Hello
Melissa and I wanted to wish everyone a happy last day of fun before the kids are back in school next week. We know that once the kids are back into their routine everyone will be looking for new ways to bring more transactions under contract. Remember to keep Seller Finance Transactions, 1031 Exchanges and Assumptions in your mind.
If you are working with an investor that is having a hard time selling investment properties it might be a good idea to contact other Agents that have other investor properties listed. Who knows maybe they could do a True Exchange to facilitate the recapture of depreciation etc. Remember, like kind exchange does NOT mean the same type of properties, it just means Real Property for Real Property. As long as it has not been the investors principal residence it should qualify.
I received this Bulletin from First American Exchange. I use them for some of the 1031 exchanges I do and I thought this was a great explanation of the Reverse exchange transaction.
I do 1031 Exchanges frequently so let me know if I can help you with one!
Thanks
Robin Moran
Backman Title Services
Reverse 1031 Exchanges Open New Opportunities
An investor who is doing a 1031 exchange may need to buy replacement property prior to the closing of the sale of the relinquished property, either because the relinquished property has fallen out of escrow, or because the investor has found the perfect replacement property before he is able to sell the relinquished property. In these cases, the investor can save his exchange by doing a “reverse” 1031 exchange.
In a reverse exchange, the investor is able to close on the acquisition of the replacement property before the relinquished property is sold to a third party buyer. This is done by temporarily “parking” either the replacement property or the relinquished property with a third party “accommodator.” In each case, First American Exchange acts as the qualified intermediary and also creates a limited liability company that temporarily takes title to the property.
Safe Harbor Rules
All of First American’s reverse exchanges are done in accordance with the IRS’s safe harbor rules of Revenue Procedure 2000-37, which means that the entire transaction must be completed within 180 days of the first closing. Under the safe harbor rules, the entity that takes title to the parked property is called an “exchange accommodation titleholder” or “EAT.” The benefit of the safe harbor is that the EAT can be considered the owner of the parked property for tax purposes, even though the EAT does not receive any income from the property or pay any expenses of the property.
The two types of reverse exchanges are referred to as the “exchange last” and the “exchange first” reverse exchange.