don’t fit well into a standard niche also have a place in exchanges. And in an economic downturn when cred- it markets dry up, exchanging may be the only viable approach to sell a property. The simplest exchange is that Seller A wants what Seller B has and Seller B wants what Seller A has. Then the main question is how to balance the equities. Say

Seller A has a free and clear house worth $150k and Seller B has a small free and clear commercial building worth $250k. Maybe they exchange properties and Seller A gives a mortgage to Sell- er B on the com- mercial property for $100k. But Exchangors are not limited to two party exchang- es. They have



techniques to identify multi-leg exchanges where Seller A provides their property to Seller B, Seller B provides their property to Seller C, and Seller C provides their property to Seller A (a 3- leg exchange). Four- and five- leg exchanges are not uncommon. Rumor has it that the record is a 42-leg exchange. Talk about a complicated transaction! Exchangors internalize some truths that many over- look. No one actually wants cash. They want what cash can buy. The property is not as important to understand as the client, and price is never as important as benefits (what a seller hopes to achieve by selling the property). The largest group of Exchangors in the U.S. is the National Council of Exchangors (www.ncexchangors. com). They meet four times per year in Las Vegas for four days of education, property presentations, deal making, and networking. You must be a licensed real estate agent (or in some cases an attorney) to be in the room. Details about sellers' needs and objectives are presented and it is important that everyone in the room has the kind of fiduciary duty a real estate agent is required to have. The meetings are extremely collab- orative. Especially when new attendees present their

Property Exchange

The answers to these questions inform what al- ternative deal structures might support the seller’s objectives. For example, a seller that wants to move up could use their property as a down payment on a larger property. A seller that wants to liquidate their portfo- lio might relish turning that property into an income stream by carrying the financing. Exchangors learn what creative deal structures are appropriate for each situation and they apply them to ensure win-win-win- win transactions. Good Exchangors council their clients. They listen and ask questions to learn what their client’s resources and objectives are. Then they discuss different ap- proaches to selling or exchanging the property so they know what their client may be willing and able to do to sell the property. Exchanging is an especially effective approach for properties that may be challenging to sell to cash buy- ers. Properties with vacancy or deferred maintenance are good candidates. Properties that are unique or


by Steve Streetman


magine a group of real estate brokers who help their clients trade real estate parcels as if they were baseball cards. Brokers who can figure out how to move through properties (sometimes in three, four or five steps) to get to an ultimate cash sale. These bro- kers regularly do the ultimate in creative deal making. They combine property for property exchanges, notes, other property (boats, cars, cryptocurrency), and spe- cialized terms (leasebacks, seller financing) to ensure their clients meet their objectives. These brokers call themselves ‘Exchangors’ and if you want to take your negotiating skills and deal structuring acumen to the

next level, you want to know how they work. The philosophy behind exchanging is one that more real estate professionals (and investors) should take to heart. Exchangors believe they need to really under- stand both the property that a client wants to sell and the seller’s objectives in selling.

• Is the seller in distress? • Does the seller want out of management?

• Is the seller retiring and simplifying their estate? • Does the seller want to move up into a bigger property? • How much debt is on the property and is it assumable?

52 | think realty magazine :: january / february 2020

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