Knowledge is power! And knowledge of 1031 tax-deferred exchanges cannot only help your clients but also you. Knowing the exchange basics opens many new opportunities and the more you learn, the more you benefit.
Following are some of the many benefits of 1031 exchanges for real estate professionals:
A 1031 exchange is a sale followed by a purchase. If your client is completing a 1031 exchange, he or she must purchase a replacement property! As soon as the old property is listed, begin working with your client to identify what he or she wants to buy (location, price range, property type, etc.)
Without the tax bill, some investors leverage their funds to diversify and buy several replacement properties instead of just one.
As your client has no large tax liability hanging over his or her head with an exchange, all of the sale proceeds can be reinvested. Your client can use those pre-tax dollars to acquire more expensive properties resulting in larger commissions for you.
We all get referrals from past clients who are happy with our services. Imagine the glowing recommendations you will get from the client who saved tens of thousands of dollars (or more) in capital gain taxes! Mention 1031 exchanges to everyone, even the seller of your client’s new property. Plant the seeds now because you never know when the time for a sale will come. Investors remember who told them about 1031 exchanges and will work with that Real Estate Professional when the time is right to proceed.
Providing information on 1031 exchanges is a great way to peak the interest of property owners especially those that would like to sell their property but don’t want to pay the taxes. Send newsletters or just a letter with some teasers to past clients as well as your prospects.
Let’s face it, our clients prefer to work with a specialist and 1031 exchanges are definitely an area of expertise. List it on your on-line bios as well as the hard copy of the bio provided to your prospective clients.
Sign-up to receive Exchanging Times the monthly newsletter of 1031 CORP., with timely and informative articles, industry updates and notification of upcoming 1031 seminars and continuing education courses in your area.
Other than suggesting the 1031 exchange and putting your client in touch with 1031 CORP., there is nothing more you would have to do in a 1031 exchange. Of course, you have to sell your client’s relinquished property and help him or her find a replacement property but that is what you do best!
You are in the ideal position to recommend an exchange when appropriate. Oftentimes the Seller is unaware of 1031 exchanges and misses the opportunity to buy replacement property with pre-tax dollars. Suggest a 1031 exchange any time your Seller does not live in the property and you may be able to help your Seller defer significant gains while earning a great referral source.
1031 CORP. charges a nominal exchange fee but it does not affect your real estate commission and it will be shown on the closing statement as always.
Our Exchange Officer will need a copy of the signed sales agreement, contact information for your client and the closing details. Once we have this information, the exchange documents will be prepared and instructions provided to the closing agent. It is a very simple process.
Absolutely! 1031 CORP. will prepare and have an assignment agreement signed at closing.
While the regulations require that the Buyer of the old property and the Seller of the new property are notified of your client’s intent to complete a 1031 exchange and that your client’s rights (but not obligations) in the respective sales agreements are assigned to 1031 CORP., we do not need their cooperation.
There is no reason you cannot sign the sales agreement for the replacement property first. The dates the sales agreements are signed are irrelevant. However, it is imperative that the actual conveyance of the relinquished property occurs before your client acquires the replacement property.
It is possible to do what is called a reverse exchange but this should only be done as a last resort. Contact 1031 CORP. for additional information on this structure.
No, everything that needs to be taken care of at closing for the 1031 exchange will be handled by the closing agent. The closing agent will receive instructions from 1031 CORP. well in advance of closing and we will review them prior to closing to ensure a smooth closing for all parties.
As a real estate professional, you do not need to be an expert on 1031 exchanges but it is prudent to know how to recognize when an exchange might be advisable. An exchange works on virtually any real estate asset other than a primary residence or vacation/second home. The 1031 CORP. Exchange Team is always available to answer your questions throughout the exchange process, discussed a potential transaction or schedule a conference call or consultation with you and/or your client.
"This was my 1st 1031 exchange. Your company made the process easy and smooth! Good job from the whole team!"
-- Randeb Property & Maintenance, Inc., Shillington, PA