Posted by Anne-ND on July 12, 2001 at 08:37:57:
Eric,
Thanks for the suggestion about the title company. My attorney owns one of the two title companies in town, I’ll check with him. I didn’t think I was going to get into exchanging this soon, but it’s a very interesting subject.
I’m going to see the Fab Four in October (Miller, Fortunato, Schaub & Napier), which is why I have the tape. I’m looking forward to a mind-blowing experience.
best regards,
Anne
Broker/exchanger question - Posted by Anne-ND
Posted by Anne-ND on July 09, 2001 at 13:36:41:
Hi All,
An enterprising broker in town called me to ask if we’d like to exchange any property with another investor that he works with who wants to sell property that he’s depreciated out.
I know very little about exchanges beyond what I’ve read about 1031s here. I told the broker we’d pay the normal fee if we did this with him (we already know the investor) and he said he didn’t know what that was, but it’s clear he wants to make a fee on the sale as well as a fee on the exchange.
This broker hasn’t done an exchange before- am I wrong in thinking that you need to use someone who’s a licensed exchanger in order to do this? Someone who’s got a CCIM?
Thanks for any insights,
Anne
Re: Broker/exchanger question - Posted by SueC
Posted by SueC on July 10, 2001 at 09:57:03:
Ann, you do need an intermediary but not a CCIM. Check out the website www.rexn.com. To exchange you don’t necessarily need to find someone else who wants to exhange their property, only someone who is selling, and use the intermediary to accomplish the part where you are not allowed to receive the money but it has to go directly into the new property.
Some exhcnagors charge more because they set it up the careful way, which is form an LLC to hold the property instead of in their own account. The latter puts you at risk if something happened to the exchangor, like they filed bankruptcy or something. Some folks feel that the LLC route is a little too anal and adds only to the cost, but then some folks prefer to be covered.
There is an EXCELLENT and detailed description of exchange rules and scenarios in the book The Real Estate Investors Tax Guide by Vernon Hoven.
Re: Broker/exchanger question - Posted by Ronald * Starr
Posted by Ronald * Starr on July 09, 2001 at 21:10:33:
Anne-----------
No, I’ve never heard of a “licenced exchanger.” You don’t need a CCIM. You don’t need a real estate broker. Most exchange people are not brokers. Some are attorneys.
There are probably about 180 million people in the United States who could, by the IRS regulations, be your facilitator. Not including your accountant, attorney, and, I think, you family members. Possibly several dozen of those 180 million people you won’t want handling your money. Maybe more? I suggest you probably want a seasoned professional.
Eric gives you the cost figures. Incidently, you can hire any exchange person or group across the country. If there are not very experienced ones where you live, you can hire somebody from Los Angeles, San Francisco, or Berkeley CA. Telephones, faxes, and express delivery services make this possible.
There is one guru, not welcome on CREONLINE.COM, that advocates a real cheap way to do the exchanges whereby your money is put into a joint signature bank account with somebody else. If you have a person you can trust and who will do what you say, you might want to try that approach.
Good InvestingRon Starr****
Re: Broker/exchanger question - Posted by Jay_TN
Posted by Jay_TN on July 09, 2001 at 20:24:35:
The intermediary must be qualified, and be a third party. The intermediary cannot be your lawyer, or any professional with which you’ve had a previous relationship. According to the IRS, this helps to ensure that you don’t get any money under the table which might be hidden from tax liability.
The cost of a 1031 exchange is typically around $500-750 per exchange, and if you exchange into or from more than one property, you’ll typically pay another $200-300 per property. For example, if you sell one property and buy another, the fee would be ~$750. If you sell one and buy two, your fee would be ~$1000. Some intermediaries are more expensive. Some are cheaper. I advise you to contact one of your local title companies. Many times they have a partner or subsidiary company which serves as an intermediary.
As far as whether this broker should get a fee is your decision. You’ll need to evaluate if the exchange presents the advantages to justify his fees.
HTH,
jay, a.k.a yung and stupid
Re: Broker/exchanger question - Posted by Eric C
Posted by Eric C on July 09, 2001 at 13:44:03:
Hi Anne -
Yep, there are very specific rules about who can and cannot be a party in an exchange transaction – and I’m sure that someone here will post a more detailed description. (if they don’t, get back to me)
But my main point would be, why are you willing to pay an extra fee to some guy who represents the other side here? And a guy (from your description) who is completely clueless about the fine points of exchanges?
After all, who benefits most here? You, or his client? Make sure you know the answer to that question before you agree to pay any fees.
Yours,
Eric C
PS - I could post more, but I am not at my computer (testing this one at the store – and getting some evil looks too!) Take care.
Re: Broker/exchanger question - Posted by Anne-ND
Posted by Anne-ND on July 10, 2001 at 14:32:56:
Thanks Sue, I’m finding the subject of exchanging to be fascinating. I’ll check out the Hoven book right away.
take care,
Anne
Re: Broker/exchanger question - Posted by Joel - MN (soon to be IN)
Posted by Joel - MN (soon to be IN) on July 09, 2001 at 15:56:25:
Gotta like a guy who’ll go to CREonline when he’s at the store! No sense wasting valuable testing time.
Good luck.
Joel
Re: Broker/exchanger question - Posted by Anne-ND
Posted by Anne-ND on July 09, 2001 at 14:41:52:
Hi Eric,
We don’t intend to deal with this broker on exchanges, but I wanted to be sure my suspicions were correct (that he knows not whereof he speaks). I’ve been driving around town today listening to a Jack Miller tape on the early days of exchanging, which prompted my question.
Thanks for your comments,
Anne
PS Did you buy the computer?
Re: Broker/exchanger question - Posted by Eric C
Posted by Eric C on July 11, 2001 at 07:58:56:
Hi Anne -
Just the thought of you driving around listening to Jack Miller brings back memories. Of course, in the “real” old days, he didn’t have much out in the way of tapes.
In fact, I wouldn’t have been surprised to see Jack search folks for tape recorders at the sessions!
He and Schaub had a history of teaching others who took their ideas public and profited nicely from them.
About that exchange - I thought that some of the larger title companies performed these services too. Old Republic, Stewart, etc. You could check.
One major reason for the qualification of the intermediary is to prevent “constructive receipt” of the funds which, in my opinion, is the easiest way to blow an exchange.
Take care,
Eric C
PS - nope, I didn’t buy “their” computer. I did buy some parts (I’m building a Linux server on the side) and some software (looking to get rid of Windoz).