1) When you are going for a 1031 property exchange it is very important that you know as many details about the process as possible. Browse through our site and speak to your tax consultant to calculate your tax exposure and make an estimate of your Capital Gain from the transaction to see if it is a feasible exchange for you.
2) Complete your purchase and sale agreement just as you would have done with a regular sale. We suggest you insert a clause in this, which clearly states that this transaction will be a delayed exchange and there will be no lack of disclosure which may otherwise obstruct the transaction.
This can be done by incorporating a clause as follows :
"A material part of this transaction is the successful completion of an I.R.S. Code Section 1031 deferred exchange. "Buyer/Seller" agrees to cooperate with the "Exchanger" (note: insert the full name of the party doing the exchange in place of the word "Exchanger") in signing those documents necessary to complete the exchange, provided that "Buyer/Seller" shall incur no additional costs or liabilities in excess of those which would have occurred had this been an outright "purchase/sale," and not an exchange."
3) When your agreement is complete and fully signed take it to your closing agent. Make sure that you tell the closing agent that this is going to be a 1031 property exchange. If you are working with a real estate agent, he will do it for you.
