What do I do with my 1031 Exchange now?
Now that one of the largest insurance brokers in the world is in trouble and household names like Lehman Brothers and Merril Lynch are either bankrupt or purchased by another entity, what do we do about deals using 1031 exchanges?
According to our friends at the IRS (laughing as I type this), the mortgage holder has no further rights beyond what was detailed in the initial agreement; to any funds, penalties or property after the exchange has occurred. In other words, you exchange a property for another one of equal or greater value. If you have an existing mortgage on the older property that mortgage is unchanged if the bank goes under. The mortgage will probably be sold as an asset to the buyer of the bank.
After the exchange, in my experience, the mortgage is paid off and the new property is assumed under different terms, but part of the same deal (for tax purposes). My team went into bidding on a property with 1031 exchange funds with the hope of acquiring a small shopping center. The trade went well. I am happy with it. However, property values have slipped a bit. So, it’s time to get out there and get new tenants!
