Q: I seem to be in a confusing predicament that is above my head. I have a house with a recent appraisal of $110,000 that my friend would like to purchase. He has a house with a tax-assessed value of $150,000 that I want to purchase.
I owe $55,000 on a private loan for my house. We would like to mutually reduce our asking prices by approximately $50,000 in order to make our houses that much more affordable. So, technically I would just need a loan of $90,000 and he would just need to obtain a loan of just $55,000 to pay off my mortgage.
How can we structure this? If I tell an appraiser I’m buying it for $90,000, wouldn’t that make the “market value” of the property $90,000? I don’t want the future value of the home to be reduced just because I’m buying it at a lower value than anybody else could buy it for right now.
A: Please talk to a local real estate attorney about arranging a swap of property. There would be a value assigned to each piece of the property, and you would accomplish this with paperwork and at an official closing. The attorney can advise you on how to obtain financing for the new property.
Just keep in mind that your tax-assessed value in some places may not reflect what your property is actually worth in the current real estate market. You and your friend may need to do a little additional work to determine what your property and what his property are worth.
In some states, when you exchange properties you save some money in the transaction fees relating to the sale or purchase of that property. In other states, the swap of properties won’t save you anything but at least gives you the ability to buy and sell knowing that your buyer has to buy and sell where both of you know exactly what is going on in the transaction.