Q. What is the Purpose of the Interim Binder?
A. It allows a purchaser of real property to re-sell the same property and have a new policy of title insurance at a fraction of the cost.

Q. What is the Cost of the Interim Binder?
A. This is the formula: The original seller pays the basic policy fee. The buyer pays an additional 10% of the sellers scheduled insurance rate for the Interim Binder.

Q. Can a Trust hold title to Real Property?
A. No; the Trustee holds the property on behalf of the Trust.

Here is an Example:

The original owner sells a property for $100,000. You, knowing that this is going to be a short term investment for the buyer, request an INTERIM BINDER before the close of escrow. The original owner (seller) pays a title policy fee of $660, the normal charge.

Benefits of the Interim Binder:

The buyer, pays $66 or 10% of the basic rate for the INTERIM BINDER. One year and 11 months later, you find a buyer for this property which is now worth $120,000. The property goes into Escrow. The buyer becomes the seller. Now the seller can reap the benefits of the INTERIM BINDER which was purchased when the seller bought the property.

Using the Interim Binder Saves Money – The seller pays only the increase insurance amount necessary to cover the increased price of the property. The money saving advantage of using the Interim Binder is evident. Title Fee on $120,000 liability $723.00 Less premium paid on $100,000 $660.00 Sellers cost for the new policy $63.00.

Q. How Long is it Good For?
A. Two Years.

Q. What Happens if I Keep the Property Longer than 2 Years?
A. In that case a policy of title insurance is automatically issued to you. However, the binder may be extended for another two years at an additional 10 percent.

It All Adds Up, For Less:

The total cost for an owner’s policy of title insurance is $63 plus the 10% or $66 the seller paid up front when the seller bought the property. The policy is a total of $129 compared to $591, the normal short term rate fee for a home valued at $120,000. The seller saved $462.

*The above information is obtained from sources deemed reliable but not guaranteed. However you are advised to seek your own legal counsel in regard to your specific situation.

The 1031 Tax Deferred Exchange is a method by which owners of investment property may transfer the equity in their current property into a new property without triggering a taxable event.

What will a 1031 Tax Deferred Exchange do for you?

The 1031 Tax Deferred Exchange preserves your equity by deferring the tax you would pay on the Capital Gain you would realize if you sold your property outright. It allows you to re-leverage your investment, thereby increasing your real estate holdings. You lose none of your equity to taxes, thus allowing you to transfer your maximum equity into the purchase of your next property.

There are several terms used in defining the Exchange process, as well as 3 basic rules.

Terms

A. DOWNLEG – Property you are relinquishing or selling.

B. UPLEG – Property you are acquiring or buying.

C. CONCURRENT EXCHANGE – When the upleg you desire has been located and is available to close escrow at the same time as your downleg.

D. DELAYED EXCHANGE – (STARKER EXCHANGE) – Used when the upleg property you desire either hasn’t been located or if located can’t close escrow concurrently with your downleg property, (you must properly identify your upleg property – see rule #3).

E. BASIS – The cost figure given to you (the client) by your accountant, which is carried over to the new property. It is very important that you have your accountant determine your property’s basis, as it is an important consideration in choosing the value of your upleg.

F. BOOT – The IRS’s term for Cash-Value. Boot may be any one of the following or any combination of the following:
1) cash you receive; 2) loans on your current property which are paid off or paid down (debt relief); 3) loans on your current property which are assumed by the next owner (debt relief); 4) valuable goods or services – either given or promised as part of the purchase price of your new property.

RULE 1: Like for Like
Investment real estate for investment real estate. You may exchange a duplex for a house, an apartment complex for vacant land in certain instances, etc. (or any combination as long as you follow rule #2).

RULE 2: Equal to or Greater Than
A. The value of your new property must be equal to or greater than the value of your old property, less costs of sale.
B. The debt amount (mortgage) on your new property must be equal to or greater than the debt amount on your old property.

RULE 3: Identification
Within 45 days from the close of escrow on your downleg property, you must choose your upleg property. This must be evidenced by purchase contract or notification to escrow or your accomadator. You may identify up to (a) 3 properties of any value or (b) more than 3 properties whose combined values are less than 200% of the value of the downleg property. Escrow on your upleg property must close within 180 days of the date your downleg closed or before you file your next tax return.

JACOB & JENNIFER ROWAN, along with its tax advisers, are uniquely qualified to guide you through all the intricate steps necessary for you to obtain the extensive benefits resulting from the exchange of your property.