In this group training session, Chris Prefontaine leads a discussion on how real‑estate agents should handle sellers who intend to use a 1031 exchange. The core recommendation is to use a lease‑purchase (or lease‑purchase vehicle) to give the seller time to identify a replacement property while still maximizing the cash they receive at closing. The conversation covers the script to ask sellers about their 1031 goals, the importance of knowing whether the seller already has a replacement property (which affects the timing window), and how a lease‑purchase avoids deed transfer, keeping the exchange eligible. Participants raise questions about alternative structures—owner financing, land contracts, subject‑to deals—and Chris clarifies that any arrangement where title transfers before the exchange can be challenged, especially in Texas, so a clean lease‑purchase is preferred. The discussion also touches on the 45‑day identification period, the benefit of buying time, and the need to stay compliant with IRS rules. Overall, the session equips agents with a clear script, legal considerations, and a practical strategy to serve 1031‑exchange clients effectively.
Chapters
Does anyone remember how we said to handle a seller who wants to do a 1031? Does anyone remember? And if not, definitely worth us revisiting anyway.
No.
No?
Nope.
Nope.
Do you ask them if they already have a property in mind?
That's one piece because that would tell you if it's too late to do the 1031. Like to do the lease purchase.
Okay.
And here's why, guys. Please, let's stay on this if you don't know, because this group's the newest group, so you might not have been part of that. So let's make sure we're all clear on it. It's going to come up for you. And Dave had a nice call. That guy was great, by the way, Dave. Nice guy. And your script, your scripts, everything else is perfect. Just got to hit the 1031.
The 1031.
So my question would be always to them, let's say Dan's my seller and he says, well, I got to do a 1031. I don't know if that'll work. So my question is, okay, so in your 1031, Dan, I'm assuming your goal is to get the most you can get out of this house to then move tax-free, you know, 1031 into the other house, right? They're all saying they're going to all say yes, all of them. You want to maximize this to move on to something else. Okay, I'm probably going to be your best route for that via a lease purchase or via a lease purchase vehicle because we're going to get you the most money. And at the end of the 1031, David, how it works is It just starts like a new transaction. He's closing on this, he's moving to a 1031.
Okay.
And this gives him, in your case, it's a guy, a ton of time to play around. He's not under the gun. He can look for properties during the end of the lease purchase. You can't do it on a financing, but you can do a lease purchase because no deed transfers.
Okay.
And that's it. That's the script. Unless, to Jessica's point, He's got his eyes set on a property and he wants to identify that now and get this sold and move and get the thing done.
Right.
But if he doesn't, that guy didn't. He was just like wishy-washy.
Yeah, he— yeah, he— and then he threw in the other property in Colorado that he wanted to combine together. So then that was— that threw me off as well. I was like, I don't know how all that goes together. So yeah, that's kind of where I left it like that.
So because don't you have to identify the property within a certain period of time and that's going to take away that window? Is that what you're saying, Chris?
Yeah, let's just say hypothetically, I'll say it 2 ways, Dan. Tell me if I answer your question. Hypothetically, he, to Jessica's point, already has something. My wife and I are buying that 6-unit building. Like, that's the one we're doing. He's going to want to get this sold, and he already identified the other one, and he's good. If he didn't, and like this guy was just like, yeah, we think we might 1031, he was wishy-washy, I would ask him the question I asked. So you want to maximize this? Lease purchase is best. So at the end of the lease purchase, it's like the lease purchase didn't happen. It's just a closing for him again. It's like he's selling it conventionally, but it's in 3 years or 2 years or 18 months, whatever.
So you just basically buy time using our strategy versus what he would have to do on a traditional, correct?
Buy time if he wants or needs it. And also, life may change for him. He might not want 1031, so it gives him a buffer.
And third, he's going to get more money out of it than he's going to conventional.
We all know that. So I'll stay there for a second. Steve, you have a question? Go ahead first because it might surprise— but I want to stay here till you guys are super clear. Like, if you got a call tonight, you could do that.
Yeah, this is a 1031 question just on what you said. So I've learned that nothing is concrete in this business and we can move a lot of things. We could do owner finance if the title didn't transfer though, right? If we said, yeah, we'll pay him directly, but no title transfers, That would still work, right?
What are you calling that, though? Are you thinking land contract, or are you just back to it's a lease purchase kind of?
I don't care what we call it. It doesn't matter. But as long as title doesn't transfer, then even if he had— Well, you're correct.
You're correct. But I'd want you to be secure, not making a napkin deal. So I'd want it on a lease purchase.
Okay. Okay.
Yeah.
Can't we— we could modify the contract, though. Lease purchase, but title doesn't transfer.
You mean under financing?
Oh, yeah.
Well, owner financing, I'm sorry, land contract, the title sits in escrow too, but I think an attorney or an accountant or the IRS could challenge that because it does behave like owner financing and you cloud title. I would just keep it simple.
Okay. So are we back to if it's— if there's no mortgage, we can't do a 1031, we can't do it if it's owner financed?
Well, let me say it differently. If there's no mortgage, you can. Yeah, I don't, You can't do an owner finance.
Okay.
You can do any type of— it could be debt or no debt, but do a lease purchase.
Okay.
If they're doing a 1031, right? Or that's what they want to do.
Okay.
Okay.
Got it.
Yep.
To get the most out of that.
Am I okay doing that in Texas since we typically— I wonder if I can do that.
Yeah, that was going to be my question as well. Is it here in Texas? It has to be a subject to.
You wouldn't even do a subject-to because that would title transfer. So you guys aren't going to, in Texas, mess with 1031s trying to get in the middle of that. Just let them go do the 1031.
