In this 1031 FAQ video, Jeff Peterson offers a few 1031 exchange tips for title closers. Watch more 1031 educational videos here.
Many title closers have questions about how to set up the closing statement and what transactional expenses are permitted to be shown on the closing statement.
First let's talk about the relinquished property that a taxpayer is selling. Remember that all of the equity (all of the net proceeds) needs to be moved into that replacement property so we don't want to clutter up the closing statement with a bunch of transactional expenses that should really be paid out of the seller’s own pocket.
Next, security deposits, taxes, and things that the seller would normally pay out of their own operating account. To the extent that we can pay those out of closing and have the seller come in with their own funds for those transaction expenses, the better we're going to be.
Moving forward to the replacement property again there are certain expenses that should not be paid for out of the 1031 exchange. Unusual expenses for insurance for example, or even cost of the new loans such as loan origination fees, rate lock fees, and underwriting fees that the lender charges. In an Ideal World those transaction expenses would be paid for out of closing by the seller or in this case the buyer.
- 1031 Hotline: If you have questions about closing on a 1031 exchange, feel free to call me at 612-643-1031.
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