I've been looking for properties for months and finally found an investment with a great return. My offer was accepted and we just finished the inspection. The owners of the property are married and have the property in a trust. The husband fell, hit his head, and now the wife wants to terminate the contract. I just closed on my other property and I'm doing a 1031 exchange so the clock started on Friday. I don't want to bring my emotions into the property, but along with a great return, I LOVE the house. What are my options? I want this house but if I have to get lawyers involved I might miss the timing for the 1031 exchange. Should I just give up and move on looking for another property?
If it’s their primary I think you’d be in for a long legal fight to get people “evicted” from their home. You could ask if you put the closing off for 3-4 months if that would solve their problem (and make your 1031 exchange.) or if it’s going to be a long term medical problem.
You have 45 days to identify the replacement property. Since you have a signed contract, you need to identity this one in that time frame. Explain to the sellers your legal obligations on the 1031. Along with that, search for other replacement properties hard and fast. Let the situation play out for a week or so and see if the sellers change their mind.
You can look into a DST as a 1031 backstop if your identification period deadline is getting close.
I agree that a DST is a great backup to your replacement property in a 1031 exchange, but...
1. It's a passive option, which may or may not fit your short-term goals for this next investment.
2. You have to be an accredited investor.
I'd consult my attorney on how you're legal options would play out in real life. They're bound by contract, but you need to be able to close on time to satisfy your 1031. That's where your backup comes in. You said house, which makes me picture a SFH. They don't sit too long on the market these days. If that's what you're hunting you'll need to be nimble. Best of luck.
@Alison Zywicke - You might be able to convince the wife to sell, but there's really no way you can force her to do so, especially within your 1031 timeframe. (even the optics are bad, if you consider it in terms of personal health and welfare of the couple against deferred taxes...)
Best option is probably to start looking for a different horse. If timing gets really tight, you might reach out to tern-key providers and wholesales. They may have off-the shelf properties that will permit you to at least complete your 1031, even if not as solid a deal as you had been hoping for.
I agree with Bill and John. If you delay it a bit, that gives them time to get things sorted and still gets you finished in time. Make sure you can lock your financing in.
Thanks @Bill Brandt . It is not their primary, it's an investment property.
that helps your chances in court, I don’t know if you could win fast enough, especially if you’re getting a loan. Ask them if the 2-3 month delay helps. GL.
Everyone has brought up great points. If you haven't already, would you be able to speak with the owner directly? My experience is that a lot can be missed when communicating through third parties. Perhaps she's just scared or stressed and if you could eliminate some of her trepidation she would be confident moving forward.