Archive for November, 2007
Real Estate Exchanges: Banter and Barter
by Roberta Murphy
Yesterday afternoon and evening were devoted to Leaving Las Vegas. I was tired of long lines at the airport, anxious to get back to San Diego, and was dismayed to hear the Southwest flight had been delayed two hours.
I spent much of the time catching up on email, reading about Costa Rica and near the end of the wait, met David Greenberger, a real estate attorney and San Diego 1031 exchange specialist. We discussed real estate exchanges at length. Some tidbits from San Diego’s real estate exchange master:
1. The first government-challenged exchange occurred when two farmers agreed to exchange horses. One owned six white horses; the other, six black ones. After the amicable swap, the federal government claimed that a taxable event or sale had occurred. Not so, claimed the farmers. They challenged the government and won. In 1921, like-for-like property exchanges emerged as legally recognized income tax shelters.
2. Real estate 1031 exchanges no longer require that the exchanged properties be “like for like.” Someone can now trade their La Jolla duplex for a La Costa vacation rental–or an avocado grove in Fallbrook. 1031 exchanges allow for any U.S. real estate to be traded for any other U.S. real estate.
3. Real estate agents in the San Diego and other resort markets tend to be more generally familiar with 1031 exchanges than agents in the Midwest or the East Coast.
4. Though 1031 real estate exchanges are certainly tax deferred, they can also result in facilitating a tax free gain under current law. You’ve got to love David’s motto: œDeath and Taxes are Certain Unless You Exchange!
It also turns out the we had each spent a couple of days in Las Vegas attending the National Association of Realtors (NAR) Convention. He had 1031 real estate Exchange classes to teach, and I–along with several other real estate brokers–had a meeting with the developers of a five star luxury resort in coastal Costa Rica.
And that explains my overwhelming curiosity about 1031 exchanges–and how they might somehow be utilized by investors seeking to exchange U.S. real estate investment equity for offshore real estate investment in a luxurious Costa Rica development….
read comments (3)Commission Conundrum with Luxury Real Estate
A year or so ago, real estate circles were abuzz with argument and discussion about the pros and cons of discount real estate services and commissions. Discounter Redfin had opened with one agent in San Diego, and their CEO Glenn Kelman promised that real estate discounters would turn the real estate brokerage business either upside down or inside out (I dont recall which).
Beating Kelman at his own venture was Iggys House, which would list ones home for free, and a corresponding sales arm that rebates even more than Redfin. In between the two were countless other ventures that vied against each other in real estate commissions and levels of service.
In the ensuing months, we began to see not a decrease in real estate commissions, but instead a rise in commission offerings. Builders and desperate sellers were offering 3, 4, 5, 6, 7 and even 8 percent sales commissions on their properties. (Of course, with inflated commissions we tend to suspect inflated pricing and share this with our clients.)
It is unimaginable to this writer that the U.S. Department of Justice could even think that the real estate industry is capable of controlling anything, let alone commissions. Brokers have long lamented that trying to control real estate agents is no easier that trying to herd cats. If they cant convince agents to attend weekly sales meetings, how could one think that they could possibly œset commissions that their independent contractors charge their clients?
So what is the commission and service situation in todays more challenged real estate market?
According to the National Association of Realtors, the latest survey of buyers and sellers showed that 83 percent used full-service agents last year, while 9 percent used limited-service agents and 8 percent needed only minimal service.
Of course, I cant resist adding my own simplistic opinions regarding the issue of full service versus discounted commission/service real estate brokers. These answers of mine came as a result of one questioners queries on Trulia regarding the advisability of using a discount real estate broker:
Pros: You may save on commission.
Cons: You may not.
Pros: You may gain valuable experience in selling real estate on your own.
Cons: You may never want to go there again.
Pros: It can be a workable strategy in a sellers market.
Cons: It could be disastrous in a buyers market.
(You seriously ask a very good question. I just cant resist simple answers and wish you well regardless of your listing strategy!)
We have been in an indisputable Sellers market in San Diego for some time. Now, more than ever, real estate buyers and sellers need expert guidance in the purchase and sale (or lease) of their San Diego property. Your ultimate success in the purchase or sale of real estate in the San Diego marketplace will depend not only on expert guidance, but timing and flexibility.
Commissions become somewhat irrelevant when 1 percent in value per month could easily be lost to a sliding market. This makes it more important than ever for sellers to employ the services of seasoned and knowledgeable real estate professionals and for buyers to do the same.
And as for luxury real estate representation in this real estate market, I can shamelessly suggest none other than Villa Sotheby’s International Realty at the Del Mar Plaza in Del Mar, just outside San Diego. Sotheby’s service is without parallel, while their commission rates remain quite ordinary.For additional reading abour these real estate issues:
Why You Always Need a Good Buyers Agent
New Real Estate Danger: Cancellation Fees
Encinitas Bluffs, But Its No Joke
