House Swapping Is a Growing Trend in Tough Real Estate Market

House swapping is a growing trend in tough market -- find out how it works.

Feb. 21, 2008 — -- For years, families have been swapping homes for a week or so, so that both parties can try another location for a vacation. In this tough real estate market, a new trend is emerging in which families actually swap houses for good.

Allen and Wilma Sawtelle's house in Pahrump, Nev., wasn't drawing any interest from local buyers. Neither was the home of Amy and Roy Farr of Cartersville, Ga.

The Sawtelles wanted to move to Georgia to live closer to their grandchildren, and the Farrs needed to move to Parhump because of Amy's new job.

Frustrated, the two couples found each other on a Web site specifically dedicated to people looking to swap houses.

"I do see more Internet sites available for these bartering arrangements," said Lawrence Yun of the National Association of Realtors.

Some of those Web sites include:

Here's how it works: Each family sells one house in one transaction, and then buys another house in a separate transaction. It just happens that they're buying each other's houses.

While it's that simple, both the Sawtelles and Farrs agree that one of the downsides of swapping houses is they couldn't be as picky as they might be in a traditional transaction, but they were happy about the price.

"We saved a lot of money. For one thing we ended up using one real estate agent instead of two. And because he was doing two deals at once he was willing to cut his commission tremendously," Roy Farr said.

Pros and Cons

Wendy Bounds, Wall Street Journal columnist and "Good Morning America" contributor, offers details on how house swapping works and the pros and cons.

You aren't necessarily swapping homes of equal value. Both parties get their homes appraised, and if one home is worth more than the other, then one buyer has to come up with cash or a mortgage to make up the difference.

One big plus is that you don't have to pay two sets of broker's fees, which can run from 4-7 percent of the price of a house.

Swapping could help you move a property that you would be otherwise unable to sell, which is huge if it lets you move on with your life.

If you are looking to buy a new home, some developers are trying swapping to offload their excess housing. In this case, it's almost like when you trade in a car: the developer buys your old home if you agree to trade up for a home worth at least 20 percent more than your current home. If that's what you are thinking about doing anyway, this can be a good deal for you.

Insist on a simultaneous closing. This usually means using one title insurance company and having a contingency in the contract that the deal is not complete until all parties sign off on it. That way no one has to worry about getting stuck if they buy another family's home but that family pulls out of the deal to buy their home. This ensures you won't get stuck with two mortgages and two homes.

Don't get involved with sellers who owe more on their home than it's worth because that seller could have trouble getting financing.

If you're swapping a home in another part of the country, Bounds recommends taking a road trip or cashing in those frequent flier miles to go see the property. Online photos can be deceiving, and there are horror stories about people ending up with a property that was seriously misrepresented online.

There are Web sites to help you research the area that you are buying into. Check out which will tell you if you're about to move next door to a family no one can stand. tells you if you can walk to stores and parks from your new home. And is another tool to help you cover your bases in a house swap.

Some sellers will literally let you sleep on it, meaning that potential buyers can spend the night in the property they are thinking about buying. Of course, this is only offered to serious buyers, and sellers have to be careful to screen the people who stay in their home, but if it helps buyers who are on the fence to make up their minds, it's well worth it.

If you have energy-efficient aspects to your home, things like green remodeling, eco-friendly paint or insulation, this can help place your property with a fast-growing niche of real estate agents who specialize in eco-friendly properties, not to mention buyers who are looking for eco-friendly homes.