Copyright 1998, Bill Broadbent, S.E.C.-CCIM, San Luis Obispo, CA

Are you running a race? For more than ten years this race has been a huge challenge for investors. If you have sold your investment property and want to defer any capital gain by exchanging, under IRC Section 1031, for another property you are running in the race.

Typically you closed the sale and assigned your position to a qualified intermediary (an accommodator) who holds the funds. From the closing date, you had 45 calendar days to identify your replacement property(s) and up to 180 days (including the 45 days) to close on one or more of the properties identified.

Talk about speed. Forty-five days fly by quickly, and you may have to settle for second best properties to stay within the IRS time limits. For that reason the delayed exchange is not popular among Americas most experienced real estate exchange specialists.

What are your alternatives? Let's look at two of them.

To locate property you drive the commercial, office and or industrial areas, and study the classified ads. You may attempt to avoid real estate agents in the hopes of finding a "For Sale By Owner" (FSBO) situation that you can buy cheaper because the seller won't have to pay a real estate commission.

In this scenario the seller, of course, is trying to earn the real estate commission by selling his own property. Only one of you can win that game.

If you (as a buyer) are not averse to working with an agent, you may contact a real estate agent. You tell him what you want in some detail. If he doesn't have anything you like, you probably leave your name and say, "Call me when you see something," and wander off to the next real estate firm where you tell your story again and the process starts all over. Some buyers find this procedure to be tedious, frustrating and very inefficient.

Ask yourself, is anyone besides you really working on your problem? Probably not! Consider this.

Will you be shown foreclosure property or other forced-sale property, probate property, or "for sale by owner" property? Not likely. The real estate person has no commission protection in any of these situations and would probably steer you away from them. This usually excludes you from a significant number of properties, any one of which might be the best property for you.

Instead of initially shopping for a property, shop for a capable agent to represent you. Remember that over 80% of real estate agents deal primarily in home sales. Inquire until you find an agent with experience in investment property, exchanging and buyer representation.

When your objectives are compatible with the marketplace and the agent's ability to help, the agent will suggest that you employ him as a Buyer's Broker. An appropriate Employment Agreement in which the fee is paid by you, the Buyer, to your agent will be signed by you and your agent. Signing an employment agreement is one indication that you're dealing with a pro. The best Buyers' Agents work only under a written exclusive employment agreement where the Buyer has agreed to pay the fee.

Time is critical. Before employing an agent ask him what plan he will implement in pursuit of your objective. The experienced agent knows how to get maximum exposure to meet your objective in the shortest period of time. It will cost your agent money to do it and will require a more focused effort. That is why he will only work for you if you employ him under an exclusive employment agreement..

When your agent's fee has been agreed to, any property becomes a possibility. Your agent may pursue not only listed properties, but can negotiate for probate situations, forced sales of any kind, "For Sale By Owner" situations, and most importantly, property that is not on the market at all.

Customers usually see only listed properties, but the entire marketplace opens up for a client who has employed, and agrees to pay a Buyer's Broker. Access to all properties is very important to investors. Experience has shown that frequently the best investment opportunities are not officially "on the market". Your agent doesn't have to waste valuable time trying to get some seller to agree to pay him a commission.

Being a client saves you, the Buyer time and effort when buying investment real estate the easy way, preserves confidentiality and increases the profit potential in your transaction.

Finding a suitable replacement property to complete a delayed exchange can be a frustrating and dangerous experience for a customer. Your best chance of winning the replacement property race is when you the Buyer become a client. If you have the benefit and protection of an experienced investment/exchange agent who understands Buyer representation to guide the way, your transaction is less frustrating, much safer and likely to be more profitable.

Run an easy race. Do it right!

Ed & Bill each have over forty years experience in investment real estate, and are specialists in exchanging and Buyer Representation.