ForecloseWithEase.com. Can assist in your review of this important component of your Pre-Foreclosure Team Strategy.
Some questions worth addressing……….
Does your QI really want to do your reverse exchange? Reverse Exchanges have a lot of moving parts which must be executed and documented properly to comply with IRC 1031 provisions. What can you reasonably expect in terms of the commitment to quality, thoroughness and attention-to-detail that you want when the chips are down in a difficult pre-foreclosure situation? ForecloseWithEase.com has affiliated with a select group of experienced QI’s from around the country who view reverse exchanges as one of their service line specialties. They are mindful of their important role as a team member to help provide a Commercial Foreclosure Solution. They are fully aware that a successful execution of such an innovative tax deferral strategy dictates the highest quality of professional services .
How does your QI look at reverse exchanges from a procedural viewpoint? A reverse exchange process involves procedural compliance elements, to be sure. In the successful completion of a tax deferral strategy, as proposed in a 1031 Exchange, there are many steps and actions that need to be coordinated effectively by the QI – who serve as the lynch pin with an acute sensitivity to the necessary timing and with the desired results – in order to do a reverse exchange to be completed in a timely and cost-effective manner. This is particularly true in a Commercial Pre-Foreclosure planning context, since the successful execution is a balancing of lender priority issues; taxpayer priority issues and the objective market conditions. We want to make sure our affiliated QI’s can participate in this time-sensitive process in which they have also invested their time and resources which are mission critical to the result. At ForecloseWithEase.com, we are required to work with QI’s who utilize the highest standards for their attention–to-detail and transaction documentation in their execution and a the highest integrity to ensure that our Clients are guided through these troubled economic waters to ‘relative terra firma’ at the end of the transaction.
What is the current financial condition of your QI ? An important first point of your checklist in considering a reverse exchange in a Commercial Pre-Foreclosure: “No surprise is a nice surprise”. There has never been a case of asset theft when a reverse exchange is involved with any of our select group of professionals. However, theft is not the only issue. As of this writing (January of 2009), there has been a “perfect storm” effecting many QI’s: first, interest rates have collapsed, squeezing the profit potential of QI’s who earn income on the cash they hold for their 1031Exchanger clients; Secondly, the volume of exchanges involving commercial real estate has dropped precipitously in the last six months of 2008; and thirdly, there are real “security of funds” issues with independent QI’s due to a spate of recent defalcations and the inadequacy of the prevailing Fidelity Bond program. Important to note in your evaluation and selection of your QI is that the IRS, in the recent past has demonstrated that is does not take a QI failure into account when they review and disqualify a 1031 exchange – so, if your QI fails it is most probable that your 1031 exchange will also fail. This applies to reverse exchanges, as well, because it would be difficult, if not impossible, to complete an IRC 1031 Reverse Exchange if the QI failed for reasons associated with their delayed exchange activities. Your 1031 exchange can get “enmeshed” in a bankruptcy proceeding or other litigation for an uncertain period for unrelated matters to your own exchange. Again, “No surprise is a nice surprise”. You might think of using a bank-owned QI; like JP Morgan or other well known institutions but they seldom do reverse exchanges. Furthermore, asset security should never be a question in reverse exchanges to afford you peace of mind in a challenging circumstance.
How can you evaluate if your QI’s fees are reasonable ? “Reasonable” should mean not too high but not too low either. We used to joke, “That we did not want a professional service vendor ‘to lose money; but we do not want you to make money’, either” A rock-bottom price estimate can be more indicative of the potential for corner-cutting and reduction in actual services. A very high price estimate is often indicative of the internal institutional reality that a QI that really does not want to participate in reverse exchanges; and will only do so, reluctantly, so they will offer it a part of their professional menu of services; but only if they can charge more than the market should bear. Our select group of correspondent QI’s fees are very reasonable and market-supported; we commit to evaluating their value to you as our client on a case-by-case basis and, in many situations, to match competitors’ prices.
Qualified Intermediary or “Tax Accommodator” Fees
(Estimated range of fees subject to precise fact situations).
|Basic Exchange First/Last
|Complex Real Estate
|Very Complex Reverse Exchange
||$12,500 and up
In Summary :
We will work hard to make our fees and those of our correspondent QI’s as all-inclusive as possible; so that there are no unpleasant surprises in that realm for you as an investor seeking solution and not more problems. As a result we endeavor to include in the fees listed above for each exchange, the following ;
• State-of-the-art, asset-specific exchange agreements that have been prepared in conjunction with independent 1031 experts of the highest standing.
• Streamlined formation of an LLC for the parking entity (E.A.T.) by able and experienced legal counsel. Their legal fees will include standard filing or registration fees as may be required in jurisdictions.
• Written guarantees that our Qualified Intermediaries that they will fulfill the federal and state tax obligations (e.g. filing tax returns for EATs, etc.) that will factor into your exchange and tax deferral strategy in a pre-foreclosure context.
There may be modest additional fees based on the length of time assets are held or the value of the underlying assets that are parked; but they will be explicitly stipulated in each instance. You will always experience full transparency as part of our core values.
Finally, you can expect that fees are net of any taxes or approved fees paid to expedite filings to satisfy Clients’ urgency requirements.
• Customary fees for LLC creation or for registering and filing.
• Fees to expedite the creation or registration of an LLC due to short-notice from the Client are billed to the Client at cost.
• Any LLC-related taxes (e.g. California’s foreign LLC tax) will be billed directly to the Client at cost with no mark up.