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Title Deed Requirements in A 1031 Exchange
By Priya Jestin, Staff Writer
There are a few little things you need to take care of when you complete a 1031 exchange. For instance, when you buy new property, you should ensure that the deed contains the same name as used in the sale of the old property. So if the old property was registered in your spouse’s name, you cannot conclude the agreement. Your spouse’s signature is required on the deed to make it legally valid.
Any initials you used in your old deed also need to be retained. For example, if your name is John Smith, but you bought the old property as John A. Smith, then the new deed should also have your name as John A. Smith.
Sometimes, in the case of married couples, lenders require that both husband and wife appear on the loan. This could be for credit and underwriting reasons and the lender may require that both names appear on the deed to secure the loan. Depending on the particular situation, this may be no problem.
For instance if you sell your old property for $100,000, and you buy new property for $200,000, you only need to acquire $100,000 of the new property (in this case 50%) to satisfy your exchange. Your wife could acquire the other $100,000. This means you and your spouse are equal owners of the new property.
However, there is one situation where joint deeds could be a big problem. This happens when the sale price of your old property and purchase price of the new property are the same. For instance, if your sale property is worth $100,000 and you purchase property worth the same amount, you must acquire 100% of the property to satisfy your exchange. So if your lender requires that you add your spouse’s name to the deed, you could face tax problems. Adding your spouse will definitely jeopardize your exchange.
In such a scenario, you could get a letter from your lender that states their requirement to have your spouse on title to counter any tax problems.
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