How Trading Your Home Works

House trading has been around for a while, and it's becoming more popular due to the conditions of today's housing market. The word "trading" implies that you exchange front door keys and high-fives as your moving trucks pass each other on the road, but that's not exactly how it works. Trading does involve swapping houses, but even if both houses are valued at the same amount, there are still lenders and lawyers involved and money does change hands. The finances of trading houses are pretty much the same as if you were to buy a house. You have to qualify for a loan, come up with a down payment and have a closing, which involves selling your house and buying the other house as two separate transactions. Existing mortgages are paid off at closing, and you get a new loan for the new house. The difference with trading is that these events happen simultaneously, with both parties' closing dates scheduled for the same time. This provides assurance that you won't be stuck with two mortgages.

You don't have to use a realtor, but if you're not familiar with real estate transactions, it's probably a good idea. You can save money by using one realtor instead of two, and they may be willing to give you a deal since they didn't have to do the legwork of finding you the house.

Because the housing market is cyclical with its up and down periods, builders have been trading for years during times when the market slows down. In the case of a trade, a builder would buy your house and sell you one of his or her new homes. Each builder has a different set of terms, but typically to qualify, you need to be looking to upgrade to your new home.

Technology has helped to bring house trading into the forefront, and Web sites like goswap.org and onlinehousetrading.com have become real estate matchmakers for motivated sellers.

Vacation Trading

Those in the know have been vacation trading for decades, and the 2006 movie "The Holiday" gave the industry a big boost. Kate Winslet and Cameron Diaz play women who temporarily trade houses to get away from the doldrums of their lives and ultimately find love. Though you may not find your life partner during your time away, you will most likely find a sweet deal in a far-away locale that would otherwise be unaffordable. In this case, it usually is an even trade, so you get to stay for free. Eliminating the cost of housing makes a vacation infinitely more affordable and convenient, especially for families with small children. The terms of the deal are negotiable and often include use of cars, ski or beach equipment, and even items such as strollers and high chairs. All of which are a pain to lug across the pond.