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The Reverse Exchange
A reverse exchange is a way to purchase your replacement
property prior to completing the sale of your relinquished property. This type
of exchange is more costly and more complicated than a standard delayed
exchange. The reverse exchange is the perfect vehicle to use, however, if you
have located the purchase property and can’t wait for the other property to
sell.
There are two types of reverse exchanges:
Exchange First – In
this scenario, the accommodator "purchases" the property from you so
that you can exchange into your desired property. In order to complete this type
of exchange, you need to have the funds available for the accommodator to use to
buy the property from you. You then have the same 180-day time frame to complete
the purchase of your replacement property.
Exchange Last – In
this scenario, the accommodator "purchases" your replacement property
from the seller and holds it until you sell your relinquished property. You must
provide the accommodator funding to purchase the property from the seller. A
recent IRS Revenue Procedure set up "safe-harbor" guidelines for this
type of exchange. You now have 45 days to identify the property you plan to sell
and 180 days to sell the property and purchase the replacement property held by
the accommodator. Exchanges set up outside the "safe-harbor"
guidelines are possible but may not be as safe. The "exchange last"
scenario is often used by individuals who plan to improve a piece of raw land
prior to exchanging into the property.
Executive Exchange is qualified and experienced in reverse exchanges. Please
call one of our representatives for further information and prices.
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