“Exchange villa on the coast for an apartment in the city”, “exchange apartment for a villa”, “exchange land for a home” are advertisements that you have probably seen on real estate portals and that are becoming more and more numerous. This is a home exchange, an operation that allows you to change homes “for free.” We tell you what it consists of and how it is done.
During the year 2022, according to the Property Rights Transfer Statistics published by the INE, 56,799 exchanges were carried out in Spain, which represents an annual variation of -14.2% compared to 2021 (year in which exchanges increased 30% compared to 2020). Regarding the 2023 data published by the INE, in March 2023, 799 exchanges were registered, which represents a monthly variation of 51.9%.
What is a home exchange?
The exchange is regulated in article 1548 of the Civil Code, which establishes the following:
The exchange is a contract by which each of the contracting parties agrees to give one thing to receive another.
In the case of a home exchange, it is a contractual operation in which two owners exchange one home for another. If the two properties have a similar market value it will be an exchange, however, if one has a higher value than the other and one of the owners pays the difference, it will be an exchange and a sale.
It is an operation that is used in various circumstances:
– When in the residential real estate market there is a lot of supply, little demand and it takes a long time to sell a home.
– When there are difficulties in obtaining loans with mortgage guarantees or people have little liquidity to buy.
– When a person wants to move house for work, family or any other reasons.
The main drawback of the exchange is finding an owner interested in it and who likes the house you want to exchange.
What steps must be taken to exchange homes?
To carry out a home exchange you can follow the following steps:
– Search for properties to exchange for yours. Search various real estate portals for homes that interest you and for which you can exchange yours. It is difficult for two owners to coincide, but not impossible. You can also count on the help of expert real estate consultants to help you in your search.
– Visit the home. It seems obvious, but it is important to visit the home you want to exchange and have the other owner visit yours. The condition of the home and the services it has will influence the value.
– Establish the value or price of your property. To do this you can request an appraisal and verify if it is on the market. Remember that the value of your property must be similar to the value of the property you want to acquire by exchange.
– Analyze the loads of the two homes. To see the charges of the two homes you can request a simple note for each one at the Property Registry (you can request it in person or through the Registry website). Once you have the simple note, you must analyze charges such as mortgages, embargoes or easements, for example. For example, if a home has a mortgage, its value is reduced and, in addition, the bank will have to authorize the subrogation of the new owner in the mortgage and may establish new conditions.
– Study the tax burdens and the community of owners. It is also important that you analyze the tax burdens and ask for proof of the payment of the Real Estate Tax (IBI), and if the owner is up to date with the payments of the community of owners dues.
– Request a home exchange deed. The next step is to ask a notary to draft a home exchange deed. It is important that the parties’ willingness to carry out an exchange be made very clear in the deed.
– Pay the corresponding expenses and taxes. We analyze this point in detail in the following section.
– Registration of the exchange in the Property Registry. Finally, once the expenses and taxes have been paid, the exchange deed must be registered in the Property Registry so that each home is registered in the name of its new owner and the exchange is publicized to third parties.
Taxes and expenses to pay for an exchange
Although in the exchange you exchange one home for another, you also have to pay expenses and taxes, which are as follows:
Home exchange expenses
Regarding expenses, the exchange generates the need to pay the fees of the notary and the property registrar involved in the operation. They are fees established by their respective tariffs and that you can consult by calling the notary office where you are going to carry out the exchange and the Property Registry where the exchange deed must be registered.
Home exchange taxes
Regarding the taxes that must be paid for the home exchange, they are the following:
– Property Transfer Tax (ITP). It is calculated by applying a percentage, which varies from one community to another, on the price of each property being exchanged. The tax is paid by both parties to the exchange in relation to the property that each of them owns. In the case in which what is exchanged are building plots: Value Added Tax (VAT) must be paid.
– Documented Legal Acts Tax (AJD). The exchange is carried out in a public deed, so the AJD must be paid, which taxes notarial, administrative and commercial documents. It is calculated based on a fixed and a variable fee.
– Municipal Capital Gains (Tax on the Increase in the Value of Urban Land). The capital gain taxes the increase in the value of the land that becomes evident at the time of the transfer of the home through the exchange.
– Personal Income Tax (IRPF). The capital gain or loss arising from the exchange must be included in the income tax return of each party involved in the exchange. In personal income tax, the possibility of applying the deduction for reinvestment in habitual residence should be studied if what is being exchanged are habitual residences.
In short, a home exchange is an operation that is quite unknown in the real estate market, but it can be a solution for various cases in which there are difficulties in finding financing to buy or there is too much supply of homes similar to yours. If you want to carry out a home exchange, it is essential that you thoroughly analyze the operation with an expert real estate consultancy and that you study the advantages and disadvantages, as well as the taxation of the operation in your case.
At PRODDIGIA we put at your disposal a team of real estate consultants and lawyers who are experts in the sector who will study your case, analyze the available options and the possibility of carrying out the exchange, and advise you throughout the entire process to meet your objectives.
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