Essentials of Property Exchanges specifically for Realtors® and Real Estate Brokers

The following is a summary of knowledge essential to the Realtor® or Broker to competently serve all their clients, not just those exchanging property.  The information will promote a better understanding of how to accomplish a tax-deferred exchange, including actions not to take.  It is not a substitute for appropriate professional review and assistance. 

Why is it important for the Realtor®/Broker to know about exchanges?

1. Tax deferral for clients
   
   Often, the Realtor® is the only professional person involved with a real property transaction.  It is important for the Realtor® to be sufficiently knowledgeable and be able to direct a simple course of action for the clients.
   
   The well-prepared Realtor® will be able to advise his client of possible tax benefits which could be of tremendous benefit.  Such benefits could be substantial, but require that the right questions be asked before a sale and not after the fact.
   
2. Exemplary service 
   
   Clients will not generally expect to be asked about the possibility of exchanging.  They will respect that professional who takes the time and has the skill to ask pertinent questions regardless of whether an exchange is appropriate.  Such inquires show that the Realtor® is looking to the best interests of the Client and will generate goodwill and referrals. 
   
   If explained carefully, the Client will understand the process sufficiently well to refer others who may benefit from one of the last tax benefits still firm in the Internal Revenue Code.
   
3. Malpractice prevention 
   
   Cases of malpractice are rare.  Quizzing clients regarding these matters show a good-faith and competent effort to serve the Client’s interests and helps protect you and your firm from frivolous lawsuits.  The Realtor® is not responsible for giving tax advice.  The best Realtors® feel responsible to assure that the customer has explored all tax options that might be available to them. 
   
4. Maximizing tactical and negotiating advantages  
   
   Knowledge of 1031 basics will provide you with a tactical advantage when receiving and giving offers for property.  It will help you guide your clients in how to draft contract provisions and respond to offers received to assure that you are operating in the best interest of the client.