I recently spoke with SmartMoney magazine about all the home swapping web sites that have come out of nowhere over the past 6 months.
These sites have received an incredible amount of publicity on national TV, in newspapers and throughout the web. The pitch is this – if you can’t sell your house, why not trade with someone else in another market that also can’t sell their home. The stars align and you can trade homes without having to worry about selling on the open market.
No question these sites are making easy money. One claims over 40,000 listings at $20 a pop ($800,000 in revenue in less than a year). Most of these sites also sell your information to real estate agents, mortgage brokers, foreclosure “rescue” companies and the like creating another lucrative revenue stream.
The question is: Is anyone actually swapping houses?
By my estimates, much less than 1% of people who contact these sites ever “swap houses” with someone else.
None of the home swapping companies will release how many houses are actually swapped – and with good reason. If swappers knew that they had almost no chance of a successful transaction, they wouldn’t pay the $20 or more to one of these companies.
Just thinking through the logistics of what has to happen for a swap to be successful makes it clear that very few (if any) transactions are completing.
If your home will not sell on the open market (listing with a real estate agent), and a discount property buyer won’t purchase it, the likelihood of finding someone that is in a market you want to move to, and has a house you would like, and is in your price range, that also wants to move to your market, and likes your house, and your house is in their price range – is minuscule at best. If you ever do find a match, the real work of getting financed and the logistics of closing begins.
Distressed home sellers have a number of viable options in this market, swapping houses is not one of them.