Check with a reliable 1031 exchange company, I don’t see how their financing arrangement will blow your exchange.
Why I am checking in, is to make a suggestion, the IRS likes it when you declare your intentions to do a 1031 exchange from the beginning of a transaction, so I would like to suggest you change your lease-option forms to include a clause that seller intends to do a 1031 exchange in the future and buyer will co-operate at no cost to the buyer. This does not commit you to a 1031 but is there in case you do.
Can I do a 1031 Exchange in this scenario? - Posted by Brett Schuler
Posted by Brett Schuler on May 17, 2006 at 21:36:13:
I have a lease option tenant who is looking to exersise their option and purchase the property. The purchase price is 245k, the appraisal is 290k. Their loan officer is setting it up as a refinance, since they have been in the house for over 12 months. Do I have to go along with this? Can I still do a 1031 exchange if it is set up like this?
Based on the facts presented you should be fine as long as your 1031 follows the proper steps, ie, you are the current owner on title and you exchange into a property under the same ownership as you have now. This should fall under a basic exchange that my firm only charges $199.00 to complete, so don’t fall for any additional fee claims.