NCS Exchange Professionals See Investors Moving Back into Real Estate

By Nicole Zaro Stahl, Hacienda Network Staff Writer

The 1031 Exchange is a special code in the realm of real estate. It refers to a provision of federal tax law, Internal Revenue Code Section 1031, that allows investors to defer taxes when they buy and sell property held for a "productive purpose in business or trade." While it is always wise to obtain professional advice when making a real estate transaction, in the intensely regulated environment of 1031 Exchanges, it is essential to work with knowledgeable specialists.

NCS Exchange Professionals, a Hacienda tenant since 2004, plays a critical role in 1031 transactions. The company is recognized by the IRS as a Qualified Intermediary, meaning that it is authorized to act as the mandatory neutral third party between the buyer and seller during a property exchange.

"Capital gains taxes can be a major deterrent in selling property," observes Ruth Vanderostyne, President of NCS Exchange Professionals. "Often, investors want to purchase a new property, but first they have to sell what they already own. Many shy away from the transaction, not wanting to pay capital gains taxes on the sale. In the meantime, they are missing the opportunity to purchase a more lucrative investment asset."

The 1031 exchange overcomes that hurdle, enabling investors to sell a qualifying property and use the proceeds to purchase a like-kind property, without paying federal income taxes on the transaction at the time. Stringent government regulations - for example, the exclusion of owner-occupied residences - specify that the Qualified Intermediary handle all monetary proceeds and fund transfers according to a very rigid timeline, so it is very important to deal with a reputable firm. "We prepare the exchange agreements and send them to the escrow company, where the client signs all the documents at one time. Once the transaction closes, the escrow sends us the money and the clock starts ticking for the taxpayer, who has 45 days to identify an exchange property and 180 days to take title to it."

Van Derostyne points out that NCS has notable strength in the market as a wholly-owned subsidiary of Mother Lode Holding Co. "We work with our sister organization Placer Title Co., which gives us the full backing of the title insurance industry to provide complete security for client funds," she says.

The downturn in the real estate market has left its imprint on the transaction volume at NCS, but clients who recognize the values available are starting to take advantage of current conditions, she reports. REO, or real-estate owned (foreclosed), properties are going for very attractive prices in the Sacramento area, for example, where a four-bedroom, two-bath home can be had for $132,000. "These are really nice properties," she comments, pointing out a convergence of favorable factors for investors: lower purchase prices allow owners to rent out private homes at rates that more than cover all their obligations, and the rental demand is high because of those who have had to move out of their own homes.

With the IRS 1031 Exchange Code encompassing all 50 states and the U.S. Virgin Islands, NCS Exchange Professionals serves clients throughout the country. For more information, visit www.ncs1031.com.

Photo: Gabrielle Ballew, Ruth Vanderostyne, and Mary Ray of NCS Exchange Professionals.

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