1031 Exchange Not "typically Motivated"

[DanBuck]

While reading an article discussing the allocation of value among different components the author proposed that a sale involving a 1031 exchange does not meet the definition of market value since the purchaser is not “typically motivated”. I disagree, what do others think?

The author makes the case that since tax considerations are a factor the buyer is not acting prudently. My position is that of course the buyer is acting prudently and tax considerations are an underlying consideration in every commercial real estate transaction.

A buyer involved in an exchange has 180 days to purchase a replacement property which in my experience is sufficient time. While working as a commercial broker many clients were involved in 1031 exchanges and while some ran up against a deadline most were closing on transactions with plenty of time remaining in that window and many would look to identify properties prior to closing on the original transaction. I never encountered a buyer who was not acting prudently and purchasing a property above market just to complete a 1031 exchange.

What do others think about a 1031 exchange not being a transaction involving a “typically motivated” buyer.

I like this post. I was contemplating this recently. I noticed that smaller apt buildings sold at a higher overall rate than the large ones on the same block..Assuming outside factors similar-it occurred to me and other peer observers that the larger ones were being picked up by the 1031 guys. Considering that, i would agree that they define the "market" and is in fact a market transaction.