21.2 – Case Study

Do not tell anyone that you are doing a 1031 exchange. Not even your broker. At some point this may be relieved but not like this buyer of one of my properties who the broker screwed him by letting me know they have a 1031 going on and only have till May 10th or be locked into this deal:

Lane,

Good morning. Our transaction team is looking for an update on 2157 Sara Ashley Way. The buyer has sent along the below message for your review and response. Please address it at your earliest opportunity as we’d like to ensure this is as successful of a sale as possible.

Buyer Note to Seller:

“Lane,

I’m looking forward to getting this deal moving forward and closed. I have a GC standing by to complete an inspection and provide a scope of work to be completed post close. My lender is ready to go with the appraisal as soon as we can get access to the home. I believe we will be able to close this relatively soon pending access to the property. I am getting a bit concerned with timing as I am in a 1031 Exchange. With this contract, my funds are 100% allocated but my last day to identify any future properties is May 10th. There is obviously some access concern given it had been communicated that 4/18/19 was the date in which we would understand when the tenant would be out. We are now at May 1st and we don’t have confirmation that the tenant has left. I have every intention of closing this deal but as you can appreciate, I need to have a firm understanding of my expected rehab costs before the end of my identification period. What I can’t afford to do is exceed my identification period and this deal fall out as I would incur capital gain charges against my investment funds.

Appreciate any color you can provide on the situation at this time.

Best,
Chris”

Please let me know what new information I can pass along; this sale’s inspection contingency and appraisal contingency both currently expire on 5/8 with an aim to close on 5/20.

Best,

Simone/Roofstock.com

PS – On another transaction, I was absolutely extorted out of an extra $5,000 because the seller knew I was doing a 1031 and played hardball after my lender had a minor delay. They would not extend the contract unless I increased the price. This even happens on bigger commercial properties. A friend of mine said that he was told by his broker that he need to come up $400,000 on a $9M property because everyone knew he was using 1031 money.