A man walked into the lavish sales office of a new 20-story Manhattan condo recently and, to the surprise of the staff, whipped out photographs of his newly built home in Connecticut. He offered to trade the property for three New York City condos, said Andrew Gerringer, managing director of the development marketing group at Prudential Douglas Elliman, which is handling sales at the building.
The deal didn’t go through because the buyer had valued the house far higher than the developer felt it was worth. But the idea of selling three units simultaneously was tempting, said Gerringer, who asked that the building not be named. Less than 10 percent of the 100-plus apartments in the building are currently in contract, according to StreetEasy.
“We all gave it a second thought,” said Gerringer, adding that he’s never before seen a home swap in Manhattan. “If it was a fair price, it would have made sense.”
As the credit crunch worsens and mortgages become increasingly elusive, homeowners are turning for help to the one group of buyers who are just as motivated as they are: other sellers. As a result, home swaps, a rare and archaic form of real estate sale, are growing in popularity across the country, experts say. The practice was unheard of in New York City until recently, but now that homeowners here are finding themselves unable to sell their apartments, some are attempting to trade them.
“If you can’t get a mortgage and you can find an apartment you want to swap for, why not?” said Patricia Anton, a former New York University professor who is seeking to trade a beachfront cottage in Montauk for an apartment in Manhattan. “In real estate today, one has to be very proactive and think of different ways to do things. The old ways aren’t working anymore.”
Anton and her husband are asking $495,000 for their two-bedroom cottage, which they’ve owned since 1986. The former Queens residents live full time at the lakeside inn they own in Warwick, N.Y., and no longer get much use out of the cottage. They want to trade it for an apartment in Manhattan, where they can retire, but putting it on the market doesn’t seem practical now.
“We have friends who have tried to sell apartments in Manhattan and are not getting anywhere with them,” said Anton. “It’s the same thing on [Long Island], because no one can get a mortgage.”
Instead, she has posted an advertisement on Craigslist for a permanent home swap: the cottage in exchange for a one-bedroom apartment anywhere below 97th Street.
Anton is one of hundreds of homeowners who are trying to buy or sell New York City homes through trades, said Brian Stroka, president of OnlineHouseTrading.com, a Web site where would-be swappers can find each other. Of 50,000 members on the site, some 780 are New York City residents, while 1,650 members are looking to trade their homes for a property in the city, Stroka said.
In essence, he explained, these swaps are two separate, but simultaneous, real estate transactions, with each buyer getting a mortgage the way they normally would, though both are more likely to get financing because they have found a buyer for their home. Stroka recommended that swappers use real estate agents to assist in the paperwork and negotiations, and that both sellers use the same title company.
While traffic on OnlineHouseTrading.com has grown steadily since it was founded in 2007, he said, recently it has increased significantly.
“I think it’s desperation,” Stroka said. “Nothing else is working for these people. The alternative is not being able to move, or foreclosure. They’re willing to try anything.”
Some homeowners view a swap as a way to find buyers who are as eager to buy as they are to sell.
“I’m looking for customers anywhere I can find them,” said one New York OnlineHouseTrading.com member who made contact with The Real Deal through Stroka. She asked that her real name be withheld, but disclosed the name she uses on the site, Mary Apple.
Apple, who is planning a move to Hawaii, put her prewar, brick three-family home in Williamsburg, Brooklyn, on the market three months ago. When it yielded little traffic and offers far below her $829,000 asking price, she joined OnlineHouseTrading.com and several other sites in a bid to trade her house for property in Hawaii.
“It makes sense because people are just not buying properties the way they used to,” said Apple, who has received several offers to trade. “This is a faster way of doing it.”
Apartment trade-ins are feasible for developers, as well, said Gerringer. While a swap isn’t ideal, condo buyers are hard to find now that Fannie Mae has stopped guaranteeing mortgages in new developments where less than 70 percent of the units have been sold.
“Where is the financing for new development [sales] going to come from?” he said. “Maybe it’s not such a crazy idea to trade for something.”
A developer would most likely take over the deed for the property from a buyer, he said, and could then sell it, have it for personal use or hold it until the market bounces back.
Outside the city, property swaps have been more common of late. In Connecticut, Kaeser Construction Company in Westport has started accepting trade-in homes, said John Kaeser, the company’s president. Kaeser was also quoted in the New York Times recently in connection with a home he bought so that the buyers could purchase one of his properties.
But some developers are reluctant to accept a trade-in because the logistics are often complex, said Richard Cantor, principal at sales and marketing firm Cantor & Pecorella, which specializes in new developments.
“I don’t think most developers want to get involved in swapping,” he said.
Instead, some of his developer clients offer bridge financing to buyers who must unload one home before buying another, offering a loan that comes due when the first home is sold.
But some sellers avoid trade-ins simply because they’re unfamiliar.
“People are not comfortable with it because it’s new,” Apple said. “But logically, it completely makes sense. It’s smart to do if you can find the right people to do it with.”