Real Estate Swaps
Over the past few years, the decline of the real estate market, upward mobility of the population and impact of the web have led to an increase in the frequency of home swaps. Often with the facilitation of dedicated websites, interested parties agree to exchange residences instead of going through the customary process of buying one home and selling another.
Now builders of new homes are getting into the act in a slightly different manner. With tightening credit lines and a very sluggish market, many builders are finding themselves in tight spots. They’ve spent time and money constructing new homes, but the number of prospects has dwindled. Recently constructed homes in foreclosure are often less expensive. To make matters worse, many people who are interested buyers are unable to close any deals without selling their existing homes.
To break open the contingency sale logjams, more and more builders are willing to consider a buy-to-sell strategy. They are able to get a more expensive new home off the market and generate some much-needed cash flow to pay bills and contemplate new construction. If they need to take out a loan to cover the cost of their “new” property, it’s generally done with a conventional mortgage that carries a lower rate than a construction loan. Their buyers are able to take advantage of low interest rates and the depressed housing market without facing the possibility of paying two mortgages at the same time.
While this type of selling strategy isn’t commonplace at the moment, it appears to be an emerging trend. Like other builder tactics such as contributing down payment money to get buyers to a lower mortgage rate, it’s a good example of the creativity sellers are willing to consider in sluggish markets.