The Voice for Real Estate 26: 1031 Exchanges, Disparate Impact

Featured Segments:

  • Little or no impact on real estate deals from Supreme Court’s disparate impact ruling
  • Pending sales up for fifth month in a row and now at highest level since 2006
  • 1 in 6 transactions wouldn't have happened without 1031 exchanges, NAR research shows
  • Live webcast on closing process changes

Get more on all the topics covered in this video:

Voice for Real Estate 26: Transcript

1031 Exchanges, Disparate Impact

Stephen Gasque Voice Over: 

Contract signings hit their highest level in almost a decade
The Supreme Court affirms: you can discriminate even without intending to
And NAR lays out why cutting 1031 tax-deferred exchanges is a bad idea
These stories and more on The Voice for Real Estate
Hi, I’m Stephen Gasque with the National Association of Realtors
Good news for our nation’s housing markets. NAR’s pending home sales index rose
for the fifth month in a row in May and it now stands at its highest level since 2006.
The index is based on signed contracts, not closed sales, so it serves as an indicator
of where home sales are heading, and NAR’s chief economist Lawrence Yun says
they’re heading up in part because first-time home buyers are finally getting back
into the market.
[QUOTE]
NAR releases its existing-home sales numbers next week. That’s for the month of
June and so far this year the sales pace points to continuing improvement over last
year.
[SWOOSH]
The U.S. Supreme Court has been busy recently. It affirmed the right of people to
receive premium subsidies even if their state doesn’t operate its own health
insurance exchange under the Affordable Care Act. And it affirmed the right of samesex
marriage.
With those big decisions, it’s easy to miss other decisions the court made. And one of
those decisions is important to real estate, because it says you can violate the Fair
Housing Act even if you don’t intend to if your actions have a disparate impact on a
protected class.
The decision doesn’t create new law. Rather, it affirms what courts have been ruling
for decades. And it mainly applies to housing developers and state and local housing
agencies to help fund affordable housing. But it’s important because the so-called
disparate-impact legal standard influences where housing gets built in your
community. NAR’s Fred Underwood has more.
[QUOTE]
It’s decisions like these that remind us how important housing is to our
communities. As a reminder, NAR makes resources available to help you stay in
compliance with our nation’s Fair Housing laws.
[SWOOSH]
Did you know $8 billion worth of real estate transactions a year involve a tax
deferral under what’s known as a 1031 like-kind exchange?
As you can see, this tax provision—which as been in the U.S. Tax Code since the
1920s—is integral to real estate, and yet several proposals in Congress are talking
about cutting it so they can generate more money for the federal government.
Well, NAR last week released research that shows why cutting the tax provision
would devastate the American economy. Among other things, 37 percent of
commercial real estate agents and 45 percent of residential real estate agents say
they’ve had between one and six transactions over the previous four years that
simply would not have happened without that provision.
NARs Danielle Hale joined other researchers at a press conference in Washington
last week to make sure national reporters who cover real estate and business news
understand just how important 1031 exchanges are.
[QUOTE]
The researchers also spoke on Capitol Hill the next day to bring lawmakers and their
staffs up to speed on the damage that could be caused to the economy if lawmakers
decide go move ahead with curbs to the tax provision.
[SWOOSH]
As many of you know, the Consumer Financial Protection Bureau has proposed
delaying its big closing process changes until October 3. Under these changes, the
HUD-1 settlement form and the Good Faith Estimate are replaced by new Loan
Estimate and Closing Disclosure forms. And new timeframes are built into the
process as well.
As a real estate agent, you want to be sure these changes don’t delay or stop your
transactions. So, NAR is hosting a live webcast for you this week. National closing
expert Phil Schulman and NAR Senior Counsel Finley Maxson will zero in on just
those things you need to know to help you improve the chances your transactions
go as smoothly as possible.
I’ll be hosting the webcast, so be sure to join me on Thursday, July 16, at 2 p.m.,
Eastern Time, to get the insight you need to keep your transactions on track. To
register, just go to nar.realtor/closingwebcast.
[SWOOSH]
And that’s our show for the week of July 13. You can get information on everything
we talked about today at The Voice for Real Estate page on nar.realtor. Thank you
for joining us and be sure to join us again as we bring you the latest news on The
Voice for Real Estate.

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