I read that if the mortgage note is issued to the qualified intermediary's (QI) name, the parties can now use the value of the note to purchase the replacement property. Is that the same as a reverse exchange, where the buyer has to loan you the money? This is ultimately what I'm trying to find out: Let's say the seller doesn't have cash sitting in the bank and neither does the buyer. If I, the buyer, pay for all closing costs and get a 100% seller financing note in the QI's name, and that note goes into the exchange, Why can't the seller hypothecate that note, and use the money from the hypothecated note to buy a property and bring that property into the exchange? How can this work?
Your video is very comprehensive regarding to inject your own money for the carry back note at high interest rate than the bank. My question is that do I get the full benefit of 1031 exchange tax defer? For example, property sold at $700k, buyer down $450k with $250k seller finance at 5.75%. In order to do 1031 exchange with full tax defer of $700k, I have to inject my own $250k to the escrow to make up to $700k. Since I inject my own $250k to make up the sold price $700K, do I get the full ($700k )1031 exchange tax defer? or I only get only $450k tax defer. Please advise. Thanks.
Thank you for the comment! For your question, the Note represents equity in the transaction, so to be fully tax-deferred in an exchange you will need to purchase another investment property at $700k (less closing costs), and use 100% of the equity as the downpayment toward the replacement property. The answer to your question is yes! If you inject the additional $250k to cover the Note, this will give you full tax-deferral on gain!
If I want to do a seller financier deal as a buyer what would happen if the seller didn’t have a ton of equity in the property? Would I have to make payments to the seller and the bank to pay off the mortgage?
Thank you for watching! Any seller carryback with a value in excess of the underlying debt would be considered a "WRAP" and typically you would pay the seller, and the seller would then pay the underlying lender. Obviously you're at risk with the seller making the payments, so a collection escrow would typically be recommended. Secondly, the loan will be at risk of acceleration.
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I read that if the mortgage note is issued to the qualified intermediary's (QI) name, the parties can now use the value of the note to purchase the replacement property. Is that the same as a reverse exchange, where the buyer has to loan you the money?
This is ultimately what I'm trying to find out: Let's say the seller doesn't have cash sitting in the bank and neither does the buyer. If I, the buyer, pay for all closing costs and get a 100% seller financing note in the QI's name, and that note goes into the exchange, Why can't the seller hypothecate that note, and use the money from the hypothecated note to buy a property and bring that property into the exchange?
How can this work?
So timely in the context of the current market!
Thank you for watching Tricia! Stay tuned for seller financing PART 2!
Future videos... Maybe go into detail - make 5 videos, 1 for each of the 5 ways to do a 1031 while doing a seller carry. Thanks!
Thank you! Great idea, we will get more examples up in this next round of videos.
@@1031ExchangeExperts Thank you. It is a bit complicated. I am a real estate agent here in Oregon trying to learn.
Your video is very comprehensive regarding to inject your own money for the carry back note at high interest rate than the bank. My question is that do I get the full benefit of 1031 exchange tax defer? For example, property sold at $700k, buyer down $450k with $250k seller finance at 5.75%. In order to do 1031 exchange with full tax defer of $700k, I have to inject my own $250k to the escrow to make up to $700k. Since I inject my own $250k to make up the sold price $700K, do I get the full ($700k )1031 exchange tax defer? or I only get only $450k tax defer. Please advise. Thanks.
Thank you for the comment! For your question, the Note represents equity in the transaction, so to be fully tax-deferred in an exchange you will need to purchase another investment property at $700k (less closing costs), and use 100% of the equity as the downpayment toward the replacement property. The answer to your question is yes! If you inject the additional $250k to cover the Note, this will give you full tax-deferral on gain!
If I want to do a seller financier deal as a buyer what would happen if the seller didn’t have a ton of equity in the property? Would I have to make payments to the seller and the bank to pay off the mortgage?
Thank you for watching! Any seller carryback with a value in excess of the underlying debt would be considered a "WRAP" and typically you would pay the seller, and the seller would then pay the underlying lender. Obviously you're at risk with the seller making the payments, so a collection escrow would typically be recommended. Secondly, the loan will be at risk of acceleration.
Thank you so much! Just subscribed! Lots of more questions to come 😊
@@drebrown6098 please keep them coming! We are always open to help.