Bartering – What’s it All About?

Posted on May 03rd, 2010

http://blogs.sandroses.com/marcelluscorolla/2010/05/03/real-estate-property-bartering-a-myth-or-reality/

When people directly exchange their products or services with the goods or services of others, the trade is known as barter. Barter system was the most commonly used trade system before the advent of currency notes. As a matter of fact, invention of money hasn’t put an end to the barter system altogether, as it is still used in various forms (even more after the arrival of internet). A relatively new phenomenon being introduced on the internet is some websites offering their services for individuals who are looking to trade their real property for any other asset of the same value. Given the fact that there are not many assets that can be exchanged with a real property, therefore most of these barters are supposed to be a real property exchanged with another real property. The idea has slowly picked up traction and many websites are providing a similar service (which means people are taking interest in property bartering).

Barter creates a win-win situation for both parties (not like the normal sale and purchase where usually one party’s gain is another party’s loss). Buyer doesn’t need to go through the long procedures of arranging finance or mortgage for property purchase, which makes a lot of difference especially in the situations like recent financial crunch when it’s extremely hard to get your hands on required funds. The barter system eliminates the need of property agents and other types of middle man, reducing selling cost to a bare minimum. Even though it sounds really difficult to find some willing property owner who’s ready to barter his/her property with yours, it’s not that difficult anymore, thanks to the Internet which makes advertising and searching so easy. Also, you can also save some certain types of taxes in case of barter trade.

Coming to the flip side of this trade system, the first and the most obvious problem is the valuation of properties or assets being exchanged. That is why you might need to hire an independent valuator to see if both properties are of the same value. Also, you need to remember that the value of the property will be different for both parties (valued less for the one who currently owns the property and who’s looking to exchange it for another property). In addition to the complexity in property valuation, barter exchange is also subject to legal complexities, therefore you must arrange for proper documentation.

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