House Swapping Without Buying

[jlynn77]

My question involves real estate located in the State of: Florida

So we are in the process of choosing whether to short sale or swap houses with a family member. Our question is if we swap house but both maintain our own mortgages, how does this effect our homestead exemption, and our house insurance. Is it possible to switcj houses without informimg anyone who is living in it. We are technically 2 streets away, but we need more space and she needs less space. We have the same mortgage, so that isn't an issue. When our market rgains we plan to sell and buy another property.

My question is, would we be considered rental property and have to give up our homestead exemption? Thanks

[flyingron]

If you deed each other your properties, your homestead exemption remains intact. The requirements are that you own and reside in the property (as of Jan 1 of the year). The bank may invoke a due on sale clause, but I'm not sure that is likely if you continue to make timely payments. It would behoove you to update the insurance coverage to reflect the proper ownership and occupancy. When you do this transfer, you have the basis that the other family member had as this doesn't appear to be an at-arms-length sale.

Now if you don't actually transfer the properties but just move into each others house, it's not a rental, but indeed you cease to qualify for the homestead exemption. You also lose a lot of the principal residence treatment for federal tax purposes, but it probably qualifies as a second home (which is about the same for the immediate tax issues, but not for the capital gains exclusion when you eventually sell).

[jlynn77]

First off thanks for the response.. do you think just adding the other person to each deed a good idea? I know I'm probably going to have to speak withv a real estate lawyer but trying to figure out if its an option before I invest time and money into tis.

I know wed have to tell our mortgage company but just curious what the ramificatiojs are fornhabimg our name on two deeds? Thanks again

[flyingron]

No, it's a terrible idea. Deeds aren't some sort of club membership. You'd be giving each one of you half intererst (or whatever) in each other's house and I can't see how that solves anything.

[Browne]

Swapping houses does not just involve the house itself. It involves everything else that comes with it including the taxes, zoning and appreciation/depreciation values. I'd really think this through before actually doing it.