Reduce notary expenses by half through an obscure real estate acquisition method
Swapping Apartments for Reduced Notary Fees: The Unconventional Real Estate Trade
By Christine Lejoux - Real Estate Manager, published on
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Preparing for a new addition, Bob and Lucie are in the market for a larger apartment. With recent increases in notary fees due to the 2025 finance law, their second acquisition will likely be costly. To cut down on these expenses, they might want to consider apartment swapping, a less common but beneficial real estate trade. Frédéric Kopp, founder of Bea, a startup focusing on real estate swaps, champions this alternative.
A practice dating back to the Napoleonic Civil Code of 1804, apartment swapping has been used in various scenarios such as farmers harmonizing their land or neighbors exchanging marginal rooms to add an extra floor or create a duplex.
Real Estate: Departments Lightening Notary Fees despite Increases
Lower Notary Fees with Real Estate Swaps
One of the primary advantages of this relatively unknown property acquisition method is the substantial reduction in notary fees. In a traditional purchase and sale, notary fees represent 7% to 8% of the property's purchase price in the old. In contrast, apartment swaps see notary fees only amounting to:
- 5% of the cheapest property's value
- 1% for the most expensive property
- Approximately 6% of the difference between the two properties
These fees are then split evenly between the two owners based on the value of their property.
Let's take an example: Bob and Lucie have their eyes on their neighbors', Alice and Pierre's, apartment, which is worth 400,000 euros. If they simply buy it, they'd pay around 150,000 euros in notary fees. However, if they were to swap apartments, they'd only pay 14,457 euros and 10,843 euros, respectively - a significant saving of 54.82%.
Clear the Loan before Swapping Your Apartment
Launched a year ago to promote home swapping, Bea has around 1,200 properties listed on its site. As Frédéric Kopp explains, home swapping can benefit young parents seeking larger homes with gardens, retirees preferring smaller city center apartments, or those looking to relocate from secondary residences by the sea to the mountains or expats returning to their homeland.
The key hurdle in apartment swapping is having a pending loan on the property as it must be paid off before the swap can occur.
Real Estate Swapping: 1031 Exchanges
In another context, more sophisticated investment properties use 1031 exchanges to sell and purchase similar or greater value properties while deferring capital gains taxes. This strategy, popular for portfolio diversification and relocation, involves several key steps:
- Consult a tax advisor or attorney to confirm the strategy aligns with your goals.
- Sell the current investment property.
- Utilize a qualified intermediary to manage and hold the sale proceeds.
- Identify potential replacement properties within 45 days of the sale.
- Complete the purchase within 180 days of the sale.
In terms of notary fees, 1031 exchanges could potentially reduce the need for multiple notarizations, resulting in potential cost savings due to the single intermediary managing both transactions. However, the specific impact would depend on the complexity of the transaction, intermediary policies, and local regulations.
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- By considering apartment swapping for their second real estate acquisition, Bob and Lucie could significantly reduce notary fees, making their larger apartment more affordable. In an apartment swap, they would only pay 5% of the cheaper apartment's value, 1% for the more expensive one, and approximately 6% of the difference between the two properties.
- Home swapping can cater to various lifestyle changes, such as families seeking homes with gardens, retirees looking for smaller city center apartments, or people relocating from secondary residences. One hurdle, however, is that all loan payoffs must be settled before the swap can be executed.
- Meanwhile, for those involved in investing in real estate, 1031 exchanges could be an alternative strategy. This method allows for selling and purchasing similar or greater value properties while deferring capital gains taxes. In the context of notary fees, 1031 exchanges could potentially lead to cost savings due to a single intermediary managing both transactions, but the specific impact depends on the complexity of the transaction, intermediary policies, and local regulations.
