Have you ever considered the benefits of helping a client solve their real estate problem using an exchange? You might be pleasantly surprised with this creative problem solving approach. It is a viable business technique, especially as financing problems begin to put a big hurt on the "traditional" buy and sell routine.
Exchanging does require a bit of a different mind set.. and many traditional brokers will simply not want to exercise the mental and other effort needed to make it come together. A common misconception is that owner A and owner B must each have what the other owns. That is very rare, and is NOT the kind of exchanging I'm thinking about..
The "Taker Offer" is a technique I learned decades ago and it is not only challenging- it's fun and potentially very profitable as well. On the other hand, someone who is put off by ambiguity should not try this alone! But if you're the type of person who is good at puzzles, you can be really good at exchanging.
The "Taker Offer" approach is the first step to organizing a "multiple exchange". Brokers representing seller and buyer clients get together at an exchange meeting. ( Today, we can actually do all this online via a virtual meeting!) The moderator asks a broker for a property package (A) and the listing broker for (A) then describes his client's proeperty, problem, and goal. The use of a "Zander Board" keeps track of facts about the client/property being discussed. Then, brokers begin making "offers" to package (A). They are "takers" for property (A) and typically offer their equity plus boot (cash) to balance equities. Those trade offers are noted on the board. Cash offers are also noted on the board.
At this point, there may be 10 offers on (A). If any of those offers seem to be reasonable to (A), a short form offer is prepared from the "TAKER" to broker for (A). Hey, it's possible (A) would accept one or more of the offers, but not likely.
Next step: Now, remember, we have 11 properties on the board (10+1).. now the moderator asks if there are any takers for any of the 10 properties offered in to (A). That could possibly generate a whole new list of properties (referred to as "catalysts") .. in effect, the new catalyst properties enlarges the pool of available properties to owner (A)- new deals he could "take" in an exchange, in lieu of the initial 10 that were offered.
Note: Keep in mind that each time an offer is written, it does NOT matter if the person receiving the exchange offer wants the property offered. I know this is difficult for new traders to understand, but just trust me on this. What is important is that we're creating a list of "TAKERS" for one more properties on the board.
Now, for the sake of brevity.. let's step through this. We are looking for TAKERS for property (A) to begin with... but (A) may never want any of the offers. But deals could be made between those traders that intended to take (A). Or, (A) could have dozens of alternatives to pick from in the catalyst list .. I will illustrate this later, but what we're doing is keeping our minds open to the possibilities, and connecting the potential trades/transactions.
When (A) finds ANY property on the board that he is willing to accept, we have a deal. It may involve 5 properties. You see, each leg of the exchange doesn't care who their property goes to- they want to acquire a specific property.. that's what's important to them. (A) doesn't care who get's his property, he's just concerned about his "Taker Offer" where he receives property (B). Here is one way it could go:
•(A) TAKES (B); (B) TAKES (C); (C) TAKES (D); (D) TAKES (E); and (E) TAKES (A).
In this transaction, 5 couplets were closed. It all started with property (A). When we have a taker for (A), it closes the "loop". Anytime there are two or more takers in a string, all that is needed to close the entire transaction is a taker for the initial property.
Think about it. If you have a string of 5 properties in an exchange, but you still don't have a taker for the initial property... it might be worth it to you to buy that property and close all the legs! If the transactions total 1.5 million altogether, and you're fee is 6%, the total commissions earned if you close this deal is $90k. You can close that multiple exchange by either finding a buyer or taker for (A), or buying it yourself.
Key elements to this: Understanding how to prepare mini exchange agreements (and full agreements when needed); how to organize and document the "Zander Board"; How to prepare an ‘exchange recapitulation" form; and above all, a cooperative "can do" attitude among the brokers who understand that working together is in the best interests of ALL.
I'll put together an illustration of all this in a later post- using a "Zander Board", the exchange recapitulation, and mini offer forms.
Happy Trading!
