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House-Swapping Trend Emerges

"I'll buy yours if you'll buy mine"

By D. O. Volente
ConsumerAffairs.com

January 31, 2008

Instead of relying on Realtors, free giveaways and other gimmicks to get some traffic into your house, how about swapping your house with someone who may be in the market to sell a house that you could see yourself moving into?

It's doing business the old-fashioned way: bartering, except that new technology now puts you closer to achieving this American dream. And more than 16,000 people around the country are apparently roped in to this trend, according to industry estimates.

As the real estate market deteriorated over the last two years with buyers developing cold feet, web-savvy entrepreneurs sensed an opportunity. Close to half a dozen websites have now cropped up to cater to this market.

OnlineHouseTrading.com connects sellers of homes in different areas to see if they may be a fit to swap properties.

To avoid any last-minute hiccups, the site recommends that both sides of the swap use one title company so the two transactions close at once, thus avoiding the possibility of one party holding two simultaneous mortgages. The site also recommends that people not get involved with a seller who owes more than what their house is currently worth.

Swapping homes could potentially save large fees traditionally paid to Realtors, recommends GoSwap.org. A simple one-time fee of $19.99 could connect you to a specific seller that appears on the website's database.

Other players in this market are DaytonaHomeTrader.com and DomuSwap.com. Not to mention the online classifieds giant, Craigslist, is also emerging as a player in this game as it sees a jump in real estate swap ads on its site.

"Ironically, many of the houses listed on some of these sites are listed by brokers," said Mohammad Khurram, a realtor with Fairfax, Va.-based Ikon Realty. "In the heated market, Realtors were the ones that got into this game and they know how to play the game and could be the ones pushing these kinds of schemes."

Khurram warns that this could be a ploy by Realtors to attract business in a tough market. "It may not be exactly bait-and-switch, but it sounds pretty darn close."

Local Realtor boards around the country are said to be watching this trend closely to ensure that no illegal activities are being conducted by their members, and also to protect their members' interests, should realtors be cut out of such transactions.

House-swapping, which sounds like an easy exit, may be fraught with perils.

• You may not get the exact property you want and may have to settle for something less

• You don't know who you are dealing with - on the web

• You may have to buy optional owners title insurance, which adds extra costs at the settlement table, to protect yourself in the event of a bad or shoddy title to the property. Typically, a bank buys title insurance when you buy a property to protect it's interests in the house. But as a buyer purchasing "owners title" is usually optional. Fees for owners title usually runs in the thousands.

• You may have no legal recourse if the deal goes bad, or there are defects in the house once you've move in, because a licensed Realtor was not involved in the transaction.

House-swapping may be one strategy that may work in a market that has largely evaporated as buyers shift their momentum toward rent, or rent-with-an-option-to-own programs.

And searching for a property online for a swap, could be a bit like online dating.

As they say: "The odds may be good, but the good may be odd."

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