Buyer To Cooperate- 1031

Comments(6)

• 
  nebulousd15th March, 2004

  I read it as the seller wanting to do a 1031 and depending on where the seller is in the 1031 process, they don't want anyone to come in and fool with the deal and mess it.
  
  This is a good thing for the buyer because you now know the seller is doing a 1031 and can use that to your advantage... Again, depending where they are in the 1031 process, they may end up being a motivated seller, and need to get things done quickly.
  
  You can ask the seller if they have identified the replacement property and see where things are.
  
  You can research the 1031 process to understand it better and you'll look more knowledgable when talking with the seller. so I would first research the 1031 process, if you don't already know it, and then contact the seller. The process is not all that hard to grasp and you'll only need to know the basics.
  
  Also DaveT is an excellent resource to understanding the process.

• 
  TracyH15th March, 2004

  Thanks for the reply, nebulousd. I will look further into the exchange process. The seller's agent very briefly mentioned that there are sometimes complications with an exchange- on the seller's side, that is- but I didn't have a chance to ask her about it.
  
  I'm just wondering what the buyer's cooperation has to do with it. Maybe it just means that a buyer would have to be able to close in accordance with the 180 day exchange period? I'm sure I'm missing something here.
  
  Thanks,
  
  Tracy

• 
  mykle15th March, 2004

  Most likely it means the buyer must be patient because there could be things that hold up the sale.
  
  The seller may be nervous about meeting time requirements and wants to identify replacement properties prior to making the sale to pad his time. He may be selling more than 1 property, if so, his time clock starts with the first property sold, so he wants to be sure all properties involved have buyers prior to completing any of the sales.
  
  Mykle

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  TracyH15th March, 2004

  Hi Mykle,
  
  That makes sense. I know someone who missed the 180 deadline through a miscommunication with the exchange agent- turned out to be a quite costly taxwise.
  
  I appreciate the reply,
  
  Tracy

• 
  DaveT16th March, 2004

  Quote:..."buyer to cooperate with seller on 1031." What, if anything, does this entail on the buyer's side? ...are there specific things the buyer must also do that are different from a regular purchase? Tracy,
  
  A 1031 tax-deferred exchange permits a taxpayer to sell an investment property and roll all of the proceeds of the sale into the purchase of a replacement investment property without paying any capital gains taxes until the replacement property is sold.
  
  What this means to you, the buyer, is that you will sign an escrow exchange agreement that really permits the proceeds of the sale to be held by an escrow agent of the seller's choosing. In some instances, the deed to the property may actually be executed by the seller's escrow agent instead of the seller himself.
  
  Other than signing one additional document at settlement, the rest the purchase should proceed as you might expect for a traditional purchase and sale. Except for this one document, the rest of the seller's exchange should be transparent to you. There will not be any additional cost to you beyond what you would have paid anyway in a traditional sale.
  
  I would not expect that you would gain any additional leverage in the deal with the knowledge that the seller's property is participating in a 1031 exchange. Most sophisticated sellers who know enough to structure a 1031 exchange, will already have their replacement property identified. The exchange time clock does not start until you have completed the purchase of the seller's property, so delaying the exchange does not increase the seller's motivation at all. Instead, a smart seller will take backup offers just in case you can't perform.

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  TracyH16th March, 2004

  Hi Dave,
  
  Thanks for the additional information- I think I have a better picture of the process now. It seems the buyer's "cooperation" is really not that big a deal. It helps to know what will be taking place, though, in the event I pursue a property with this kind of stipulation.
  
  As always, your help is much appreciated.
  
  Tracy