200 Percent Rule Coordination

The two hundred percent rule allows an exchanger to identify an unlimited number of replacement properties within the forty five day window, provided the combined fair market value of everything identified does not exceed two hundred percent of the relinquished property's sale price. This is the identification method Los Angeles exchangers use when a strategy calls for more than three candidate properties, often when dividing exchange proceeds across several smaller assets.

The ceiling is based on the gross sale price of the relinquished property, not the equity or net proceeds available for reinvestment, so a Los Angeles property that sold for two million dollars supports up to four million dollars in combined identified replacement value. Getting this calculation right at the outset avoids identifying a list that technically exceeds the ceiling and jeopardizes the entire identification.

An exchanger consolidating several smaller relinquished properties into a diversified portfolio of Los Angeles or Southern California assets, or one who wants more than three backup candidates in a competitive submarket, generally needs the flexibility the two hundred percent rule provides since the three property rule caps the list at three regardless of value.

If the combined value of everything identified exceeds two hundred percent of the relinquished sale price, the identification is treated as if no identification had been made at all, unless the exchanger satisfies the ninety five percent rule by actually acquiring at least ninety five percent of the total identified value. This all-or-nothing consequence is why we run the value calculation carefully before finalizing an identification list under this rule.

Because Los Angeles property values can shift between initial interest and formal identification, we confirm current asking or contract prices for every candidate property before the list is finalized, building in a reasonable buffer under the two hundred percent ceiling rather than identifying right up against the limit.

Because the two hundred percent rule is often used when an exchanger plans to close on several properties rather than just one, we coordinate financing and closing schedules across all target properties early, since the one hundred eighty day closing window applies to the exchange as a whole regardless of how many separate closings are involved.

Because the two hundred percent ceiling is based on the relinquished property's gross sale price, we keep a written record of that sale price alongside the fair market value support for every identified Los Angeles property, so the exchange file clearly demonstrates the identification stayed within the applicable limit if the exchange is ever reviewed.