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Will Banks Approve a Sale that includes an IRS 1031 Exchange? Has anybody run into this?

Posted by Beth Larsen on February 7, 2013 at 7:46am in Short Sale Discussions

Hello Everybody,

Just received an offer on a short sale listing (B of A 1st, Chase 2nd).

The contract stipulates that the sellers cooperate with the buyers' 1031 Exchange. It's been a few years since I've even seen a 1031, let alone on a short sale.

Has anyone had one? And if so - were you successful in getting it approved and closed?

What should my sellers consider before accepting this offer, please?

Thanks in advance for any experience you can share.

Beth Larsen 928-284-2501

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Replies

Phyllis L Gleaton February 10, 2013 at 3:55pm

I am working on a 1031 short sale now. The offer was placed in the hands of the servicer in October, 2012. Obstacle after obstacle has been put in the path of this short sale. Since Fannie is the investor, I had to go directly to Fannie to get a resolution to the inflated property value. Now the deal has to close on Feb 20 or the buyer looses and the seller has to re-market the property. I will keep you posted.
- Beth Larsen > Phyllis L Gleaton February 13, 2013 at 8:15am
  
  Geez. Well, since our offer is otherwise solid and the buyer's sale is well-documented, we will go for it.
  
  Phyllis, best of luck with your Fannie short sale. I've found them one of the most difficult investors to work with. Hope it closes!
David W. Sorensen February 10, 2013 at 5:25am

I would never accept a 1031 contingent offer. The path of least resistance is best with short sales. Priorty being cash, conv. fha, va. etc. The downside I could see is the time line process on the buyer side. Too much risk for seller I think. Keep the short sale as simple and quick as possible. So you don't end up going through mulitple failed sales.
- Beth Larsen > David W. Sorensen February 13, 2013 at 9:31am
  
  Cash is nice but not always offered! ;^). This is a nice house but some challenges that may mean an investor is our best bet.
Paul Antonelli February 10, 2013 at 2:08am

The only issue I can see is that the buyer may not complete the sale in the allotted time frame. But like Brian says, a 1031 really does not effect the sellers outcome.
Bryant Tutas February 8, 2013 at 1:10am

Good question Beth. It's my understanding that the buyer purchasing through his 1031 exchange will have zero affect on the seller. I don't think this will make any difference to the lender since there is really nothing extra they would need to do.

To be on the safe side just have the buyer side put in writing what hey need the seller to do if anything.
- Beth Larsen > Bryant Tutas February 9, 2013 at 6:12am
  
  Thanks Bryant. In looking into it, I think it's do-able, but the time frames could be tricky. Probably more a risk for the buyer than for the seller, but if we are organized and move quickly I think it could be successful.
  - Becky Martin > Beth Larsen February 9, 2013 at 1:22pm
    
    I completed one and it is tricky on the time frame, more of risk for the Buyer for sure. Thankfully it worked out for our seller and buyer.
    - Beth Larsen > Becky Martin February 13, 2013 at 9:32am
      
      Thanks Becky, good to hear you were successful. We will need to stay on top of moving this along, for sure.