Buying foreclosures with 1031 exchange

[Tami Walker]

Looking to purchase a rental house with a 1031 exchange. Would you recommend buying a foreclosures house. Or will the timing be a problem? Having 180 days to close. I don't have any experience with foreclosures.

[Bill Exeter]

Hi Tami,

You have to be very careful if you want to buy foreclosure properties as part of your 1031 Exchange.  As you know, you must identify your replacement properties within 45 calendar days after the close of your relinquished property.  Trustee Sales, Sheriff Sales, etc., can be postponed numerous times for many different reasons and you have no control over that process.  You will be assuming the risk that you might not be able to acquire the property within the 180 calendar day exchange period, especially if you do not have any experience with the foreclosure process/cycle.  It is very much buyer beware, or in this case exchanger beware.