1031 exchange - Posted by Mich_Mike

Posted by Ronald * Starr(in No CA) on May 18, 2003 at 22:54:31:

William L. Exeter-------------

Thank you for your analysis. What you say makes a lot of sense. I think you are right to point out the benefits of dealing with a strong organization.

I see the risks that you mention having a single person as an accomodator. Fortunately, that exchange is behind me, so I don’t have to worry about it. It was a very short time between the sale and the purchase of a new property, about two or three weeks, so that reduced my risk a lot. However, that is not to argue with you about the risks you point out.

I think, as a professional in the field, that you should defend the practices of those who operate as you do. I think you should point out the potential problems for those who do not use services such as the one you offer.

Although it might be interesting to see some analysis about the probablity of the various risks. And whether higher-priced providers present a lower-level risk than do the lower-priced providers.

Good Investing and Good IntermediaryingRon Starr**

1031 exchange - Posted by Mich_Mike

Posted by Mich_Mike on May 12, 2003 at 13:45:39:

Hello all,
I have a property that I am selling with a good deal of equity in it. I am interested in doing a 1031 tax exchange so I won’t have to pay the hefty cap gains tax.
I am wondering if there are some recommendations on who to use as a facilitator for the transaction. Any good experiences and/or horror stories you can share? Thanks in advance.
Mike

Things to look for in a QI - Posted by William L. Exeter

Posted by William L. Exeter on May 18, 2003 at 01:48:17:

Hey Mike, I have been running 1031 exchange companies since 1986 and I agree with all of the comments and recommendations in response to your post, except for the $300 to $500 fee comment. Always check their bonding levels and insist on copies of the insurance binder to prove they have coverage, including their fidelity bond coverage (crime insurance, employee dishonesty) and errors and omissions insurance (human error). Also, as the Qualified Intermediary (QI or Accommodator) if they will set-up a Qualified Escrow Account or Qualified Trust Account as part of the 1031 Exchange and include it with their normal fee. The Quaalified Escrow or Trust Account helps protect you in the event of a bankruptcy filing on behalf of the QI, otherwise you will be considered part of the bankruptcy estate and subject to creditor claims. Call or email me if you have any further quesitons. (800) 972-1992.

Re: 1031 exchange - Posted by Nate(DC)

Posted by Nate(DC) on May 13, 2003 at 21:09:11:

I have used Starker Services, (800) 332-1031, and was satisfied with the service. Their fee is $750.

NT

Be careful - Posted by randyOH

Posted by randyOH on May 13, 2003 at 12:33:02:

Mike,
I am in the same situation as you right now. I have decided to use a big national title company to handle my transactions. There are many small escrow companies that provide exchange services but you have to think about the security of your money. In 1992 in Orange County, CA, an exchange accomodater skipped out with over $4 million.

I asked the owner of an escrow company about the security of my money. She said there is no bonding, nothing. She said all you have is my word that I won’t take off with your money.

So I am looking at First American Title and Investment Property Exchange Services. These are big national corporations. They do have insurance and bonding. And I just do not see the same level of risk as I see with a small company owned by one individual.

HTH,
Randy

Re: 1031 exchange - Posted by Earl

Posted by Earl on May 13, 2003 at 08:07:14:

I’ve done several, and you want to look specificially for the term ‘exchange accomodator.’ One who’s qualified will know what that means.

One horror story I did not do but I heard elsewhere was someonee trying it didn’t realize they had to use an agency specifically designated to be an exchange accomodator. They casually called up a realtor simply saying they had sold a property, put a huge sum of $ in their personal bank account, and now wanted to do a 1031 Exchange. The realtor sadly had to tell them sorry Charlie, you just blew it.

Be sure you find a ‘qualified accomodator.’ Start with local title companies, then maybe local realtors. They should steer you the right way. Ask about fees. A typical ‘Accomodation fee’ may run $300-500 or so. But done right it’s worth it because they’re keep you out of trouble with the IRS.

Re: 1031 exchange - Posted by Dave T

Posted by Dave T on May 12, 2003 at 19:53:19:

In addition to the resources Ron Starr gave you, check with your own bank. The trust department of your bank can act as the exchange escrow agent for you as well.

Re: 1031 exchange - Posted by Dave T

Posted by Dave T on May 12, 2003 at 19:53:00:

In addition to the resources Ron Starr gave you, check with your own bank. The trust department of your bank can ask as the exchange escrow agent for you as well.

Re: 1031 exchange - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on May 12, 2003 at 14:04:23:

Mike–(MI)-----------

Using last year’s Info USA PowerFinder phone disk, there is a category for exchange accomodaters. This is 653125. You might see if the local library has that program handy. Many used to have it before the internet sites got popular.

Otherwise, there are many accomodaters here in the San Fran Bay Area which charge about $700 for a simple exchange. You can communicate with them with long distance. If your find the local people too high-priced, try those here.

You can usually find them at the major title companies.

Good InvestingRon Starr********

1031 Exchange Fees - Posted by William L. Exeter

Posted by William L. Exeter on May 18, 2003 at 01:42:47:

Beware of the low fees. The exchange company is either keeping all of the interest to make up for the low fees or they are not bonded, etc. The standard fee for most reputable, well bonded exchange company is in the neighborhood of $750.00, not $300.00 to $500.00. It is the old buyer beware.

Re: 1031 Exchange Fees - Posted by Ronald * Starr

Posted by Ronald * Starr on May 18, 2003 at 08:35:23:

William L. Exeter--------------

I think it is good that you point out possible problems wtih exchange accomodators.

However, I don’t think you can judge exchange accomodators by the price.

The accomodators typically do very little work for their fees. They probably have set up all of their forms and resuse them over and over, again contributing to their effeciency.

I used John T. Reed’s materials on 1031 exchanges and used a good friend of my as the accomodator. Cost no money. Went smoothly. He points out in his materials that there is no reason for high fees.

Do you have any evidence that lower fees are related to poorer service?

Good InvestingRon Starr******

Re: 1031 Exchange Fees - Posted by William L. Exeter

Posted by William L. Exeter on May 18, 2003 at 18:32:43:

Hi Ron,

I have never linked fees with service - poor or good. The comments in my post were all related to financial strength, such as bonding. I have been in the 1031 Exchange industry since 1986 and we have noted in all of our fee comparisons that we have done over time that there is always a very close correlation between fees and financial strength - hence my comment about beware of lower fees and that you get what you pay for. It is too bad that many people always go for cheap, but they do so because they do not understand what they are really getting, or if they do they may not understand the full extent of the risks they are taking. For example, in your example where you used Mr. Reed’s 1031 Exchange documents and then used a good friend as your accommodator, there are a number of risks, which include voluntary or involuntary bankruptcy, death (God forbid), and theft. There can be many reasons that someone files for bankruptcy and it may not be something that either of you anticipated, but it would result in your 1031 Exchange proceeds getting tied up in the bankruptcy proceedings and the friend’s creditors would certainly take a stab at them. And, unfortunately, you can never predict death. The death of an individual acting as an Accommodator would result in your 1031 Exchange funds getting tied up in probate and would almost certainly prohibit you from completing your 1031 Exchange within the 180 day period. Finally, I realize that you used a trusted friend, but I have seen many “trusted” individuals over my career prove that everyone has their price tag. For these three important reasons, I would never use an individual because the potential risks are too great. I would always look for a corporate entity that is well capitalized, well bonded, well established, and hopefully closely regulated. The safety of the client’s funds is paramount in our business, technical knowledge should be second, service should be third and fees should be fourth. Why take the risk, hence my comment - you get what you pay for.