1031 Exchanges in the Lockdown Economy
Updated: Jun 2
How has COVID-19 affected the real estate market?
The novel coronavirus and measures taken to contain its spread have rocked the U.S. economy in a manner that is, in some ways, unprecedented. The real estate market has not been spared: in many areas, lockdowns have shuttered businesses, driving up vacancies; asking prices have dropped; property viewings in locales with shelter-in-place orders have been put on indefinite hiatus.
However, there is a silver lining for those looking to conduct a 1031 property exchange: it’s a buyer’s market. (Thinking of conducting your first 1031 exchange? Read our recent article on the five things you should know.)
“But wait,” you may be saying to yourself, “to complete a 1031 exchange, I have to sell my current property too!”
This is true, but you don’t need to wait until you’ve sold your existing property to make a desirable — and perhaps well timed— purchase in the down market.
1031 reverse exchange —
your best option if you can’t sell first
The most common 1031 exchange structure is the forward exchange: you sell your relinquished property, then buy the replacement property afterward.
But for those needing additional flexibility, a 1031 reverse exchange enables you to buy a new property first and sell yours later (within 180 days). This is done utilizing a “parking arrangement” whereby a Qualified Intermediary (QI) holds the replacement property until the relinquished property can be sold.
Work with the nation’s most trusted 1031 facilitator
A reverse exchange is more complex than a forward exchange, and not all QIs are able to facilitate them — in many cases (as with some bank-owned QIs) because they don’t wish to hold title to the new property, and in other cases because they simply don’t know how to navigate the IRS’s “safe harbor” guidance.
This is one reason it can pay to select a QI carefully. At Granite Exchange, our general counsel is a leading authority on structuring 1031 exchanges — in fact, she co-authored the IRS Revenue Procedure governing reverse exchanges. So we’re equipped like no other QI to help you facilitate a complicated exchange, in these complicated times.
What can we help you exchange?
Granite Exchange, we’ve put together an industry-leading track record of 1031 success, across tens of thousands of transactions and more than 20 years in the business.
If you’re considering a real estate exchange, you’ve come to the right place. Give us a call at 1-800-899-6959, or schedule a free consultation (with no obligation) by filling out the form below!