Long before money was invented, people traded goods to get what they wanted. Later on, as people began domesticating livestock, salt became a form of money; and later yet gold and silver; but trade between buyers and sellers has never completely gone away. This is seen every day when people “trade in” their old cars for new cars.
A little after WWI, IRC Code Section 1031 was adopted. It laid out the basic tax ground rules for “exchanging” and has continued to be amended over the years as people found more and more creative ways to trade properties. In its current form, real estate can be exchanged for other real estate tax free so long as it is held for business or investment, but not for resale or personal use; and so long as there is no “unlike kind” such as cash, Notes, or “debt relief” involved. All that means is that there has to be at least as much mortgage debt against the property traded for as there is on the property being traded in for it to be tax free.
When personal property, such as a boat or RV, is traded in for real estate, that doesn’t qualify for a tax free swap, but still can be the basis of a deal. One person in San Diego had a moderately priced condo she couldn’t unload in this market. On my advice, she began making offers on every car or truck being offered for sale in the classified ads so long as it approximated the equity in her condo. For six weeks she offered just about every person trying to sell a vehicle her condo. Finally she was able to trade it off for a newish Chevvy to someone who would qualify to ASSUME her loan as an owner-occupant and get a full release of her debt from the lender.
Now, she no longer owes money on a condo she can’t rent, and she has a car that she can use, or borrow against, if she chooses; or simply resell by running her own ads.
The moral of this story is that you too should make it clear in your sale ads that you will accept other property in trade; and you should also offer property as part payment for houses you want to buy. It may not be tax free, but it will produce customers in a cash-starved market.
