What's A Real Estate Bargain Sale For Commercial, Industrial And Retail Properties

You’ve probably noticed in the news that real-estate markets across the nation are starting to see a little increase in activity and sales prices. That’s fantastic news for the typical seller, but for sellers having distressed property sale prices and surely days-on-market figures may not be looking up much. The truth is it is tough to sell an underutilized or distressed property in any market as traditional purchasers view it as a high risk investment given its condition and the amount of capital that will be necessary to get it into good running condition. So what’s an owner of distressed commercial, industrial or retail property to do? Think about a real estate bargain sale!

What IS a Real Estate Bargain Sale?

A bargain sale real estate transaction is an alternate to traditional selling techniques that allows the seller to pocket cash at closing while getting a substantial tax deductible donation that usually saves them from paying more in taxes on their regular income than they’d receive cash at closing. These kinds of sales are cash, meaning no contingencies to meet and a fast, comparatively painless closing. In a real estate bargain sale transaction the seller is given a bit of cash at closing to cover their assessment and closing costs, additionally they get a non-profit donation deduction which could be used on a quarterly return if they’ve sufficient income, or it could be applied to their tax returns for around 6 years. Real estate bargain sales often bring a higher sales price for the property than traditional buyers would offer due the IRS Rules regarding assessing bargain sale real estate in Publication 561 . So between the fast cash, charitable donation and higher sales price these sales really are a fantastic option for sellers of distressed properties!

IRS Publication 561

As everyone knows in this day and age if it sounds too good to be true it generally is. Sellers pursuing real estate bargain sales do not need to panic about a scam. The Bargain Sale Exchange was created by the government in Section 170 of the IRS Code and predates the 1031 Exchange, making it a long running safe and proven technique of selling distressed or underutilized business, industrial and retail properties. How does the bargain sale offer a greater profit for sellers than a traditional sale in the real estate market? These sales are bound by the IRS Code Section 170 and are more explained in Publication 561 requirements for real estate appraisals. This kind of appraisal allows the appraiser to assess the value by a combination of three methods of valuation: the Replacement Cost Strategy, the Market or Sales Approach as well as the Income Approach. They then take a weighted average from those techniques and may also think about the highest and greatest utilisation of the property when determining its value even if that use differs from its current use. According to IRS Publication 561:

‘Fair market value (FMV) is the price which property would sell for on the open market. It is the price that might be agreed on between a willing purchaser and a willing seller, with neither having to act, and both having reasonable knowledge of the relevant facts.’

Valuing a property in this manner removes the factors of time constraints and carrying costs on the seller’s part. Therefore the property can be appraised for a higher value than it might be in more traditional sales which use only the Market or Sale Approach or the quick bank .

Bargain sales of real estate offer an excellent alternative to more traditional selling methods for owners of underutilized or distressed property. As real estate bargain sales are cash transactions, closing is fast and simple. Under the terms set by the government the seller is entitled to a charitable donation deduction due to the sale and also pays minimum capital gains taxes on the cash obtained at closing. Thus all that cash saved by not paying as much in income taxes from gifting real estate via a bargain sale to charity can be reinvested in your business!

For more details visit http://mercyrealestate.com and http://mercyfoundation.org