Help! I Can't Find a Buyer for My 1031 Exchange

In the nearly 20 years I’ve been helping investors navigate the tricky waters of a #1031 exchange, I occasionally receive a frantic phone call that goes something like this. “Hey, I’ve found a great replacement property and closed on it, hoping to do a reverse exchange. But it’s almost 180 days later and I still haven’t found a buyer for my relinquished property. What should I do?”

Unfortunately, not every 1031 exchange goes as planned. In situations like the one above, the investor with no buyer for their relinquished property has two options when the 180 day deadline is looming.

The first option is to discontinue the exchange and take deed to the replacement property. Of course, this eliminates the tax-deferral benefits an exchange would have provided, but in some cases this is the best course of action.

The alternative is for the investor to decide to extend his or her Reverse Exchange outside the safe harbor provisions of the IRS code. Since the safe harbor guidance issued by the IRS is not mandatory, an investor is free to conduct an exchange that falls outside the protections of Rev. Proc. 2000-37. Such exchanges stand or fall on their own merits, exposing the investor to potentially more risk.

If a 1031 exchange is in your future, visit our website to learn more about these powerful tax deferral tools and our qualified intermediary and replacement property locator services.