1031 tax deferred exchanges provide real estate agents with a tremendous opportunity to increase commissions! Conversely, by not understanding a few key exchange concepts, real estate agents often can unknowingly incur increased liability. I have provided answers to questions frequently asked by real estate agents. Contract law varies from state to state. It's important to know the law regarding the assignability of contracts in your state. In California, contracts are freely assignable unless there is specific language within the contract restricting its assignability.
Q: When should the Intermediary be contacted?
A: As soon as the purchase/sale contract is signed. Asset Preservation, a leading national "Qualified
Intermediary," does not charge a cancellation fee if the transaction does not close.
Q: What language should be added to the Purchase and Sale Agreement?
A: The language below is satisfactory in establishing the Exchanger's intent to perform a tax
deferred exchange and releases the other parties from costs or liabilities as a result the
exchange. It also provides notice to the Buyer that the contract will be assigned to the QI for 1031 exchange purposes:
"Buyer is aware that Seller intends to perform an IRC Section 1031 tax deferred exchange. Seller requests Buyer's cooperation in such an exchange and agrees to hold Buyer harmless from any and all claims, costs, liabilities, or delays in time resulting from such an exchange. Buyer agrees to an assignment of this contract to Asset Preservation, Inc. by the Seller."
Q: Who should I contact to set up an exchange?
A: You can call either National Headquarters toll-free .800.282-1031 or info@apiexchange.com.
Q: What should be done so I do not incur a potential additional liability?
A: Everytime you list any property that may have been "held for investment" (ie. rental house,
second or vacation home, duplex, land, etc.), recommend that your client talk to their legal
and/or tax advisors about the benefits of a 1031 exchange. You can also suggest that your
client call an experienced Qualified Intermediary. Exchanges have been a part of the tax
code since 1921. As a licensed professional, a real estate agent can't afford to say "I don't
know anything about exchanges because I specialize in residential."
Q: Can exchanges be set up at the last minute?
A: Yes, as long as the transaction has not closed. Asset Preservation can successfully convert a
sale into an exchange. Documents can be prepared and faxed to the title company within a
matter of hours.
Q: If my clients have more questions, where can they go for more
information?
A: Call Asset Preservation's toll-free number, email info@apiexchange.com or visit our Internet site: http://www.apiexchange.com/.
Lisa A. Lambert, Esq. 877.646.1031 or LisaL@apiexchange.com
Asset Preservation,Inc. 800.282.1031 or info@apiexchange.com or http://www.apiexchange.com
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Hello Lisa I really love your blogs because they are very informative. I live in Florida so I will check out the law issues here as well. Take care, Abi