Home Buying in 91106>Question Details

newinvestor,  in 91106

How does 1031 exchange affect buyer?

Asked by newinvestor, 91106 Wed Mar 3, 2010

I want to purchase a property whose seller wants buyer to "coop in 1031 exchange". I understand the tax advantages of 1031 for the seller but not sure how it affect the buyer. Does this mean I can't close escrow until the seller closes within the required timeframe? From a financing standpoint, what happens when a loan is approved but I can't close escrow because the seller isn't ready?

Help the community by answering this question:


Great question, 1031 doesn't reflect on the buyer.

In a typical transaction, the property owner is taxed on any gain realized from the sale. However, through a Section 1031 Exchange, the tax on the gain is deferred until some future date (e.g., the future resale of the home you will purchase with the proceeds from the sale of a current property).

To learn more, check out this post:

1 vote Thank Flag Link Sat Jan 5, 2013
Thanks for all the responses.

Edward - the possible delay is what worries me. I thought lenders usually give you a timeframe to accept a loan. If i can't close within that timeframe, i would lose the deposits and lending fees. Correct?
0 votes Thank Flag Link Wed Mar 3, 2010
A 1031 exchange shouldn't effect the buyer. With a 1031 exchange, the seller needs to identify a like property within a certian timeframe to avoid paying taxes on the sale. The seller can still close according to the contract.
0 votes Thank Flag Link Wed Mar 3, 2010
My experience is that it does not affect you as the buyer. It is a disclosure
a seller must inform you of. Do you need assistance in you search?

0 votes Thank Flag Link Wed Mar 3, 2010
No true affect on buyers only possible delays of closing your transaction. It's all on the Seller side for Tax purposes.
0 votes Thank Flag Link Wed Mar 3, 2010
For all practical purposes, it shouldn't affect the buyer at all. You should just proceed as a normal sale. The seller just has to disclose that it is a 1031 exchange.
0 votes Thank Flag Link Wed Mar 3, 2010
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