House Swapping
Posted: Thursday 2 December 2010
For many people, the desire to move house reflects very much their “age and stage”. Perhaps the arrival of a family makes it essential to move to a bigger home, or it may be somebody looking to downsize as they grow older and find their family home too big to manage and too expensive to heat. In a difficult property market, it becomes essential to think creatively, in an effort to find a buyer and make a successful sale, which will, in turn, enable you to move on. One novel possibility worth considering is a property swap, particularly as ESPC have introduced “Matchmaker”, a new service which aims to identify two sellers who might be interested in buying each other’s houses.
Clearly, the chances of finding someone who owns just the house that you were looking for and who, in turn, wants to move to a property just like yours, are not very high, but a successful swap, if it can be achieved, has enormous advantages for both parties, as neither then becomes dependent upon anyone else who is in the house market.
There are very few savings in terms of cost, if both properties are already on the market. The real advantage lies in the fact that it allows both parties to achieve a move to a property that they really want, by removing the inhibiting factor which has dogged the market in the last two years, namely the fact that nobody is prepared to commit to a purchase if their own property is not already sold.
Clearly, there are potential pitfalls, even if both parties would like to go ahead. High on the list is the question of mortgage finance as, no matter how keen you are to proceed with such a deal, raising the necessary loan funding may turn out to be the stumbling block for one or other party, so this should be clarified at as early a stage as possible.
As both properties will already be on the market, each will have a Home Report and the only way that this cost could be avoided would be if the deal was a completely private one between two individuals, neither of whom had actually started marketing. There are no savings on Stamp Duty and, of course, there will be an equalising figure to be paid by one party to the other, to reflect the different values of the two properties. Indeed, agreeing the prices of the two properties may be one of the most difficult aspects of house swapping, but at least if each property has a Home Report valuation, there is a starting point for the negotiation.
The most important thing in relation to a possible house swap is to ensure that you are not contractually bound to purchase unless and until the person from whom you are buying is equally contractually bound to take your property, so each transaction has to be dependent upon the other going ahead. This will probably involve both sets of solicitors examining the titles of the properties that their clients are going to acquire and ironing out any potential difficulties there before the stage of a binding contract is reached.
There may be no financial savings in terms of legal fees and other outlays, but anything which provides you with the certainty of a sale and which then allows you to achieve your ambition of moving on to another property is worth looking at. Bear in mind, however, that what we have said here applies where there are two individual parties looking for a genuine swap. That is entirely different from the sort of part-exchange option which you will sometimes see advertised, where a property company buys your house if you in turn buy one that they are selling. These companies are looking to make a profit, either by paying you less for your existing property or making you pay over the odds for the new one. Treat any such approach with extreme caution and do not agree anything whatsoever until you have taken full advice from your solicitor.
