A property exchange is a type of transaction in which two parties agree to exchange property, be it a house, an apartment, a plot of land or other real estate. This type of transaction is an interesting alternative for those who wish to change their residence or investment in a more direct and convenient way.
The exchange of real estate is regulated by article 1538 of the Civil Code:
“An exchange is a contract by which each of the parties undertakes to give one thing in order to receive another”.
The property exchange process begins with the identification of the two properties to be exchanged, which must have a similar or agreed value by both parties. It is important that both properties are properly valued by property experts to ensure that the exchange is fair and equitable.
If there is a difference between the values of the two properties, the one with the lower value should also make up the difference in value, for example by paying the difference in cash.
If the properties to be exchanged are mortgaged, the bank granting the mortgage must approve the transaction.
THE EXCHANGE CONTRACT
Once the properties have been identified and valued, an exchange contract is drawn up setting out the terms of the exchange. This contract should be drawn up by a lawyer specialising in property transactions to ensure the legality and security of the transaction.
When exchanging property, it is also necessary to take into account aspects such as taxes and costs associated with the transfer of the property, which vary according to the legislation of each country or region. It is advisable to seek the advice of a legal professional to avoid any unpleasant surprises.
HANDING OVER THE PROPERTY
As with the purchase and sale of a property, the exchange contract is completed with the delivery of the property.
Within the time limit stipulated in the exchange contract, the property and the ancillary costs are transferred until the value of the two properties is equal if this is the case.
It is important to ensure that both parties are satisfied with the state and condition of the property received.
WHAT TAXES ARE LEVIED ON PROPERTY EXCHANGES?
– ITP (transfer tax). The ITP is paid on the acquisition of the exchanged property, according to the rate established by the Autonomous Community and taking into account the reference value of the property.
– IRPF (Personal Income Tax) In this tax it is necessary to pay tax on the capital gain obtained from the transfer of the property and if the exchange is made between 2 properties that will become the main residence, the exemption for reinvestment in the main residence can be applied.
– Municipal Capital Gains Tax, you will have to pay tax on the capital gains generated after the transfer of the property.
WHAT ARE THE COSTS OF EXCHANGING PROPERTY
As with the purchase and sale of a property, the following costs and taxes must be taken into account:
– Notary fees. The exchange must be formalised in a public deed before a notary.
– The property exchange must be formalised in a public deed before a notary. The deed of exchange of the property must be registered in the relevant land registers.
CHOOSING AN EXCHANGE IN TIMES OF CRISIS
When the economic situation is not favourable for taking out a mortgage to buy a home, many people opt for a home exchange or property swap, which significantly reduces or even eliminates the amount of mortgage required.
The swap is also used by elderly people whose homes have become too big and who prefer to exchange them for a smaller home, in addition to the financial compensation for the difference in value, which provides them with liquidity and financial support.
Exchange property can be an excellent option for those who want to change their home or investment in a quicker and more direct way. However, it is important to seek the advice of property professionals to ensure a safe and satisfactory transaction for both parties.
At Quikprokuo, we specialise in this type of property transaction and have over 20 years’ experience in buying and exchanging property, guiding our clients through the process and ensuring the success of the transaction.
Please contact us for any property exchange related matters or for our international clients click here.