When there's no way out, try a home swap
In a market where homeowners who need to move feel trapped by plunging prices, Chiara Cavaglieri looks at the web services that may offer a solution
Sunday 22 March 2009
The continued decline in house prices and restrictive lending criteria have narrowed the options for homeowners looking to up sticks, just as the threat of redundancy forces some to relocate to follow work, or downsize their property to save money. With sales at historic lows, thousands of people are likely to be stuck in a property rut, wanting to move but unable to do so.
This is where home-swapping websites can help. Services that began as a way to arrange holiday accommodation have transformed into exchanges for permanent moves. HomeSwapper4-Sale.co.uk and EasyHouseExchange. com may come of age as homeowners try to break through the buying-and-selling impasse.
Often labelled as a bricks-and-mortar "dating service", these sites offer a meeting point for homeowners, who upload details about their properties in the hope of matching them with other homes that suit their needs. Those with matching properties can then get in touch with each other and start making arrangements for a swap.
One benefit is the opportunity to avoid estate agents' fees – up to 3 per cent on the price of any property sold – and since there is no chain, house swapping allows people to make the move quickly, with far less risk of a sale falling through.
"The conventional way to move, via estate agents, is not proving successful at the moment," says Richard O'Driscoll, the director of EasyHouseExchange. "We're trying to unblock the UK's problem and help those people who have to move and are finding it difficult through the normal channels."
This isn't to say that home-swapping sites don't have room for the middle men. Many people still want an estate agent to help with negotiations and to arrange the home information pack (HIP). Indeed, some agents are using the sites to market property on their books if the vendor has expressed an interest in swapping. This way, they market the property more widely and, if a swap goes ahead, they can still claim their commission.
"A problem for both agents and vendors is a lack of viewings," says Ralph Catto, the chief executive of Scout Solutions, the company behind HomeSwapper4Sale. "Many people are no longer looking until they have an offer on their home, which exacerbates the slow market. We drive viewings by actively matching potential swappers. If they agree a deal, they avoid chain stalemates and can be constructive around any price conflict,"
Even if a direct swap is unsuccessful, advertising a property on an exchange site could lead to a sale, he adds. "Where a swap doesn't work, one party may still become the buyer of the other's home, so for both agent and vendor there are two bites of the cherry."
For homeowners, the first step is to register with one of the several sites offering a house-swapping service. Most of these charge a fee to list a property for a set period. At EasyHouseExchange, for example, it costs private owners £49.50 per property for a three-month subscription, although there is a special "free listing" offer in place until June. HomeSwapper4Sale currently charges £19.95 for a three-month subscription. No further fees are levied if a swap takes place.
Each homeowner then provides details and images of their property, as well as a description of the kind of home they wish to move to. At Homeswapper4sale, users must specify preferred location, how many bedrooms they require, the type of home they are looking for (house, bungalow, flat) and their price range. This information is added to the database, which automatically matches sellers. Those who have been selected for a potential swap can then contact each other through the site and arrange any viewings. It is also possible, because people are dealing with others who are in a similar situation, that they may be able to arrange a trial period living in each other's properties – a sort of "try before you buy" arrangement.
If both parties are happy and ready to make the exchange, they are left to continue the process independently. However, a permanent house swap is still a legal transaction and there may be issues to be ironed out before the process is complete, "Even if you are making a like-for-like swap, you are still taking on a new property and all the usual 'due diligence' rules would apply," says Thomas Moran, partner at law firm Speechly Bircham.
The onus still lies with the homeowners to pay the taxes and legal fees, usually through a solicitor. And it is advisable to have a full survey completed to determine the condition of the home. The parties to the swap should also consider checking the market values of the properties involved, and if they have a mortgage, there must be sufficient funds to pay it off. Any price difference between the two homes should be met either with a cash payment, or by obtaining new financing from the mortgage lender,
"Technically, you would have to redeem the mortgage on your old house, but in practice many lenders will allow what is, in effect, a transfer of the mortgage from the old property to the new one, subject to a satisfactory valuation and conditions," adds Mr Moran.
Once the exchange has been completed, both parties will need to pay stamp duty on the full value of the property acquired and register the swap at the Land Registry.
At the moment, one of the biggest drawbacks with the initiative is a shortage of homes available to swap. Without a large volume of houses to choose from, the likelihood of finding a perfect match is reduced, which could mean a long wait or a significant compromise on the house and location.
This may be about to change, though, as more homeowners look for inventive ways to sell their properties. Although yet to make an actual swap, Homeswapper4sale currently has over 5,500 members and 1,873 potential matches in place. EasyHouseExchange has 650 member houses on the site, including both independent properties and homes from developers Bovis Homes and Ballard Homes. The site claims that this number is on the rise.
During the past fortnight, EasyHouseExchange has also introduced a temporary exchange option for homeowners who are reluctant to sell but need to relocate for personal or financial reasons.
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