HOW TO USE 1031 TO BE A BETTER BROKER
As service providers, we are all looking for ways to feel our clients pain points and help alleviate them. They know what we are good at and that we will get the job done, but if they can feel we actually care about other concerning issues related to the main service that you provide, loyalty deepens and a referral source flourishes. That dreaded tax bill a few months after you close the transaction is one such pain point.
About half of the tax deferred exchanges that should be getting done, aren’t. One reason for this is that brokers don’t feel comfortable service as “tax advisors”, that is the clients CPA’s job. True! But, the reality is that half of time the CPA either isn’t consulted before the sale or isn’t recommending an exchange either. The client doesn’t get what he deserves.
The easy answer is what we call “The handoff”. As soon as you understand the sellers situation, that he won’t be selling or buying a personal residence, and he’s owned the property to be sold for more than a couple years, all you have to do is ask if they spoke to a 1031 expert. If they haven’t, just hand them off to someone like us at Exchange Trust. Most facilitators will answer you or your clients exchange questions for free.
The 1031 exchange remains a Win-Win for everyone involved.
Besides simply informing the sellers that they could probably defer all state and federal capital gains taxes via a 1031, there are other ways to use process to gain new clients in addition to just solidifying the ones you already have. Recording a an informative video with a facilitator to use in your marketing is powerful, and we have been a part of a few of those. You will get to a point where you will be able to share that the 1031 process is not complicated just because it sounds like it should be, or expensive, and when compared to the tens of thousands of dollars in tax savings, it makes a ton of sense.
A 1031 benefits you the broker in addition to the client. If the sales proceeds instead get invested into a DST (Delaware Statutory Trust), there will be no replacement property for you to broker. And like the DST, if they invest in the new Opportunity Zone Fund, the client loses control of the investment which doesn’t allow you to continue to assist. The 1031 exchange remains a Win-Win for everyone involved.