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In a reverse exchange, the new or replacement property is purchased before the sale of the old or relinquished property. The Exchangor cannot hold title to both properties at the same time, so an Exchange Accommodator Titleholder (EAT) is created to take title or park either the old or new property. The EAT is a single member limited liability company created for the purpose of holding the property for the exchange. It is never reused or holds multiple properties. Once the old property sells, the equity is paid back to the Exchangor for any cash contribution to the new property or to pay down the new property debt.
7 Steps to a Reverse Exchange Parking either the Replacement or Relinquished
Property
1. Exchangor engages Atlas 1031 Exchange to facilitate the
exchange.
2. Exchangor enters into a Real Estate Purchase Agreement
for the new or replacement property. Remember to include the assignment
language in the Purchase Agreement.
3. Atlas 1031 prepares multiple exchange agreements for the closing. Exchangor provides financing for the purchase through a primary, bridge or home equity loan.
4. Depending upon which property is parked with the EAT, a warranty deed transfers ownership for the old property from the Exchangor to the EAT. Exchangor is responsible for
loan payments, insurance, taxes and operating expenses. All rent flows to the Exchangor if applicable.
5. If the Exchangor wishes to identify additional properties to sell, the 45 day rule applies and alternate relinquished properties may be identified.
6. Exchangor enters into a Real Estate Sales Agreement for the old or relinquished property.
Remember to include the assignment
language in the Sales Agreement.
7. At the closing, traditional closing and exchange agreements are signed. If the old property is parked with the EAT, the EAT signs as the Seller. If the new property is parked with the EAT, the EAT conveys title to the Exchangor. Proceeds from the sale are returned to the benefit of the
Exchangor.
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Andrew W. Gustafson,
CES®
Managing Member
Atlas 1031 Exchange, LLC
Toll Free: 866.521.1031 | EFax: 850.201.6911
Dallas: 214.523.9067 | Destin: 850.837.1031 |
Houston: 713.821.1776
Email: andgus@atlas1031.com
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Atlas 1031 Exchange, LLC is a Qualified Intermediary and does
not provide advice regarding specific tax consequences of IRC 1031 tax
deferred exchanges. Investors are encouraged to seek the
counsel of their attorney and accountant.
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Atlas 1031 Exchange, LLC. All rights reserved. Site designed by VTD, Inc.
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