I hate negative news. But facts is facts. When it comes to the sale of apartment properties in the Des Moines market, there's not a lot of positive news right now. If you only want positive news, skip to the last paragraph and I'll give you the best spin I can come up with.
According to Rick Krause, Senior Associate with CBRE Richard Ellis/Hubbell Commercial, sales transactions 
involving apartment buildings in Polk County were down 48% in 2008 compared to 2007. Dollar volume was down an even higher percentage: 62%. This information comes from Rick's self-published monthly newsletter, the Central Iowa Income Property Newsletter, which he has produced for over six years. It is a short, informative newsletter that reaches over 90% of apartment owners in nine central Iowa counties. (Email Rick if you would like to be added to his mailing list.)
Transactions considered include garden-style apartments, apartment conversions, and apartments with elevators. The raw numbers show that there were a total of 72 transactions in 2008 versus 139 in 2007. The overall sales volume for these properties in 2007 was $81 million; in 2008 it dropped to $31 million.
Comparing 2008 numbers to two years ago is even more bleak. Total transactions went from 146 in 2006 to the 72 mentioned above in 2008 (down 51%), while dollar volume plummeted from $145 million in 2006 to 2008's total of $31 million mentioned above (down 79%!).
Breaking things down another way, high dollar transactions were down, too. In 2008, the sale price of only five transactions exceeded $1 million, compared to 18 in 2007 and 19 in 2008. Ave
raging the transactions for the three years shows the following:
The positive spin to all of this negativity is that things can't get much worse. Rick believes that commercial real estate transactions will increase in 2009. Reality is setting in for many investors who are considering the sale of their properties. Reality has already set in for some who, for one reason or another, must sell in the near future. Those who have the ability to purchase in this market stand to benefit from these newly-realistic sellers.
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Please consider IOWA EQUITY EXCHANGE as your source for answers to your questions about Section 1031 like-kind tax-deferred exchanges. Contact us at your convenience for prompt, accurate information. Please think of us for your next exchange
Ken Tharp
800-805-1031 toll free
Providing Qualified Intermediary services for Section 1031 tax deferred exchanges all over the United States. Headquartered in Iowa, our services are available in Missouri, Kansas, Nebraska, Colorado, North Dakota, South Dakota, Minnesota, Wisconsin, Illinois, and all other states.
INTEGRITY. PRECISION. SECURITY.
Copyright © 2009 By Ken Tharp, All Rights Reserved. * Apartment Sales Report - Des Moines, Iowa * Contact Ken Tharp for information on Section 1031 tax-deferred exchanges anywhere in the United States.
What could be more exciting than a discussion of the liquidity of funds, right? Okay, so it sounds pretty dry. Let me try to explain why it's actually of critical importance.
In my opinion, the cornerstone responsibility that a Qualified Intermediary has to his client is to protect the client's money while it's in the QI's possession. If the QI does something that makes it so his client's money isn't available when it's needed, or isn't worth as much as it was when it was transferred to the QI, then it really doesn't matter how well the QI prepared the documents, or how in tune with the laws that affect Section 1031 exchanges he is, now does it? The QI who places his clients' funds and accounts at risk is on a track for disaster.
Unfortunately, there have been a few disasters in the QI industry. The numbers are very, very small number in comparison to the number of practitioners; a tiny fraction of one percent, thankfully. It's not beneficial to delve into any specific failures. Instead, I will point out that, in every case about which I am aware, the crux of the problem was that the QI had, knowingly or unknowingly, placed his clients' funds at risk.
What can be done to avoid these risks as an exchanger?
We sometimes have a client who simply signs the documents to start an exchange without paying any attention to what we intend to do with their money. We like to point out to them what our plans are so they can feel comfortable, even though it may not have occurred to them to feel otherwise. Do not just blindly turn your money over to your QI. Ask questions and satisfy yourself that ALL of your money will be available when you need it to close on your replacement property!
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Please consider IOWA EQUITY EXCHANGE as your source for answers to your questions about Section 1031 like-kind tax-deferred exchanges. Contact us at your convenience for prompt, accurate information. Please think of us for your next exchange
Ken Tharp
800-805-1031 toll free
Providing Qualified Intermediary services for Section 1031 tax deferred exchanges all over the United States. Headquartered in Iowa, our services are available in Missouri, Kansas, Nebraska, Colorado, North Dakota, South Dakota, Minnesota, Wisconsin, Illinois, and all other states.
INTEGRITY. PRECISION. SECURITY.
Copyright © 2009 By Ken Tharp, All Rights Reserved. * Liquidity of funds - doesn't sound exciting? Read on... * Contact Ken Tharp for information on Section 1031 tax-deferred exchanges anywhere in the United States.
In the summer of 2008, I was honored to be asked to author an article for The Auctioneer, the official publication of the National Auctioneers Association, on the subject of Section 1031 exchanges and their 
application within the auction industry. The article was published in the September 2008 issue. If you would like to access the article online, it can be found on pages 62-64 of this link: The Auctioneer. The article is reprinted in three blog entries; this is the third of the three. (Part 1 can be found here; Part 2 here.)
What is the difference between the exchange agent and the closing company? Can they be the same company or must they be different? The exchange company oversees the closing to ensure that it complies with the requirements of Section 1031. The closing company actually conducts the closing and cooperates with the exchange company to meet those requirements. Restrictions within Section 1031 prevent certain parties who are agents of the taxpayer from functioning as their Qualified Intermediary. This includes relatives, the exchanger’s attorney, accountant, employee, investment banker or real estate broker or agent. The code specifically excludes a title company from the list of disqualified parties. Often, title companies that also function as Qualified Intermediaries operate their exchange business under a different name. If you consider having your clients use a closing company as an intermediary, before you refer business to them you should be satisfied that they are knowledgeable about the intricacies of Section 1031 requirements. Working with a full-time exchange specialist generally is a safer course than employing a closing company that tries to accommodate exchanges on a part-time basis.
Why do I care which exchange agent my client uses? If all exchange companies were the same, it would not matter which one your client used. If you deal with more than one exchange company, you will find over time that one is easier to deal with than the others. One will have more knowledge about exchanges. The people at one company will go out of their way to assist you and your auction client. In addition to knowledge and service, you and your client also need to consider the security of your client’s funds. Some QIs promote a bond that they have purchased. Others believe that a dual-signature account requiring the exchanger’s approval plus the directions of the QI to move money is a safer solution. Discuss security of funds with your QI so that you know what actions are being taken to protect your client’s money.
Is there a way an exchange can assist prospective buyers? If you often work with prospective buyers prior to a sale, you should familiarize yourself with reverse exchanges. If you hear a prospect say something like, “I wish I could bid on that piece of ground, but I’d need to sell this piece to buy it,” you should think of a reverse exchange. The term “reverse exchange” is a misnomer, because technically nothing is done in reverse order. In a reverse exchange, the exchanger directs a new entity, such as a single-purpose LLC, (typically formed by the QI) to purchase a property and hold title to it while the exchanger sells one or more properties as the first leg of the exchange. Once those properties sell, the QI arranges a standard exchange between the new entity and the exchanger. The advantage to you in an auction setting is that a reverse exchange can allow you to accept a winning bid from someone who needs to sell another property to buy the one you are auctioning. In conclusion, Section 1031 exchanges can be a boost to your auction business and a service to your clients. The basic structure and rules are straightforward and easy to understand. Idiosyncrasies within nearly every exchange make the involvement of a knowledgeable exchange expert imperative. Awareness of the basics by the auctioneer and the assistance of a respected exchange professional can help set your business apart from the crowd.
The foregoing information is a basic overview of Section 1031 tax-deferred exchanges. In no way does it substitute for tax or legal advice in a particular situation. Please consult your tax and legal advisors before beginning an exchange. Ken Tharp is the owner of Iowa Equity Exchange, a Qualified Intermediary service located in West Des Moines, Iowa. He has been a real estate investor in central Iowa for thirty years. His background includes construction, property management, sales, property rehabilitation and development. Iowa Equity Exchange handles all types of exchanges: delayed, improvement, construction, and reverse structures. For more information about exchanges, go to www.iowaequityexchange.com or contact Ken by phone (515-224-5259 office) or by email at ktharp@iowaequityexchange.com.
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Please consider IOWA EQUITY EXCHANGE as your source for answers to your questions about Section 1031 like-kind tax-deferred exchanges. Contact us at your convenience for prompt, accurate information. Please think of us for your next exchange
Ken Tharp
800-805-1031 toll free
Providing Qualified Intermediary services for Section 1031 tax deferred exchanges all over the United States. Headquartered in Iowa, our services are available in Missouri, Kansas, Nebraska, Colorado, North Dakota, South Dakota, Minnesota, Wisconsin, Illinois, and all other states.
INTEGRITY. PRECISION. SECURITY.
Copyright © 2009 By Ken Tharp, All Rights Reserved. * Section 1031 Exchanges and the Auction Industry (Part 3) * Contact Ken Tharp for information on Section 1031 tax-deferred exchanges anywhere in the United States.
In the summer of 2008, I was honored to be asked to author an article for The Auctioneer, the official publication of the National Auctioneers Association, on the subject of Section 1031 exchanges and their application within the auction industry. The article was published in the September 2008 issue. If you would like to access the article online, it can be found on pages 62-64 of this link: The Auctioneer. The article is reprinted in three blog entries; this is the second of the three. (Part 1 can be found here.)
Specific questions about exchanges and auctions:
When should I get in touch with a QI? The important thing to remember is that exchange documents must be 
signed and in place before closing and transfer of title occurs. Many QIs can do the paperwork for an exchange in a matter of twenty-four hours or less, but most prefer to be involved earlier in the process. Bringing the QI in early enables him to gain a thorough understanding of the circumstances, and allows plenty of time for review of all documents and the answering of any questions.
Does a 1031 exchange become a contingency in the contract? How does an exchange affect my “as-is, where-is” sale? If you affiliate yourself with a knowledgeable QI, he will thoroughly explain to your client the various rules and regulations that must be adhered to in order to achieve a successful exchange. With a clear understanding of the requirements of Section 1031, the client can decide whether to proceed with or without an exchange. Whether or not the client enters into an exchange agreement with the QI, the sale can take place without contingencies as to the exchange. In essence, the exchange is external to the auction.
Do I need to put “cooperation language” in the contract? Is there any harm in putting that language in the contract? “Cooperation language” refers to disclosing to the other party that one is involved in an exchange. There is no specific requirement to disclose in the contract that an exchange is in process. On the other hand, in an auction setting it does no harm in disclosing the existence of an exchange. Many commercial real estate companies have incorporated cooperation language into their standard purchase contracts today. If cooperation language is not included in the purchase contract, it is important that there be no prohibitions to assigning the purchase contract, because it must be assigned to the Qualified Intermediary for the exchange to proceed. If present, prohibition language in the contract can be overridden by the parties by using an addendum.
We provide the following language to our clients for their purchase agreements: “It is the intention of Seller to transfer the above-listed property pursuant to Internal Revenue Code Section 1031, which sets forth the requirements for tax-deferred real estate exchanges. Seller’s rights and obligations under this and future agreements will be assigned to Iowa Equity Exchange, qualified intermediary, for the purpose of completing an exchange. Buyer of the above-listed property agrees to cooperate with Seller and Iowa Equity Exchange in a manner necessary to enable Seller to complete said exchange. Such cooperation shall be at no additional cost or liability to Buyer.”
Should I add “1031 Exchanges Welcome” to my advertisements, or something similar? It certainly cannot hurt anything, and it demonstrates your awareness of the process.
As an agent of the seller, can I promote to the seller the use of a particular exchange agent? There are many opportunities for the auction company to refer business to any number of service providers. Termite inspections, title companies, attorneys, accountants, and more are part of the typical real estate transaction. If you refer business to those sorts of companies, you should feel comfortable establishing a relationship with an exchange company for referrals to them as well.
(Article is continued in Part 3.)
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Please consider IOWA EQUITY EXCHANGE as your source for answers to your questions about Section 1031 like-kind tax-deferred exchanges. Contact us at your convenience for prompt, accurate information. Please think of us for your next exchange
Ken Tharp
800-805-1031 toll free
Providing Qualified Intermediary services for Section 1031 tax deferred exchanges all over the United States. Headquartered in Iowa, our services are available in Missouri, Kansas, Nebraska, Colorado, North Dakota, South Dakota, Minnesota, Wisconsin, Illinois, and all other states.
INTEGRITY. PRECISION. SECURITY.
Copyright © 2009 By Ken Tharp, All Rights Reserved. * Section 1031 Exchanges and the Auction Industry (Part 2) * Contact Ken Tharp for information on Section 1031 tax-deferred exchanges anywhere in the United States.
In the summer of 2008, I was honored to be asked to author an article for The Auctioneer, the official publication of the National Auctioneers Association, on the subject of Section 1031 exchanges and their application within the auction industry. The article was published in the September 2008 issue. If you would like to access the article online, it can be found on pages 62-64 of this link: The Auctioneer. The article is reprinted in three blog entries; this is the first of the three:
The purpose of this article is to provide basic information about Section 1031 exchanges and discuss some particular matters that apply to exchanges and the auction industry. Ultimately, the idea is to supply you with another arrow in your quiver to distinguish your company from your competitor who is not familiar with the benefits that Section 1031 exchanges offer.
What is a Section 1031 exchange? Section 1031 of the Internal Revenue Code was made a part of US tax code
in the early 1920’s, shortly after our modern income tax code came into being through the ratification of the Sixteenth Amendment in 1913. Section 1031 allows the owner of property held for investment or used in a business to dispose of that property through a sale and reinvest the sale proceeds in new property that will be held for investment or used in a business and defer any taxes on capital gains. (A taxpayer can exchange either real estate or business personal property or both.) The net effect of this tax savings is that more money is available for the purchase of the new property; sometimes a lot more money. There are a number of factors that determine the taxes owed on a sale when an exchange is not utilized, but in some cases taxes can represent a very sizable portion of the client’s proceeds. In extreme cases, more taxes might be due than proceeds received!
Over the years since Section 1031 was added to the US tax code, the IRS has made many aspects of exchanges much clearer as to what is allowable and what is not. Today, while there are still areas of gray, in most cases a knowledgeable exchange expert can offer a quick assessment of the viability of an exchange in a given situation.
When you are involved in selling property that has been held as an investment or used in a business and your client is considering reinvesting the proceeds in new property, it will demonstrate your concern for your client’s best interests if you bring up the possibility of a Section 1031 tax-deferred exchange. You do not need to be an expert in exchanges; you merely need to know an expert whom you can call on for help. Back in 1991, Treasury Regulations established the use of an entity known as a Qualified Intermediary to handle exchanges. Qualified Intermediary companies come in a wide variety of sizes, much like auction companies. Find out who handles exchanges in your area. One way of doing that is to visit the web site of the national association for the industry, the Federation of Exchange Accommodators, at www.1031.org, and use the Member Locator for your area. Many QIs, including my company, work nationwide. Establish a relationship with a QI or two so you can call on them for assistance when one of your clients might benefit from an exchange.
The diagram below illustrates the basic structure and requirements of an exchange.
(Article is continued in Part 2.)
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Please consider IOWA EQUITY EXCHANGE as your source for answers to your questions about Section 1031 like-kind tax-deferred exchanges. Contact us at your convenience for prompt, accurate information. Please think of us for your next exchange
Ken Tharp
800-805-1031 toll free
Providing Qualified Intermediary services for Section 1031 tax deferred exchanges all over the United States. Headquartered in Iowa, our services are available in Missouri, Kansas, Nebraska, Colorado, North Dakota, South Dakota, Minnesota, Wisconsin, Illinois, and all other states.
INTEGRITY. PRECISION. SECURITY.
Copyright © 2009 By Ken Tharp, All Rights Reserved. * Section 1031 Exchanges and the Auction Industry (Part 1) * Contact Ken Tharp for information on Section 1031 tax-deferred exchanges anywhere in the United States.
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Iowa Equity Exchange is a nationwide, trusted provider of Qualified Intermediary services for all types of Section 1031 tax-deferred exchanges. Free consultation about potential exchange transactions.
IOWA EQUITY EXCHANGE meets the needs of investors and business owners who desire to defer capital gain taxes on real estate transactions involving property held for investment or used in a business. We provide Qualified Intermediary services for tax-deferred exchanges throughout the United States. All exchange structures are supported and available through Iowa Equity Exchange: delayed exchanges, reverse exchanges, improvement/construction exchanges, business asset exchanges, and parking exchanges.
Ken Tharp established Iowa Equity Exchange to serve investors of all levels of expertise and experience. He has been a real estate investor himself since 1979. During the past thirty-plus years, Ken has been involved in virtually all areas of real estate – including sales, new construction, property management, and extensive renovations. After personal experience in a number of §1031 tax-deferred exchanges, it became a passion to expose this invaluable process to as many others as possible—thus was born Iowa Equity Exchange.
At Iowa Equity Exchange, our commitment is to provide investors, business owners, and real estate professionals with the highest level of expertise. Security is available for every dollar of your funds while they are held in trust. We pledge to maintain the integrity of every exchange.
A “Qualified Intermediary” has the very specific role of guiding the investor through a §1031 exchange. We inform the exchanger of exchange requirements, produce the necessary exchange documents, provide the critical time monitoring procedures required, and manage the investor’s funds while in our possession. We are not engaged in the practice of law or accounting; we urge all clients to discuss the matter of exchanging with their trusted advisers. We will be happy to join in those discussions if desired by the parties.
If you are interested in learning more about Section 1031 tax-deferred exchanges, there is a lot of information on our web site, www.iowaequityexchange.com.
IOWA EQUITY EXCHANGE. INTEGRITY. PRECISION. SECURITY.
Our Mission Statement: Iowa Equity Exchange exists to provide Qualified Intermediary services, but to do so with the utmost of integrity in our actions, precision in our documentation, and security for our clients’ funds.
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Iowa Equity Exchange Is a proud member of the Federation of Exchange Accommodators, the only trade association dedicated to the representation of professionals who conduct like-kind exchanges under Section 1031 of the Internal Revenue Code.
Members of the Federation of Exchange Accommodators must read and agree to abide by a rigorous Code of Ethics that can be found at the association's web site, www.1031.org.
In addition to the FEA, Ken Tharp is a contributing blogger to the American Apartment Owners Association, a member of the Iowa Commercial Real Estate Association, the Two Rivers Real Estate Investors Association, and the Iowa Landlord Association. Ken speaks frequently to real estate investor associations, real estate company meetings, various Boards of REALTORS®, and a variety of other organizations.
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Testimonials
"Excellent service, I would highly recommend for a 1031 exchange."
David Elgin, West Des Moines, IA, 2/4/09
“I am so glad I decided to work with you on these exchanges. I just want to let you know that everyone who has been involved and in contact with you has expressed excessively how nice you are to explain everything to them as the process progresses and how patient you have been with all of us who are ignorant of this business. You have made this so easy for everyone involved. Thank you from the depth of my heart. With all of my hysteria about the whole sale transaction, you have been the one smooth factor I could count on.”
Lora J, Coralville, IA 1/22/09
“Thanks for your prompt attention to all of our paperwork and your very clear instructions. This could have been complex and cumbersome, but you made it smooth and easy.”
Jean I, Olympia, WA 1/22/09
“Excellent work, I didn’t have to worry once. Ken made a very smooth transaction out of this and I’m very grateful. Will do business again with Iowa Equity Exchange.”
Frank S, Pleasant Hill, IA 12/5/08
“We work with Ken directly as our sole source for 1031 exchanges involving our clients. Ken's ability to give direction on where our clients need to head financially with property exchanges is an asset that we are very proud to offer at LandAndGame.com. The opportunity to work with Ken has been a real blessing for our business and will allow to us increase the bottom line for our clients investments across the board. In short, if you're an active investor in farm ground, hunting land with income, or duplexes and apartments, your time spent with Ken will pay dividends exponentially in your property portfolio."
Rod White, owner, LandandGame.com
“I first worked with Ken in 2007 after meeting him online. As a real estate agent and auctioneer serving my clients needs well is important to me. Ken spent hours on the phone with me taking the mystery out of 1031 equity exchanges and putting them in EASY to understand terms. I refer ALL of my 1031 exchange clients to Ken because he has taken EXCELLENT care of every client I have ever sent him. He is in my opinion the best in the business. He makes it so easy!”
Jason Smith, Land Specialist and Auctioneer, Loess Hills Land
"I contacted three 1031 exchange companies before selecting Iowa Equity Exchange for my 1031 exchange. Ken Tharp of Iowa Equity Exchange seemed to be the most knowledgeable person and was willing to answer all of the questions that I had about 1031 exchanges. The 1031 exchange went smoothly following the guidance provided by Ken Tharp.
Max Peterson, Stanton, Iowa, 6/8/08
“As a banker, I found your service to be very helpful.”
Paula Sears
“Being a new [real estate] agent, I’ve not dealt with 1031 exchanges yet. I found your presentation to be both informative and easy to understand.”
Rachelle Bryan
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