Posted by Rossdillingham on June 02, 2007 at 15:51:06:
House A is me
Anyone ever traded properties? NEED HELP - Posted by rossd
Posted by rossd on June 02, 2007 at 07:14:17:
I need help on how to make a deal work:
Owner of House A wants House B. Owner of House A owes 80K, and FMV is around 325K. Owner can come up with the $$ to deliver home free and clear.
Owner of House B owes 500K, FMV is $525K. Owner of House B can bring 100K to the closing table to make the deal work.
Any advice on how to make this work would be appreciated!
Re: Anyone ever traded properties? NEED HELP - Posted by Dave T
Posted by Dave T on June 03, 2007 at 18:26:01:
Please explain why you are willing to accept only $125K in equity in trade for your $325K free and clear house and the liability on his mortgage loan. From B’s perspective, he gains $200K in equity and complete debt relief because he gets you to take over his mortgage loan.
Seems to me to make the deal equitable, B would have to give you $325K in equity to equal the equity you are giving up. In other words, B needs to bring his mortgage balance down to $200K to make the deal equitable for you.
If it helps you see where I am coming from, look at the deal this way. You are giving B $325K (the equity in your house) and you are assuming his $400K note. You are “paying” $725K for his house, but only receiving $125K in equity from the seller, making your net purchase price equal to $600K.
Not quite an even trade. Just how I see it.
Re: Anyone ever traded properties? NEED HELP - Posted by Frank Chin
Posted by Frank Chin on June 03, 2007 at 07:25:58:
Rossd:
You said you are the owner of House A, but tax wise, much depends on whether it’s a SFH, and owner oocupied. Since FMV is 325K, and if SFH owner occupied, you probably won’t owe capital gains. On the other hand, if it’s a rental, you’ll be subject to capital gains unless you do a tax free exchange.
There is such a thing as a simultaneous exchange, which is the ideal situation here, and assuming the purpose is to save on taxes, a simultaneouse closing can be done, though you might be better using a facilitor familiar with the procedures and guide the respective attornies.
If the houses are not owner occupied, there would be some tax issues involved. But if you exchanged the 325K free and clear house for a 525K one, taking on a 200K mortgage to take over,it would appear you owe no taxes. Because both the equity in the new house, and the mortgage is larger, and it this case, the trade is tax free. There are tax issues if either the equity or mortgage is smaller, so the owner of house B would have some tax issues, depending on if it is owner occupied.
Frank Chin
Too many holes in the scenario - Posted by JT-IN
Posted by JT-IN on June 02, 2007 at 17:05:14:
ross:
What is the motivation of each party…? Anything special other than they each want the others house and the financial committment works perfect for each of them…? Are both A-B in solid shape financially, or is there a reason to look at this creatively because one or both of them are unable to deal with a Bank…?
Are these both primary residences for each, and if so, have they each been in the home for 2+ years…? If not the primary res for either, is there a taxable gain to be considered…?
Why is B wanting to downsize homes…?
The simplest thing is to draw up a purchase contract on each, then each obtain whatever conv financing you will need, then have a duel closing where the sale and purchase of each home is funded with the respective new financing and the equity from A is transferred to house B purchase in the amount desired… A title company could handle this w/o a challenge.
Now if there are other reasons that dictate going in another direction, the motivating cause(s) would be imperative to know here in order to provide tailor made advice…
Have you ever noticed how hard it is to work a jigsaw puzzle when half the pieces are missing from the box…?
JT-IN
Re: Anyone ever traded properties? NEED HELP - Posted by James Harris
Posted by James Harris on June 02, 2007 at 12:26:12:
I may be a bit slow, but, this seems quite confusing. Does Owner of House B want House A?
Re: Anyone ever traded properties? NEED HELP - Posted by rossdillingham
Posted by rossdillingham on June 02, 2007 at 12:54:21:
yes, sorry they both want each others properties.
Re: Anyone ever traded properties? NEED HELP - Posted by James Harris
Posted by James Harris on June 02, 2007 at 14:00:13:
What is your role in this situation?