Are 1031 Exchange Res. Properties Lower Priced - Posted by Mark Hadleberg

Posted by Rich[FL] on June 07, 2005 at 11:56:55:

My guess is this: under a 1031 exchange, the time allowed by the IRS to qualify for a 1031 is quite limited. I’ll bet the price has been lowered to ensure a quick sale.

No doubt that he’d lose more money to taxes if he had to pay capital gains than he would by simply lowering the price as is indicated.


Are 1031 Exchange Res. Properties Lower Priced - Posted by Mark Hadleberg

Posted by Mark Hadleberg on June 07, 2005 at 11:40:30:

I’m kind of confused and hope that someone can explain this to me. I am in San Francisco and I was looking at some residential properties and I noticed that one home was going for about $50,000 lower than the rest but that home was being sold as a 1031 exchange. The home has tenants and the property is being used as investment property. So would using a 1031 exchange lower the value of a residential property since I suppose most people looking at residential property are people who actually want to live there and not use the residential property for investment. So then you would not get as many competitive bidders and a lower price on the property.

Or does this have more to do more with the fact that there are tenants living there and under the strict San Francisco tenants law they are harder to evict by a new owner who wants to move in when the tenants are on a lease or something like that. I’m just not exactly sure what the reason might be for the lower price but I have a feeling that wanting to buy a home to live in that has tenants is not such a good thing.

Re: Are 1031 Exchange Res. Properties Lower Priced - Posted by Sailor

Posted by Sailor on June 07, 2005 at 19:52:01:

Also a factor could be that some buyers are leery of 1031 just because they think it is too complicated. Good agents & an escrow co. specializing in 1031’s (some in CA do ONLY 1031’s) should smooth the road for you as buyer. Like any other RE deal, keep both your own eyes on the details–no one else w/love your deal as much as you.


Go get that expert - Posted by John Merchant

Posted by John Merchant on June 07, 2005 at 18:22:44:

A couple of thoughts here.

First, why in heck wouldn’t you, as a newbie, go find yourself a Buyer’s Broker/Agent to represent you and help you find the best possible deal…instead of trying to go it alone, and without the knowledge or experience to do it really well ?

Secondly with any 1031 question, there are myriad 1031 companies which advertise in the yellow pages and online, and any of which would quickly get you to one of their exchange experts to freely answer any questions you might have.

So I’d sure recommend you quickly avail yourself of the opportunity to work with an expert or two…as your cost in doing so will be minimal and you need their expertise.

Re: Are 1031 Exchange - Posted by dealmaker

Posted by dealmaker on June 07, 2005 at 18:15:46:

I’m pretty sure it would be caused by the fact that there are “difficult to get rid of tenants” in it. Leases run with the property, NOT with the property owner.

I doubt that Rich has hit it as in a 1031 the “relinguinshed” property sells before the “replacement” property is acquired. Unless the original deal on the sale fell through and he started the clock by closing on the replacement. But heck in SF $50,000 is probably 5%-10% of asking price, not a huge PC difference. And a “slow” sale in SF is probably 2 weeks instead of 1.