So it looks like some of the 1031 money is running scared. What I’m hearing is that several exchangers are entering into their 45 day identification phase, not finding a replacement property, and then canceling the exchange. That’s probably not surprising. Right now we are near historic lows on the capital gains tax, so the fear of taking a tax hit is offset by the fear that you’ll purchase a piece of real estate that is overvalued or declining. There are still exchangers out there that because of depreciation and multiple 1031 exchanges are at risk for suffering a much larger than average tax penalty, but it’s becoming harder and harder for them to find a decent replacement property that can believe in. This is creating some creativity in the kinds of properties people are looking for. More on this later…
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