It's a seller's market here in Austin, and in much of the country. There is very little inventory, and some properties are getting multiple offers the minute they hit the market. How does this impact a 1031 exchange? Since sticking to the timeframe laid out in the 45 day and 180 day rules is a must, planning the execution of the exchange becomes key.
First, DO NOT wait until the last minute, (i.e. the 45th day) to identify your 3 properties, without ever really looking at or considering them in detail. You'd be surprised how often people wait until the last few days, then begin to look for replacement properties. The process of looking for a replacement property should begin when you know you will close on the relinquished property, likely a few weeks or so before the actual closing.
Keep in mind that in a seller's market, some of the properties you are considering may not even be available once you are ready to make an offer. And there's no telling if the offer you make on the first property will even be accepted and you'll go under contract. It is wise to at least have one property that you can make an offer on in mind very soon after you close. If it does not go through, identify some other properties that are also acceptable to you, and don't spend too much time hesitating or negotiating. Remember, the capital gains you are saving is worth a little bit of wiggle room in negotiating, especially from the buyer side.
If you've waited until the last day to identify your three properties, then you must end up closing on one of them. Don't wait to get one under contract, or you could come down to your last choice, and very little negotiating room, or worse, no choices at all, and a failed exchange. Even though you have, in theory, 4 1/2 months until you have to close, this again becomes a case of "don't wait till the last minute".
Another solution to all of this is to do a Reverse Exchange, which I will cover in another post! Visit us at 1031 Exchange Austin for more information on this and other 1031 topics.
First, DO NOT wait until the last minute, (i.e. the 45th day) to identify your 3 properties, without ever really looking at or considering them in detail. You'd be surprised how often people wait until the last few days, then begin to look for replacement properties. The process of looking for a replacement property should begin when you know you will close on the relinquished property, likely a few weeks or so before the actual closing.
Keep in mind that in a seller's market, some of the properties you are considering may not even be available once you are ready to make an offer. And there's no telling if the offer you make on the first property will even be accepted and you'll go under contract. It is wise to at least have one property that you can make an offer on in mind very soon after you close. If it does not go through, identify some other properties that are also acceptable to you, and don't spend too much time hesitating or negotiating. Remember, the capital gains you are saving is worth a little bit of wiggle room in negotiating, especially from the buyer side.
If you've waited until the last day to identify your three properties, then you must end up closing on one of them. Don't wait to get one under contract, or you could come down to your last choice, and very little negotiating room, or worse, no choices at all, and a failed exchange. Even though you have, in theory, 4 1/2 months until you have to close, this again becomes a case of "don't wait till the last minute".
Another solution to all of this is to do a Reverse Exchange, which I will cover in another post! Visit us at 1031 Exchange Austin for more information on this and other 1031 topics.
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