Can you swap houses with someone — permanently?

In theory, a home swap could be the solution to all your problems. Movies like The Holiday romanticize short-term home swapping, but you can conceivably make this model permanent — as in, you buy their house and they buy yours, a literal, legal home swap.

Of course, it’s not as easy as simply exchanging keys. You’ll need to figure out how to handle the mortgages, and there are title and tax implications at play, too. Curious? Here’s what you should know if you’re considering trading places — permanently.

Trading houses instead of selling

Let’s say you need to move to a new town for your job, or for family reasons. Wouldn’t it be great if you fell in love with a house in the perfect neighborhood, that house’s owner also fell in love with yours, and you could both just shake hands and move in? Well, not legally speaking. There needs to be a legal, binding deal in place, both for your own protection and for your lender’s.

You may have heard of some home builders letting buyers “trade in” their existing homes for new construction. You can bet this kind of trade had plenty of contractual requirements behind it, and the same should hold true for yours.

Home swappers need to be vigilant in terms of due diligence. “It can be a good idea if both parties have all the necessary knowledge and are coming into it with eyes wide open,” says Ari Rastegar, founder and CEO of the Rastegar Property Company. “It can be used effectively when both parties don’t want to go the route of selling the property, having a liquidity event and then having to find the next house they want to purchase.”

How to swap houses, in 5 steps

You don’t swap mortgages along with your keys. Instead, you’re essentially closing two transactions at once: the sale of your home to the other swapper, and the sale of their home to you. It can get complicated, so let’s walk through it step by step.

Step 1: Gather your team

If you want to swap houses and there are mortgages involved, you’re going to want serious real estate experts on the case. “You need all the advice and protection you can get before making major financial commitments,” says Lazer Sternhell, co-founder and CEO of Cignature Realty.

In addition to having a real estate agent broker the deal, be sure to have a real estate lawyer oversee the entire proceeding so that nothing slips through the cracks on the legal side. “I recommend using a real estate attorney because there are several different nuances,” says Rastegar. “And you’re also going to need to utilize a title company in order to swap titles.”

Step 2: Find the house you want to swap for

Next up, it’s time to find someone to swap with. Why isn’t this Step 1, you might wonder? Because your agent can help you find it — and lead the way in terms of approaching people to gauge their interest.

Most agents have networks of colleagues and contacts they can tap to help clients find what they need. There are also online home-swapping resources you can explore, including BestHouseSwap.com, GoSwap.org and OnlineHouseTrading.com.

Step 3: Negotiate the contracts

For a home swap to be legally binding, both parties need to go through the same processes you would in traditional real estate sale and purchase transactions. That means first figuring out how much both homes are worth. “You need to get an independent appraisal in order to assess what that value is,” Rastegar says.

“Get your own [valuation],” Sternhell adds. “Do not trust that from the other party.”

With this information, your agent and attorney can draw up a purchase agreement for the transaction, and negotiate terms that both you and the other swapper agree to. To make things seamless, make sure the contracts stipulate that both purchases will close on the same day.

Step 4: Secure financing

Your houses most likely won’t be valued at the exact same amount. That’s OK — you’ll both need to get new mortgages anyway. Shop around for the best rates and the most favorable terms, and make sure your loan officer is aware of the swap situation. A representative from the lender will likely be present at the closing, and you don’t want there to be any confusion or surprises.

Step 5: Close

Don’t skip important steps of the closing process, like a title search. Your agent and/or attorney can help you make sure everything is in order. The closing itself will probably take longer than usual, due to the sale and purchase happening at the same time, so be patient, take your time, and make sure all the details are buttoned-down.

House-trading pros and cons

Pros

• You get the house you want: A home swap means you’ve already pre-chosen the exact house you want to buy. There’s no shopping around, making compromises on your must-haves or wondering if there’s something better out there. You’ve already won!
• No need for staging or showings: When you swap houses, you don’t need to go through the process of attracting a buyer — you’re already working with another party who’s also committed to closing the deal. You don’t need to worry about preparing the home for photos or showings, and you don’t need to invite a steady stream of strangers in to poke around.
• Streamlined process: Because this option combines selling your current house and buying your new one into one closing, it can move more quickly and experience fewer hurdles than a traditional transaction. In addition, it consolidates the stress of buying and selling into one event instead of two, which can save you extended headaches.

Cons

• Potentially leaving money on the table: Because you’re getting your ideal home in return, you might not be inclined to negotiate for the highest possible price for your current home in a trade deal. There’s always a chance you could have made more money on the open market.
• Unusual circumstances: This kind of transaction is out of the ordinary, and many real estate professionals will never have handled a home swap. Your agent might be learning the ropes right alongside you, although they’ll have the benefit of their real estate expertise. And if your attorney, who you’re likely paying by the hour, is still learning the ropes as well, it could cost you more money.
• Possible pressure from the other party: It’s not easy to find someone who loves your home as much as you love theirs. And even if you find each other, dealing with each other can still be tricky. Sternhell cautions against home swapping “when there is a rush by the other party to get it done quickly, and when the other party suggests that agents, lawyers or accountants aren’t necessary.” Don’t ignore due diligence — you’re still undertaking a major financial transaction.

Bottom line

Trading homes for a week or two at a time is fairly common for vacationers, but it’s possible to make the swap permanently. It’s more complicated than a traditional real estate process, though — especially when there are mortgages involved — so make sure you have an experienced Realtor and attorney in your corner.