Updated about 7 years ago on . Most recent reply
Seller refused 1031 verbiage on contract
I recently put an all cash, offer on a property. 1031 verbiage was included that simply stated that the seller would agree to sign any 1031 required paperwork. There were no contingency’s. The developer thought this was somehow being used as out clause and would not accept the contract.
Can a seller legally refuse this?
Don’t you have to notify the seller of your intentions when looking for a 1031 replacement property?
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- Qualified Intermediary for 1031 Exchanges
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@David Brimble, Well the seller can refuse any term they want in a contract. So ya gotta live with that. And unfortunately there are folks who don't understand 1031.
But you do have a couple of options.
1. All parties must be informed in writing of the 1031 exchange. But there is no requirement when they must be informed. So we routinely include a "notice of assignment" that is given to all parties at the closing. We include a signature blank for a little extra redundancy. But they technically don't have to sign anything even. We simply have to notify them and have documentation of that. The fact that the title company closer hands them the notice and the closer signs is fine. The key is to do it late so there's nothing for the seller to stew about and no argument until the closing table.
2. If you simply make the contract assignable that covers everything a QI needs to legally do in the 1031. That's an easy thing to do. And can be done so that is no way for you to get out of execution (...contract may be assigned but the buyer will not be released from performance etc). This doesn't even raise the specter of a 1031 exchange. But protects you and your QI.
3. Just go into contract and brave ahead with no addendum or without it being assignable. yes I spose the seller could balk and throw a hissy fit at the table. But honestly in 19 years of this I haven't seen it personally. Once the seller gets to the closing table they can sense, smell and taste that money! They want to sell. You want to purchase. And they're only fear was that you were looking for an out. So the vast odds are you'll have no problem.
- Dave Foster
