House Swap, from London Mortgage Advice Monday, 27th April 2009

Recently, the number of homeowners looking to swap their homes instead of selling them has increased dramatically as the housing downturn has deepened. Over 6,000 properties have been registered on www.homeswapper4sale.co.uk, the specialist website, since it was created in August last year.

Those undertaking this practice are people who have to move and others are using the sites as a means of bypassing estate agent fees. Typically, estate agents charge about 2 per cent of the selling price - a hefty expense at a difficult time financially. However, even estate agents and developers are using the sites as they concede that buying and selling through the traditional channels is not working.

You simply post details of your property, including pictures, and the location, price range and size of property you would like to move to. There are many reason for using this service. Some users are looking for a similar property, while others will be trying to downsize or find something more grand. Some want to move to far-flung parts of the country, while others may want to move only a few miles, especially in London.

In addition, there is even the option of swapping with an overseas homeowner.

Swappers are alerted by e-mail or text message when they are matched with someone. If the two sellers are interested in each other's homes, they can then arrange viewings and proceed in the same way as they would for any other house purchase.

One of the key advantages of a home swap is that there is no chain, with your sale or purchase relying on the sale or purchase of one or more other properties. Because only two parties are involved in a house swap, it should allow people to move much more quickly, with less risk of a sale falling through.

However, anyone who has tried home swapping will know that, like online dating, it is rarely as simple as it sounds.

Home swapping first appeared in the UK in the 1990s, partly as a tax dodge. This was because, until a few years ago, most house swappers could avoid stamp duty. The Revenue cracked down on this relief in 2003 and once the exchange has been completed both parties now need to pay stamp duty on the full value of the property acquired and register the swap with the Land Registry.

The valuation for each property should correspond to the price that they would be expected to fetch if they were being sold. If you find a match at the same price, you can do a direct swap, otherwise one party will need to make up the difference.

Any attempt to fiddle the numbers to cut your stamp duty bill will be frowned upon by the taxman.

As well as doing all the usual checks, your lawyer should draw up a contract of exchange that includes all terms of the transaction, including any cash payments.

Some lawyers will charge double what they would for a normal house purchase because house swaps are out of the ordinary. They will need to do extra work to ensure that everything is above board and correct.

It also makes sense to pay for a survey to make sure that everything is in working order in your new property.

Swappers who advertise will need a home information pack (Hip), which costs about £300. Since April 6 all properties are required to have a Hip from the first day that they are put on the market.

You might not even escape an estate agent's fees if you decide to keep your options open by advertising through a traditional estate agent and on a home-swap website.

You must also talk to your mortgage lender before proceeding with a house exchange to make sure that it does not have any objections.

Another drawback is the shortage of homes to swap. The number of swappers advertising is growing, but the concept is still in its infancy here, so the chances of finding a perfect match are slim.