of online forums for swapping homes is widening the base of potential suitors and pushing the idea mainstream. Listings for permanent and part-time house swaps on the free classifieds Web site Craigslist rose to 10,466 in December 2008 from 7,393 in December 2007, according to spokesperson Susan MacTavish Best.
Entrepreneurs are also getting into the mix with sites made exclusively for house trading. After being unable to arrange a house swap for his property using word of mouth, David Moskowitz, president of a Sarasota, Fla., software development company, saw the need for an online repository of homes available for trading. He created Domuswap, which has listed more than 6,510 properties since its launch in June 2007. Moskowitz knows of four successful swaps completed by the site’s users.
"Sellers become buyers if they can sell their home. So why not put some motivated sellers together?" says Daniel Westbrook, a sales professional with RE/MAX First in Real Estate in Tampa, who founded OnlineHouseTrading.com.
Westbrook says Florida is the most popular state for trades, followed by California, Nevada, Michigan, and Arizona. All of these states have been hit hard by the real estate downturn and are brimming with sellers open to a nontraditional approach, he says.
Whether the home swap is born on the Web or evolves through a personal connection, real estate practitioners can move along a transaction. "The details are not much different than two separate sales that are contingent upon each other to close," Moskowitz says.
When the homes’ values differ, one buyer will have to secure cash or a mortgage to make up the balance. Benton sold his house for $225,000 and took out a mortgage to cover the balance owed on the $500,000 Longwood property.
As a general rule, Strauss says there are no notable commission differences with swap transactions than with traditional home sales. "In my case, I made an arrangement with the buyer that if I was able to make a deal, I would get a commission," he says. If the other party isn’t represented by a real estate agent, Strauss recommends securing an agreement for additional compensation.
If you’d like to help sellers find a potential swap, start by asking them detailed questions about their ideal replacement property, Westbrook says: What are their desired locations and amenities? Are they looking to trade up or down?
If sellers are open to the idea, spread the word among your sphere of contacts. Make sure your real estate colleagues understand what your client is looking for so they can make connections on their end. And create flyers for your open houses showcasing the swap option.
While some sites charge for a one-time posting—OnlineHouseTrading.com charges $19.99—others, such as Domuswap, offer users a free basic service and additional paid upgrades for better visibility. In Domuswap’s case, home page listings cost $4 per day and banner ads range from $1 to $10 per day.
Strauss uses Postlets, a free service that allows users to build ads that can be posted to multiple sites, such as Craigslist and Trulia. He says it’s best to advertise swaps with a pithy blurb: "Wanted: Townhouse close to airport. Offer trade to 4 bedroom on north end of town."
In addition, Strauss says, ask your client for permission to disclose information about the trade possibility in the remarks sections of the MLS listing and on REALTOR.com and other listing sites.
If you find a suitable replacement property, contact the listing agent and ask if the seller would entertain a trade. E-mail or fax a preliminary trade proposal to all the salespeople with matching listings.
For a smoother closing, try to use a single title company for both deals, Strauss suggests.
Even if you do everything right, home swapping can feel like a game of chance, he says. But it’s one more option that can help to speed a sale—and a purchase.