Costs
Our Fee For Most Exchanges: |
One Relinquished Property |
PRE Fee is Only $750! |
Various services are offered by PRE in connection with simultaneous and deferred exchanges. PRE's exchange fee applies to each separate exchange of a relinquished property. PRE's exchange fee for most exchanges is only $750. These basic exchanges are simultaneous or deferred exchanges of one relinquished property. The fee is earned when we set up the exchange of the relinquished property since that is when the bulk of our work is done. There is no additional fee over $750 if only one replacement property is involved in the exchange. If more than one replacement property is involved, the added fee is only $250 per additional replacement property. Other small costs include the cost of wire transferring funds charged by financial institutions (e.g., $30 per wire), and Federal Express and other delivery costs, notary fees, and California tax withholding fees (if applicable). Some escrow or other closing agents may charge a small additional fee for an "exchange escrow" but these fees are not imposed or received by PRE.
If a special exchange account is set up with a special financial institution, PRE receives an additional fee of $250 for our time involved in setting up the special exchange account. There may be added fees over $250 if these accounts require significant time and activity on our part until the accounts are closed. These added fees only apply to special exchange accounts requested by a customer. PRE receives an additional fee of $250 for PRE's handling of a seller carryback note. This fee includes receiving note payments, assigning the note and reconveying a deed of trust when the note is paid off. Most of our simultaneous and deferred exchanges do not involve any additional fees or costs other than those noted above. Thus, the cost of most exchanges is very low.
There are some exchanges that are very complicated, however. A complex exchange may require meetings, additional documents, consultations with the parties or their advisors, and other consulting services. Any consulting services are priced reasonably at professional rates based on the time involved, the service performed, the size of the transaction and the benefits conferred. Special exchange situations and services are discussed further below and in our exchange agreement.
The IRS has provided a safe harbor for certain "reverse exchange" transactions. The new property is acquired before the old property is sold, and title to the old or new property must be parked with an exchange accommodation titleholder. Reverse exchanges are much more complicated than simultaneous or deferred exchanges and involve many additional documents and parking title to either the old or new property. PRE owns and can form new entities that act as an exchange accommodation titleholder in a reverse exchange.
Fees for a reverse exhange vary depending on the exact structure used, the properties involved and the complexity of the transaction. Simple reverse exchanges involving two properties typically have total fees between $3,500 to $5,000 when all phases of the transaction are complete. More complicated reverse exchanges cost more, including cases where a new entity is formed, build-to-suit improvements are made, or more than two properties are involved. After we have analyzed your Reverse Exchange Information Sheet (see "Forms" to download), we can specify the total fees for your reverse exchange transaction.
Qualified Intermediary
PRE acts as a "qualified intermediary" under IRS regulations. If the owner exchanges with a "qualified intermediary," the IRS will not challenge the exchange on grounds of agency or actual or constructive receipt of cash. Since the IRS provides a "safe harbor" for such transactions, owners should not risk their exchange with anyone but a "qualified intermediary."Documentation
PRE provides agreements and other documentation to effect a valid exchange. PRE maintains a complete "exchange file" for the owner. The importance of proper documentation cannot be overemphasized. In auditing a transaction reported as an exchange, the IRS focuses on the documents to determine whether a valid exchange was made. The IRS also examines whether the owner had actual or constructive receipt of the sale proceeds.Expertise
PRE specializes in real estate exchanges. PRE is owned and operated by licensed California attorneys with many years of exchange experience. We are regarded as national experts on tax-free exchanges and are faculty members for the nation’s premier exchange conferences. Although we do not provide legal or tax advice while serving as intermediary, we have a complete library of all Section 1031 cases and rulings. Copies of the legal authority relating to any exchange issue can be provided to you and your tax advisor so that you can make informed decisions.Security
Sales proceeds are held in secure accounts until needed to complete the exchange. Funds are held in exchange accounts with Merrill Lynch, Bank of America and other financial institutions. Funds are wired directly between these financial instituions and escrow accounts to ensure the safety of exchange funds.Fees
PRE charges an exchange fee of $750 for accommodating a simultaneous or deferred exchange. If more than two new properties are involved, the fee is increased by $250 per additional new property. For example, if one property is exchanged for two new properties, the fee is $1,000 ($750 plus $250 for an additional new property).