Let me share with you a bit what I’m after with my client counseling sessions with my clients.
Again, I want to come at them prior to the time that we have sold the relinquished property. I need to really understand the process.
First of all, let’s take a look at the client’s decision making process. Who are the decision makers? Who are the influencers? Am I talking to the person who will actually make the decisions or am I speaking with someone who frankly doesn’t hold much water when it comes to the final maneuvers.
What’s the magnitude of their tax problem? In some instances it’s not very large and frankly it may not be worth the anxiety that’s going to be caused by going through the tax deferred exchange process.
The better you counsel, the more you understand, the better off you’re going to be.
Do they have available tax losses that they can use? Maybe they’ve had losses from the stock market that could be used against the long term capital gain concern as they sell the relinquished property. What are the client’s financial concerns?
As an example, take a look at their loan, the loan that exists on their property. Is there a pre-payment penalty or a yield maintenance concern that a fees clause can be just a deal killer. They may also have personal debt concerns. Do they have credit card debt? Do they have short term balloons that are coming to? Do they have high interest loans that could be taken care of here?
This is a huge opportunity in a tax deferred exchange to maybe pull back some equity that turns into cash as you sell the relinquished property:
- If they grab a handful of cash, pay off a short term balloon payment that would have otherwise been a problem to them, you may have just solved several problems at once.
- Pay off high interest rate loans, pay off those loans that have high monthly payments for the amount that’s actually owed, you could be giving them a huge favor by doing that sort of thing.
- You’re improving their cash flow, you’re improving their long term position in the property and their overall financial stability.
There may be some other non-financial issues of concern. Are they concerned with estate planning? Maybe this is a great time to posture them for their estate plan. How about their marital status? Is it stable? Is there a concern here? Maybe we can structure things there.
Make sure that you understand the client motivation.
The more you can understand what motivates them to transact, the dangers that they perceive, the strengths that they seem to have and the opportunities that they perceive, the better off you’re going to be. Client counseling leads to a very success opportunity and you’ll look great in your client’s eyes.