What's Involved in
Trading Houses?

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Trading houses is extremely rare. However, once you find someone who owns a home that suits your wants and needs and they feel the same way about your home, that's the toughest part of trading homes. After that's accomplished, it's not a complicated process, provided of course, you carefully follow a strict contractual protocol.

If you're fortunate enough to find someone interested in house trading and if you're attempting to put the deal together without the guidance of an experienced real estate agent, I urge you to consult with your real estate lawyer.

Before Signing Any Documents

They'll ensure the Agreements of Purchase and Sale are properly prepared and executed to protect your interest. It's possible to have one lawyer act on behalf of both parties, provided nothing is anticipated to occur that could create a conflict of interest. If a conflict arises, the lawyer will probably completely withdraw from the entire proceedings.

Frankly, the easiest way to handle house trades is to have a realty agent act as dual agent, as long as the agent is knowledgeable and familiar with the procedure and its special contract clauses. The negotiation process of home trading can be emotionally tricky. Thus, having a skilled negotiator could save everyone involved a great deal of stress and frustration.

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To assist each party with the evaluation process, an agent can prepare a Comparative Market Analysis for both properties. The final reports should be shared with all parties to the trading houses agreements.

Trading houses?
Full Disclosure = Good Policy

Once the sale prices have been verbally agreed, the two contracts are drafted with the usual clauses, including necessary appropriate conditions such as financing and home inspection, and Status Certificate if one or both properties are condominium. If the homes are rural or recreational, other conditional clauses may be necessary. For obvious reasons, a condition regarding the sale of the other property is unnecessary. Usually, the expiry date of any condition would coincide with its counterpart in the other agreement, as would the completion date. After all, each family will need a home to move into on moving day.

Also, it's not important for the two homes involved to be of equal value because each buyer will be arranging a mortgage for whatever amount they require to complete the purchase.

Critical Clause

Each contract should include the same clause which states basically that each Agreement of Purchase and Sale of the properties involved in the home trading is ...

Subject to Mutual Completion

If party one refuses or is unable to close their purchase on party two's property, or, for that matter, party one's own property sale, then party two is then not compelled to complete their contract on the property belonging to party one.

Confusing?

If you enter into a house trading arrangement, thereby agreeing to buy the other people's home unconditionally and, for whatever reason, they refuse to close on the purchase of your home, even though you're ready, willing and able to do so, you'd still have to be prepared to close on your purchase of his home or risk being declared in default of your purchase contract. But without your sale proceeds, that might be difficult, unless you have sufficient funds to complete it without them. Thus, to be on the safe side, have a Financing Plan B just in case the other buyer can't close.

Is trading houses complicated? It may sound like it. But with the assistance of an experienced realty agent, it's not necessarily so. I invite you to explore my website to learn more about buying, selling and trading houses. And to learn a little more about how a realty agent can help, visit The Canadian Real Estate Association or its counter-part in your country.

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If you're considering selling your house - with or without an agent - and buying another, check out my book The Happy Agent. Learn how to effectively evaluate your home as well as your intended new one, how to prepare your place for market to enhance its market value, including basic staging and renovations, how to advertise if necessary, how to handle showings and open houses like a pro, how to successfully negotiate an offer - and when it's time to throw in the towel and hire a professional.Having said this, I still advise involving either a qualified realty agent or at least a lawyer in a trade.

When you consider the huge potential savings in real estate commission, the investment of a pittance of your time and money could prove quite worthwhile. At the very least, you'll be encouraged to try it alone. Remember - knowledge is power.

Available virtually everywhere print and e-books are sold.

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