buyer wants to go straight to escrow

Member since 2024 · 4 posts · 0 votes

I’m selling my commercial property. I’m closing my business and no longer need the property. Currently have over 80% in equity. I’m not a real estate investor by any means so this is a first for me besides the home I live in. Buyer is asking to go straight to escrow since we both agree on the deal. What is the downside to this? (I’m planning on doing a 1031 exchange)

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Wayne Brooks

Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes

Well, whenever you sign a purchase agreement, you are “now in escrow”….just sounds like a semantics thing. If you want to do a 1031 exchange you want have as much time as you can get before “closing” to start finding your replacement property, and hopefully have it under contract.

You’ll a Qualified Intermediary like @Dave Foster to handle the 1031 part, he can chime in with suggestions.

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Wayne Brooks
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
2y
Well, whenever you sign a purchase agreement, you are “now in escrow”….just sounds like a semantics thing. If you want to do a 1031 exchange you want have as much time as you can get before “closing” to start finding your replacement property, and hopefully have it under contract.

You’ll a Qualified Intermediary like @Dave Foster to handle the 1031 part, he can chime in with suggestions.
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Andrew FreedBusiness Member
Investor · Worcester, MA · Member since 2020 · 1k+ posts · 1k+ votes
2y
@Lesley Stoll - Agreed, if you are doing a 1031, the only downside is the timeframe. You want as much time as possible to find the property you are transition the funds into. If you can extend it while you look for your replacement property, that is preferred. More or less, the buyer just wants to move quickly to close which is really all it means.
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Bradley BuxtonBusiness Member
Real Estate Agent · NV · Member since 2023 · 1k+ posts · 720 votes
2y
@Lesley Stoll
You'll want to talk to a 1031x expert asap so you know exactly when the clock starts for identifying a new properties to exchange into. Escrow is a neutral party that holds funds so opening escrow as soon as the contract is signed is normal and sometimes done before a property is under contract. Also talking with a business escrow officer with also give you great insights they are versed in B2B transfers. Happy to share some resources and references.
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Dylan Johnson
Qualified Intermediary for 1031 Exchanges · Greater Detroit, MI · Member since 2023 · 14 posts · 7 votes
2y
@Lesley Stoll I would be more than happy to answer any questions you might have surrounding the 1031 exchange process. No strings attached of course. We are a nation qualified intermediary and I would be happy to help!
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Dave FosterBusiness Member
Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
2y
HI @Lesley Stoll, Thanks for reaching out via pm. Going into escrow is perfectly fine. The buyer is probably eager to get started with their due diligence. And there should be a couple of contingency hurdles that have to be passed before you can actually close. As long as the QI for the 1031 is in place prior to that closing you'll be fine.
The only downside right now is that your 45 day identification period starts with the closing of your sale. But you can be using the time before your sale to also identify and even get your new property under contract. So maybe, as a last negotiation, you ask for an extended closing. To give you more time to find your new property.
You have the info for our online order portal now. So best thing to do is get you up to speed on the process and possibilities. Congrats on that business sale!!
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Jacopo Iasiello
Investor · Miami Beach, FL · Member since 2017 · 362 posts · 109 votes
2y
Before proceeding with the sale, it's essential to weigh these potential downsides against the benefits of a quick and straightforward transaction. Consider consulting with a real estate attorney or financial advisor who can provide guidance on the best course of action, especially regarding your plans for the 1031 exchange.
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Sean RossPro Member
1031 Exchange Qualified Intermediary · Denver, CO · Member since 2017 · 176 posts · 97 votes
2y
Quote from @Lesley Stoll:

I’m selling my commercial property. I’m closing my business and no longer need the property. Currently have over 80% in equity. I’m not a real estate investor by any means so this is a first for me besides the home I live in. Buyer is asking to go straight to escrow since we both agree on the deal. What is the downside to this? (I’m planning on doing a 1031 exchange)

@Lesley Stoll,

Look, buyers and sellers go through the full escrow process to clear away potential liabilities. I would second @Bradley Buxton's point about speaking with a business escrow officer or @Jacopo Iasiello's advice to chat with a real estate attorney.
From a 1031 standpoint, faster closing simply means faster exchange deadlines. If you're a first time 1031 exchangor, just know that the 45-day identification deadline passes very quickly.
When you're looking for possible 1031 replacement options, remember that you have a very wide net of potential assets to reinvest in. Think broadly, chat with a QI (there are several of us here on BP), and try to get a gameplan together as quickly as possible (with backup options).
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