Professionals to Hire for a 1031 Exchange
The U.S. real estate market is one of the most sought-after markets in the world. However, it can be difficult for an inexperienced person. There are many step-by-step guides, but they are no substitute for experienced real estate agents, attorneys, mortgage brokers, and financiers that you will need to consult with throughout the process.
The Stages of a 1031 exchange in the U.S.
On average, people spend 30-60 days on a transaction and another 14-60 days from signing the contract to closing the 1031 exchange. Sometimes the process can be rapid and take as little as 30 days — for example, when you know exactly where and from whom you will purchase the property. On the other hand, there are times when the 1031 exchange period can take several months.
Your Team: Professionals to Hire for a 1031 Exchange
The next important step is selecting your team. People who will assist you in the 1031 exchange process determine the endeavor’s success and the speed they can accomplish it.
If you don’t speak English or prefer to speak your native language, choose agents, attorneys, inspectors, and bankers who know your speech well. That said, you have to sign translated copies of standard real estate documents in English. But this is only necessary at the closing stage of the deal.
Finding a qualified team will take some time. It is a significant task:
- The recommendations of your acquaintances who have already purchased real estate.
- It is not superfluous to search on large websites to find realtor ratings, reviews of their work, and information on their qualifications and experience.
In the United States, you must have an agent. Thus, only licensed realtors who use a single MLS system and several services to verify properties can get real estate listing information. Potential clients can only access a portion of this information through real estate websites. In the U.S., the owner should pay commission to an agent though they work on behalf of the client.
U.S. real estate agents must have a license to work. Legislation to certify such professionals differs from state to state, but the level of education, type and depth of realtor certification exams, and continuing education after licensure are relevant everywhere. Agents with additional training may use the Certified International Real Estate Specialist (CIPS) designation.
Choosing an Agent When Selecting Real Estate in the United States
When choosing a realtor, you should not baffle more than one person with your inquiries at a time. Many often resort to such a tactic, announcing a kind of tender between professionals: whoever is fastest to find a suitable option, and with that will work. However, this demotivates the brokers — knowing that the competitors are doing the same thing, they may refuse to cooperate. No one wants to waste months on the search.
Many often additionally recruit real estate attorneys, appraisal inspectors, and banks or financial advisors to join the team. The former will be needed to review documents, adjust contracts to suit your interests. A lawyer also guarantees the safety of the transaction and can advise on legal and tax issues related to your property.
The latter — to thoroughly verify the proposed objects, as even an experienced realtor cannot immediately analyze all the technical and residential nuances. Finally, you hired the financier for a complete calculation and control of the budget of the transaction.
Keep in mind that the 1031 exchange process for real estate in the United States may vary from state to state. Each state has its own set of rules regarding 1031 exchanges, including the type of 1031 exchange agreement used, the method of closing, and the responsibilities and roles of those involved.
When you form your team, the task is to provide clear and complete requirements for the property that the realtor will be looking for (ranging from logistics, profitability requirements, and quality of interior finishes). Everyone has the right to own single-family homes, condominiums, duplexes, triplexes, quadruplexes, townhouses and invest in commercial properties (offices, retail space, warehouses, etc.).
Real estate taxes vary in American cities. To get a general idea, you need to know the municipal property tax rate. This information is usually available on the official websites of city governments and realtors, and financial advisors own it.
To exchange 1031, you will need to get an individual taxpayer identification number (ITIN). It is a tax processing number assigned to foreign nationals who must have a U.S. taxpayer identification number. Still, they don’t have one, nor are they eligible for Social Security numbers.
Entering a 1031 Exchange Contract in The U.S.
The offer of a bargain usually comes. It can be given orally through the client’s agent, who will give it either to the owner’s agent or directly to the owner. The owner may refuse your offer or begin a negotiation process to agree on a price, terms, and closing date.
The owner’s attorney begins preparing the 1031 exchange agreement. They have a complete set of documents on the property on hand at this point: premises survey report, insurance policy, promissory notes or mortgages on the property, occupancy certificates, tax bills, heating and utility bills, leases, elevator permits, pools, etc.
In the meantime, your attorney checks the financial condition of the property you want to exchange. The attorney reviews and negotiates the contract, title search and insurance, and the documents listed on the title policy.
After your attorney reviews the property and the 1031 exchange agreement, they will approve you to sign the contract. However, it is essential to note that the property owner can still accept offers until all parties have signed the agreement, and it is authenticated.
Closing practices are dictated by custom and vary from region to region. Closing often takes place in the office of the owner’s attorney but sometimes in the office of the other party. Typically, all parties are present in person, with verified identities, the documents are finalized, and financial settlements are made.
It is possible not to come in person. It is enough to execute a power of attorney. A realtor or a lawyer will represent his interests, and they will also sign the documents.