Frequently Asked Questions
(Q) I thought I could not do my own exchange or offer exchange services for current clients without the exchange being disallowed, in fact I thought I needed special training or a license to perform exchanges.
(A) Contrary to popular belief, professionals can act as a Qualified Intermediary and perform exchanges for current clients without the exchange being disallowed, there is even an example in the Internal Revenue Code that explains how it can be performed. It is even possible to perform an exchange for yourself using a number of legal techniques. The exchange industry doesn't want you to know about this so they can keep the exchange fees and all the interest income on the funds held in escrow and not have any other competition. It is true that some complex exchanges should never be performed by anyone but a trained exchange professional, but over 90% of all exchanges are rather simple to complete and can be done using our training program and software.
(Q) How large is the market for exchange services?
(A) The market for exchange services is very large and growing rapidly. According to a recent Wall Street Journal article dated August 2006, exchanges are surging in popularity even in a down market. We predict the number of exchanges to more than double in five years as more people discover the advantages that an exchange can offer them. The beauty to the exchange industry though, is that many clients become repeat customers with 22% performing an exchange every three years which creates a residual income
(Q) I have seen many exchange companies offering free 1031 courses.
(A) You probably have. Most 1031 exchange companies offer free courses to explain the tax benefits of exchanges to the public. But they do not teach you how to perform the exchange. Instead they explain what an exchange is, the benefits of an exchange, and how it works. They want you to hire them to do the exchange so they can keep the whole fee, which can exceed $2,500.00 for a simple tax-deferred exchange, for themselves.
(Q) What if I get asked to do an exchange and do not feel comfortable with it?
(A) I was nervous for my first exchange so I know the feeling. Not to worry - just follow our checklist and nothing should go wrong. We offer full email support to help you complete the exchange.
(Q) Do I have to go to the real estate closing?
(A) No, but we strongly recommend that you do. We have generated hundreds of referrals by attending closings. Almost all other exchange companies fax the documents so as a result, no one has ever met a 1031 practitioner, and showing up is powerful advertising. Secondly if I were paying someone a large fee and entrusting them hundreds of thousands of dollars of my sales proceeds, I would expect to see them at the sale.
(Q) Do I have to know math?
(A) No, there is really no math involved. You do have to understand the rules and regulations of 1031 exchanges and about capital gain tax law. With our simple, easy-to-use forms and calculators, we take all the guesswork out of the process.
(Q) Can I really make money doing 1031 exchanges?
(A) We cannot state how much you are going to make, but the demand for exchange intermediaries is growing very fast. The average fee for a simple exchange is approximately $2,500 with all combined fees. Many intermediaries are also making additional income by selling replacement properties and offering mortgages.
(Q) How can I average $2,500 in exchange fees when I see some competitors offering exchanges for as little as $400?
(A) Most QI's make the bulk of their income on an exchange from the interest on escrow, not from the exchange fees. With rising interest rates, intermediaries want to do more exchanges and increase their funds in escrow. By offering lower fees, the public thinks that they are getting a bargain. Some QI's also offer low fees but only for the sell part of an exchange; each purchase can then cost additional fees, and there can even be hidden wire transfer fees of up to $100 per wire. No one is doing an exchange for only $400.
(Q) Does the course contain everything I need to complete a tax-deferred exchange and open my own exchange business?
(A) This is a complete turnkey solution. The course contains everything that you need: software and forms, marketing materials, training manual and supplement, four 2-hour DVDs of training, and email support to complete a delayed exchange from beginning to end. The course is designed for your success.
(Q) What if I have no prior experience with taxes or real estate?
(A)The course was designed for anyone. There is no need to have any prior experience although it would be helpful. Regarding taxes, you are not required to be a tax expert. In fact, most people in the industry have no tax background at all, you just have to know the exchange rules and the forms to use, all of which are completely covered in our course.
(Q) How much should I charge for an exchange?
(A)Prices vary area by area. The best thing to do is call some competitors listed in your local area Yellow Pages and ask them what they charge.
(Q) How can I market my exchange services?
(A) If you are an accountant, financial planner, attorney, real estate agent, mortgage broker, title company, insurance agent, home inspector, or appraiser, you already have a base of customers you can farm to offer these services to. You can also offer free seminars as a way to build both your new exchange service and regular business. You can even partner with others to create a large exchange company. The courseware has many marketing ideas included to assist you. We know of some firms that do not offer the exchange service but farm the work out to others. Instead, with their new knowledge of exchanges and how they work, they market replacement properties and mortgage services. Some even specialize in dealing with real estate investors only.