What is a Reverse 1031 Exchange?
A reverse exchange allows you to acquire replacement property before selling your relinquished property. This strategy is particularly valuable in NYC's competitive market where desirable properties move quickly.
When to Consider a Reverse Exchange
- You've found the perfect replacement property but haven't sold yet
- Market conditions favor buyers for replacement property
- Your relinquished property needs time to sell
- You want to avoid the pressure of the 45-day identification period
How Reverse Exchanges Work
An Exchange Accommodation Titleholder (EAT) acquires and "parks" either the replacement property or your relinquished property. The exchange must be completed within 180 days.
Parking Arrangements
- Replacement Property Parking: The EAT holds the new property until you sell the old one
- Relinquished Property Parking: You transfer the old property to the EAT while you close on the new one
NYC-Specific Considerations
Reverse exchanges in NYC require careful coordination with ACRIS filings, transfer tax timing, and title insurance requirements. Working with professionals experienced in NYC reverse exchanges is essential.
Cost Considerations
Reverse exchanges typically cost more than forward exchanges due to EAT fees, additional legal work, and carrying costs. However, the benefits often outweigh the costs in competitive markets.