As anyone who reads my blogs here and at The Settlement Channel know i've been warning about the inevitable collapse of the real estate market for over two years now. My most recent post on The Settlement Channel discusses my thoughts on real estate, sub prime mortgage and where we go from here.

As part of those warnings I mention the loose and careless lending practices being promoted by mortgage brokers nationwide, although living in Phoenix I got an up close view over the last 7 years of just how wild and crazy it got. Virtually anyone could get a loan if you really wanted one. College students buying houses on the prospect of sharing the mortgage payment with their roommates, retirees on fixed incomes getting no money down loans to buy condo's, single mom's just out of a divorce and bankruptcy getting a 2% down loan with an ARM at 3% to buy a home in Scottsdale. Those are just some of the one's I know of personally.

So, the inevitable happened. The market slowed down, payments got late, foreclosures rose, home prices dropped, mortgage rates reset at higher levels, and all of a sudden we have a mortgage crisis as all these packaged loans start to go bad and the institutional investors panic about losing their money. We are now in the midst of a classic credit induced sellers panic and it should last at least a full year as the lending community figures out how to start making responsible loans again.

The issue is, what if you have a sale you were trying to make happen and were scheduled to do a 1031 roll over or transfer, and now the new property you wanted to go into can't be financed for what you thought you could get? I have no doubt that there are a lot of transactions right this minute that are blowing up because the property to be rolled into can't appraise for what the buyer needs, the financing has collapsed or other issues have put your purchase at risk.

What do you do if your 1031 roll over is going bad, but you still must sell your property?

You absolutely need to look into using a structured sale annuity to spread out your tax hit and defer the taxation of your gains as the real estate markets go through this correction. If you are lucky enough to have a buyer that can still afford your property, and you want to spread your gains out, to my mind the best option now is to use a structured sale annuity to fund an installment sale over time. Spread out your tax hit, consolidate your assets and debt, wait for a better buying opportunity and then take advantage of it when you see it.

Rolling over into a property that is over valued and sure to decline is never a smart decision no matter what you think you might save in taxes! Take your sale, defer the gains safely and at good rates of interest and then wait for your next buying opportunity.

Contact my office if you'd like to know more.