EARN TWO COMMISSIONS THROUGH REAL ESTATE ExchangeS

That's right, if you are a real estate agent or broker and you are in the business of brokering any type of real estate other than personal-use property which includes either ones primary or secondary residence, you have an opportunity to earn two commissions on one transaction. This is possible through the use of what is called today, a Deferred Exchange. Under Section "1031" of the Internal Revenue Code, anyone disposing of either business or investment held property can defer both state and federal income tax that would be associated with the gain (profit) when disposing of that property.

HOW DOES A DEFERRED ExchangeWORK TODAY?

Under the new ExchangeRegulations, that were issued in the Federal Register as of May 1, 1991 a Deferred Exchangemeans that a taxpayer (seller) who is disposing of either a business or investment-held property can put that property on the market in the same manner as if that transaction were to be treated as a sale. That means the property can be entered into any multiple listing service and the only thing that is necessary is that a buyer for that property is found. The wake-up item here is that you don't need to find someone that has a property and wants to swap their property for your listed property. Today, a Deferred Exchangeis no different than disposing of one property using the proceeds from disposition (the sale) to acquire other property deemed of a like-kind. Other replacement property deemed of a like-kind means any type of real estate as long as its business or investment-held property and not personal-use property by your client. Some examples include disposing of a parcel of land for a multi-family, disposing of a investment-held duplex for a commercial property, disposing of a single-family rental in Rochester, New York for a mobile-home park in Tampa Florida.

The wake-up item here is that in order to achieve a Deferred Exchangethere must be a Qualified Intermediary involved who structures the transaction as an Exchangeand not a sale for I.R. S. purposes. This professional Qualified Intermediary cannot be the seller of the property meaning the taxpayer who is trying to accomplish an Exchangenor can it be anyone who has an "agency" relationship with the seller meaning the real estate agent, the accountant/CPA, attorney or employee. A professional Qualified Intermediary is in the business of facilitating real estate Exchanges and should be experienced and provide customary services in that area. The Qualified Intermediary works together with the real estate professional in structuring their clients transaction as an Exchangeand does not participate in their commissions. 

HOW DOES THE REAL ESTATE PROFESSIONAL EARN TWO COMMISSIONS

The real estate agent/broker who lists the property being disposed of, will earn a commission on the sale-end even though their client is treating the transaction as an Exchangeand will also earn a second commission on the purchase of the replacement property. The beauty of this concept is that the taxpayer (the seller) has to acquire the new replacement property within (6) six months of the closing date of their sale. Today, earning two commissions on one transaction is one of the smartest ways a real estate professional can use there time and one of the best ways for their clients to accumulate wealth through the use of real estate.