Some taxpayers completing 1031 exchanges are buying replacement properties from sellers with “seller-backed financing,” such as a contract for deed. Furthermore, this contract may be inconvenient to record because this conveyance of equitable title by contract for deed may violate the sellers existing bank financing agreements which is sometimes referred to as the “due on sale clause.” These provisions in the loan agreement and mortgage, often prohibit any convenience or transfer of the banks collateral without first paying off the debt owed to the bank.
Minnesota requires that the contracts for deed be recorded in a timely fashion, and imposes both potential criminal and civil penalties for failure to record.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
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