I received an offer on one of my listings last week. We negotiated terms and the contract was signed by both parties.
The morning after the execution of the offer, the buyer's agent calls me up and says: " my clients want to cancel the deal. They own another property that they want to sell later on and their accountant told them to sell that first and buy something else later, so they can do a 1031 exchange and do not have to pay taxes on the gain."
Now, I have become somewhat obsessed with 1031 exchanges (I think it is the best tool that the IRS has given investors) and I have taken a few seminars on it, read a lot about it and become very knowledgeable on the subject, and so I explain to her that this accountant that her clients have hired is only giving them half of the information. While it is true that if you sell an investment property and buy another one within the IRS guidelines, you can defer the taxes on the gain, but what this accountant is failing to explain to their clients is that the IRS is been so nice to investors, that doesn't only allow them to defer the taxes on the gain when selling and then buying, but they also let investors do what they call a reverse exchange. A reverse exchange is a process that gives an investor the ability to buy a new property prior to the sale of the old property they intend to sell and still defer the taxes on the gain (provided of course that the guidelines are followed.)
The agent had never heard of this and although somewhat confused, said she would go the her clients and tell them there was a choice; they didn't have to lose the property that they had loved so much. I referred her to the Exchange Experts (http://www.expert1031.com/), a very good QI in case you ever need one, for more information. Equipped with this, she went back to her clients and we saved the deal.
This deal just showed me once more that you should always look to learn more about everything. You just never know when you'll need it.
How has knowledge of something saved you a deal?
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