House trading involves selling your home to someone while buying their property. You essentially swap residences. This can spare both parties the irritation of showings and the expense of agent commissions while giving each party their new next home.
Trading homes isn’t done every day, but it can occasionally be an option that works for the parties involved. Learn more here.
What Is House Trading?
House trading means that you sell your home to someone and simultaneously buy their place.
You’re likely familiar with home exchange programs when it comes to vacations. You dash off to a lovely apartment in Paris, and the owners come to the Big Apple to enjoy your apartment. Both parties enjoy a vacation with a much lower price tag.
With house trading, this kind of switch is made permanent. Perhaps you’re outgrowing your compact two-bedroom house as your family grows, and the empty nesters down the street in a four-bedroom are looking to downsize their home. You could proceed with a house trade, selling and buying each other’s places simultaneously.
💡 Quick Tip: SoFi’s award-winning mortgage loan experience means a simple application — we even offer an on-time close guarantee. We’ve made $7.5 billion in home loans so we know a thing or two about what makes homebuyers happy.‡
How Does House Trading Work?
Think of a house swap as a win-win. You want to sell your house. You find a home you like, and the homeowner is interested in buying your home too. It happens.
What comes next? You trade. This means there will be two simultaneous transactions. You sell your home to the Joneses, and they buy yours, typically on the same day. Because you’re selling and buying at the same time, it’s much like a trade. This is not a simple transaction, though. You want the stars aligned on that day.
However, there are some similarities to buying a home the traditional way. Expect the basics of the home-buying process to be the same:
• Qualifying for a mortgage
• Getting a home inspection
• Doing a title search
• Closing with simultaneous transactions.
You pay off one mortgage, if you have one, and take on a new one if needed. At the same time, the other party will sign their purchase and sale agreement.
As much as doing all this at once may feel overwhelming, the upside is that you won’t have two mortgages on your hands at the same time. If both homes are owned free and clear, then the only money matters are transfer taxes and closing costs.
You’ll probably want a real estate lawyer who knows how these deals work at your side.
Recommended: How to Buy a House When You Already Have a Mortgage?
What If the Homes Are Unequal in Value?
It’s quite probable that the two homes won’t be of equal value. That’s not a deal-breaker, though. What matters is whether each house meets the needs and desires of the other party.
It’s important for both parties to order home appraisals. If one home is more valuable than the other, the buyer of the more expensive home pays the seller the difference at closing.
How Common Is House Trading?
Trading homes is not something that happens every day, but as people continue to search for creative ways to fulfill their dreams and technology helps connect like-minded folks, house trading has its place in the array of home-buying options out there.
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Pros and Cons of Trading Your House
Here’s a look at the upsides and downsides of trading houses.
Pros
There’s something to be said for this unconventional way of buying and selling a home.
• You may be able to buy a house without a Realtor®. If there is no real estate agent involved in the trade, both buyer and seller keep the money they would have shelled out to their agents.
• You eliminate some of the hassle of moving day. Because both parties are working in concert, it makes orchestration of the move easier.
• You skip the whole dog-and-pony show of potential buyers traipsing through your home and the stress of having it look perfect for showings.
• You also may find that getting financing when trading a home is easier. Some homeowners encounter hurdles qualifying for a mortgage before their home is sold. However, if you have a contract to sell your current house (which you would in a home trade), your lender won’t count your monthly mortgage payments as debt if you apply for a mortgage.
Having this improved debt-to-income ratio can allow you to qualify for better terms on your new mortgage, which just might save you a ton of money as well.
Cons
Trading isn’t without its issues.
• If you’re in a hurry to move, you may not be able to find someone who wants a house swap as quickly as you want to move.
• In a big-picture way, house trading may mean you have fewer options, you may not get the neighborhood you have in mind, or you may not find a home with all your dream features.
• If you owe more on your mortgage than your home is worth, you may have trouble getting financing. The only way a trade would work is if you pay the lender the difference of what you sell your house for and what is still owed on the mortgage.
• If for some reason the purchase and sale don’t happen at the same time, you could be stuck for a time with two mortgages.
| Pros of Trading Homes | Cons of Trading Homes |
|---|---|
| You may not need to use a real estate agent | May not find a home as quickly as you want |
| Getting financing may be easier | Fewer options |
| Avoid the hassle of showing your home to multiple potential buyers | Could have to temporarily pay two mortgages |
Trading Houses vs Conventional Selling
With trading there’s a good chance you will be able to avoid using a real estate agent if you find your trading partner on your own, be it a relative, colleague, friend of a friend, or from a website. You can also avoid the hassle of staging your home and showing it to prospective buyers.
There are some things that are pretty much the same.
Both parties may need new mortgages, and both may want home inspections. Both will probably want attorneys present.
| Trading Homes | Conventional Sale |
|---|---|
| Likely no real estate agent | Usually buyer’s and seller’s agents involved |
| Small market | Wide market |
| Deal with one buyer | Handle multiple offers |
The Takeaway
Trading homes is a viable option for house hunters who find a trading partner who wants to own their home. While the home exchange approach is decidedly nontraditional, the steps of securing a home loan (if needed) and closing will be familiar.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
Photo credit: iStock/AndreyPopov
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
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‡SoFi On-Time Close Guarantee: If all conditions of the Guarantee are met, and your loan does not close on or before the closing date on your purchase contract accepted by SoFi, and the delay is due to SoFi, SoFi will give you a credit toward closing costs or additional expenses caused by the delay in closing of up to $10,000.^ The following terms and conditions apply. This Guarantee is available only for loan applications submitted after 04/01/2024. Please discuss terms of this Guarantee with your loan officer. The mortgage must be a purchase transaction that is approved and funded by SoFi. This Guarantee does not apply to loans to purchase bank-owned properties or short-sale transactions. To qualify for the Guarantee, you must: (1) Sign up for access to SoFi’s online portal and upload all requested documents, (2) Submit documents requested by SoFi within 5 business days of the initial request and all additional doc requests within 2 business days (3) Submit an executed purchase contract on an eligible property with the closing date at least 25 calendar days from the receipt of executed Intent to Proceed and receipt of credit card deposit for an appraisal (30 days for VA loans; 40 days for Jumbo loans), (4) Lock your loan rate and satisfy all loan requirements and conditions at least 5 business days prior to your closing date as confirmed with your loan officer, and (5) Pay for and schedule an appraisal within 48 hours of the appraiser first contacting you by phone or email. This Guarantee will not be paid if any delays to closing are attributable to: a) the borrower(s), a third party, the seller or any other factors outside of SoFi control; b) if the information provided by the borrower(s) on the loan application could not be verified or was inaccurate or insufficient; c) attempting to fulfill federal/state regulatory requirements and/or agency guidelines; d) or the closing date is missed due to acts of God outside the control of SoFi. SoFi may change or terminate this offer at any time without notice to you. *To redeem the Guarantee if conditions met, see documentation provided by loan officer.
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