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Bulgarian Property: Practicalities of House Swaps

Permanent exchange of property has suddenly become the new kid on the block in Bulgaria. The USA has been doing this for years and even in the UK a council house swap service is in operation. Swapping your Bulgarian property for one in another country has now become increasingly popular as a way to beat the current market conditions.

This is hardly surprising when you consider the current global financial situation. Many are wanting to sell their properties both in the UK and in Bulgaria, so swapping homes seems a good alternative: quick and easy, often without recourse to obtaining mortgages which can involve long delays. The idea of exchanging your small semi-detached house in grey Britain for a lovely Black Sea coast home is extremely appealing.

More discussion of the overall principles of house swap on a permanent basis are covered in our recent article Creative Ways to Buy Bulgarian Property: House Swaps. In this article we now turn our attention to the detail of such a transaction.

On the face of it, a swap seems totally uncomplicated and easy but before you get into this way of moving home, you should consider the issues involved.

Where the two property prices are similar, it is far easier. However, the prices may be completely different and sometimes this difference is even financed by the current owner of the property, agreeing to give the other party a secured loan.

It is worth bearing in mind that the legal procedure in Bulgaria for property is far quicker than that in the UK and therefore it is important for both parties to be protected. The easiest way of doing this is to place a clause in the contracts whereby the 'sale' of the Bulgarian property is dependent upon exchange of contracts on the UK property within a specified period of time. This makes sure one party cannot pull out whilst the other property is going through.

It is important that you obtain the services of an independent lawyer who can draw up a suitable contract as many notaries in Bulgaria will never have been involved in this kind of transaction and may even be unwilling to be part of it as they may possibly consider it a payment in kind outside of notary accounts, leading to problems with fiscal controls.

With the exchange rate of the British pound to euro still remaining very low, swapping properties can have advantages. You can agree a price for the Bulgarian property in sterling if you wish, so that the transaction is free of uncertainty with currency swings. Although you will still have to pay lawyer, notary fees and taxes in local currency regarding the transaction.

If one of the properties has a mortgage, this will make matters more complex. By preference, the mortgage should be paid off prior to putting the property up for exchange but of course, this is not always possible. In essence when you property swap you are exchanging equity, not any finance on the property. In this instance, where there is a financial lien on the home, the 'buyer' may pay a cash difference to pay off the mortgage for the 'vendor'.

Whether a mortgage is involved or not, it is not unusual for a house swap to involve properties of differing value. As an example, a permanent home swap between the UK and Bulgaria: the home in Bulgaria is worth 100,000 and the UK property is worth 90,000. The person moving from the UK to Bulgaria would swap their UK property and pay the extra 10,000 to make the total 100k.

This brings us onto an interesting point; that of mortgages. In most house swap transactions, if a mortgage is required, the amount needed is significantly less than a normal house purchase. These days, the less you are applying for, the more chance you have of success as the loan to value ratio will be so much smaller.

With swapping, fees are naturally reduced as the transaction is generally a private one, not involving any agents, so savings on fees can be made here. Usually, the buyer pays the solicitor/notary fees in Bulgaria as normal. The person in Bulgaria moving to the UK would pay the solicitor fees in the UK. Therefore, legal fees are those which are normally paid and thus does not cost more or less than any normal sale/purchase.


What's the downside

The downside to exchanging properties is that there is a smaller selection available, so sometimes you may not get exactly the home you want and may have to compromise a little. The complexity of paying off mortgages can also put people off.


And the upside

The biggest advantage for house exchange is that it speeds up the whole process and gets the market moving. Lots of vendors are really frustrated with the current property market, having had their house for sale for a year or more. For many, this creative way of buying property means that a move is possible which would not otherwise be able to happen and both parties will be in the country they want to live in. Where there is no outstanding mortgage, then the transaction is straightforward and simple. Some house swappers are even swapping furniture, white goods and other items such as cars.