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Home swapping - the future of the tough market?

The idea

Only the most optimistic of industry watchers in the current market conditions would be able to say that conditions in the property market in the UK are not toughening. The credit crunch, the sudden lack of availability of mortgage finance for both first time buyers and buyers with equity in their properties, and a nervousness over the state of the economy in general have led to what is at best a stagnant property market.

Of course, we in the UK are not the only ones to be suffering from laxity in the housing sector. In the US, where the credit crunch seems to have had its origins in the sub-prime mortgage market, the property market is suffering even more seriously from a lack of activity than anything seen so far on this side of the Atlantic. Developers are desperate to sell units, agents have been going out of business and the numbers of repossessions are up sharply.

We may have all of that to endure here in the UK, but there is a solution that is widely used in the US for holidays that could be the answer for some people to still fulfill their dream of moving home, and without spending any money.

Home swaps have been used in the US as an alternative way of taking a holiday for years – allowing people to holiday in the comfort of someone else’s home and enjoy the comforts of a real home, while experiencing the different area and experiences that are on offer. Now the concept is being used more often for more permanent home swapping, and if the housing market in this country continues to suffer, we may well see it coming over to this country.

How does it work?

In much the same way as holiday home swapping websites operate, the idea is to find someone in the area to which you are looking to move who wants to move to where you live. From there you can hopefully find a fellow swapper with the kind of property you are looking for, and arrange a swap.

This system clearly needs to have a certain volume of people looking to take part in order for it to be a success. Otherwise the mis-match of properties, people and places will be significant and there is likely to be an over-weighting of property in one region combined with a paucity in another. The risk here is that some users will be stuck on the site for months without anyone wanting to move to their region.

There is also a need for people to be honest and realistic about the valuation they place on their property, as well as what they expect to get in their choice of new location. Again, an unrealistic valuation will put off potential swappers and make the process much longer than it needs to be.

Legal issues

There are some significant legal issues to be ironed out in the home swapping process that will complicate matters. There will need to be some form of legal agreement of a transfer of ownership to allow the permanent swapping of property, which should present no significant legal problems.

There will also need to be some way of deciding and arranging for a payment of some description to be made between the two parties in the swap, as it will be only in very rare cases that the valuations of the property prices will match exactly. This brings up the issue of financing, and the fact that any lending on either one of the properties will have to be approved by a mortgage lender in order to proceed, adding another layer of confusion and bureaucracy.

Legal and financial institutions will likely treat any home swap as an ordinary transaction of property, whether the full amounts of money changes hands or not is of little interest to them, but the fact that their portion of the investment in your property is protected is far more important.

Why do it?

The main reason to get involved in any scheme that doesn’t involve using estate agents is to save on the commissions that would otherwise have been paid over. This can be a significant amount of money, which will allow buyers and sellers to use that money towards other expenses and costs. Selling, or swapping, a property without the services of an agent is as satisfying as it is cost-effective and if properly managed, can be less stressful than leaving everything in the hands of an agent.

This kind of property transaction allows buyers and sellers the opportunity to ‘try before they buy’. As the system is based upon a vacation home swapping system, people who meet and propose a permanent switch should be able to arrange to have a trial period living in the properties. This eliminates a huge part of the uncertainty that goes along with a substantial relocation to a completely new part of the country.

Disadvantages

Perhaps the biggest disadvantage with this kind of arrangement for swapping properties is that there will be no agent present as a buffer in the negotiations. Although the temptation is to believe that agents don’t do too much work for their commission payments, when you are faced with entering into negotiations over the price of your property, the fixtures and fittings and, more significantly, any problems there could be with the property itself, having someone else to represent you can be a great boon.

If you are happy to negotiate yourself, it is important to be thick-skinned, and to try to distance yourself from being too emotionally-involved. What you see as the perfect family home may not conform to the ideals of others, and at times this can be difficult to hear. At the same time, make sure you are honest when discussing the attributes of the property you are proposing to move into, while being polite and clear. If you are going to make a point about a certain aspect of a property, make sure you back it up with logic and reason. Again, try to leave emotion at the door in this negotiation.

The other major disadvantage of this process is that at present it is not a popular way to move home. The sites that do exist have a certain patchiness to where properties are located and how many are available to swap. This means that you may be waitng for some time before any suitable properties come up in the areas you are looking, so it could be a good move to have another strategy for moving in place in case home swapping takes longer than planned.

And finally...

Given the precarious situation of the UK housing market at the present time, there is a strong possibility that home swapping will be seen as a viable way for cash-strapped owners to move home without incurring huge expense. Swappers need to keep a close watch over the legal situation of exchanging houses, and will have to keep all finance and insurance companies involved fully-informed.

In the US, examples are emerging of home swappers who are looking to downsize, or new parents looking to move close to good schools for their growing children. Most of the people involved in these swaps have spent time trying to sell through the ‘conventional’ market, and have come to the home swap solution as the way forward. One of the advantages to the successful home swaps that have taken place Stateside is that buyers and sellers feel that they know each other already. One example of a couple who wanted to downsize swapping homes with another family who needed somewhere bigger resulted in both families staying on the same street but moving into each other’s houses – a perfect arrangement for both parties.

As the market in the UK toughens, and less people have the ability to spend out on the expenses of moving home in the ‘normal’ way, home swapping may become much more popular here.

More pages

Page 1: The idea

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