The mechanics of a Reverse Exhange would be to start looking for your upleg prior to a sale of your existing property. Outline the parameters for your upleg and engage the services of an active broker who will work for you. A seasoned broker will often have access to many leads prior to the real estate even hitting the market. Solidify your deal and proceed with your purchase.

It is very important that all contractual documents, including your purchase contract and escrow instructions, not be in your name or any entity to which your name is part of. Title must also not be in your name. (The name on title could be a relative, a friend, an attorney or your CPA.) In other words, the buyer cannot technically be you. Now this escrow (your upleg) has closed and you can proceed with actually selling your existing property (your down leg.) When the sale of your downleg closes escrow, the 45-day period to nominate your upleg now begins. You then nominate your upleg (the property that previously closed to an entity or person other than yourself.) Remember that the purchase price must be the same price or greater than the sale price of your downleg. In order for the actual buyer on title of the upleg to avoid all tax when this property ultimately transfers to you, the sales price to you must be the exact price that this buyer paid.

Another scenario may even be that during the escrow of your upleg property, your downleg property sells, which may enable you to simply do the typical 1031 tax deferred exchange. The Buyer of the upleg can simply assign the upleg property to you. Make sure that the original purchase contract from the onsite allows for the title to be assigned.

The reality of this scenario actually happening in this market is still at the date of this writing very viable. In a Seller’s market, selling high is a reality but remember you’re now also the buyer in the same Seller’s market.