Years ago there was an escrow poster that some clever artist created that exhibited a rowing shell. The shell contained at least half a dozen rowers with their oars in a variety of places and the boat was on the edge of sinking. Below the image were the words One, Two , Three, CLOSE! Well in good times getting a single deal closed can be a challenge, in bad times you may feel it near impossible, so what do you do when there are a series of closings all hinging on their respective 1031 Exchanges? That is the question our client asked just days ago and the following is our answer.
How Can I get this Closed?
Today’s lending environment makes closing a financed deal difficult at best. Our Exchangor is relinquishing a fourplex and is replacing it with a portion of a large apartment building.
The Exchangor’s relinquished property is being acquired by another Exchangor who originally had a cash buyer but the buyer has chosen to finance the purchase instead of going the cash route. This change has started a chain reaction that now potentially effects three different closings!
Our Exchangor’s replacement property has a loan rate lock due to expire and the bank is at the moment unwilling to offer a few days of breathing room…
How do we ensure our client’s replacement closing occur without a delay? Well, we cover the bases and offer two paths to the goal:
1. We coordinate with the respective escrow officers to if possible do the exchange as a delayed exchange in an effort to minimize our client’s exchange fees. In order to ensure funds move as rapidly as possible from closing to closing we request the buyers facilitator wire the buyers funds from closing to closing, we are preparing to do the same. Since all deals are closing on the West Coast we are hoping we will not have wire cutoff times to deal with and this should help in our efforts to get the deals funded and closed.
2. We prepare ourselves for the possibility our client’s exchange requires a Reverse Exchange. We are fortunate in that our client has the ability to close the target property without closing the relinquished property. Though the transaction would be a much more expensive exchange our client’s financial well being allows us to warehouse the relinquished property if necessary and therefore the financing of the replacement is unaffected if the course is necessary. In order to make this option work our client’s relinquished property would be deeded to a new EAT (Exchange Accommodation Titleholder (LLC)) that we are the member of. Our EAT would then sell to the buyer when their exchange was funded and ready to close.
With two options available we can assure our client his ability to get where he needs to go. So which course was taken you may ask? Well, check back next month and we’ll let you know how it all worked out…
