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					Inside this Issue

Welcome to the Spring 2003 issue of the S.E.C. Real Estate

Spring is the season of renewal. It is a time of re-awakening. Each
Spring brings with it the hope of a new beginning.

This issue of the S.E.C. Observer represents the renewal of the spirit
we enjoy every spring. Our mission is to provide informative and
timely information that we hope will allow our readers to find a new
beginning for their real estate practices or experience a renewal of
ideas that will help our readers expand their knowledge and, in the
end, assist them to better serve their clients, partners, and
investment objectives with timeless creative real estate principles.

We hope you enjoy this issue of The Observer and that we will see
you at a S.E.C. meeting or education program in 2003.

Virgil Opfer, S.E.C.

I. Table of Contents                                      Volume 2 - Issue 2 – Spring 2003

S.E.C. President’s Message                         Ideas and Formulas

   “Its Your Decision”                                    “Putting Together an Exchange
   Mark A. Johnson, S.E.C., CCIM                          That Will Close”
                                                          Virgil Opfer, S.E.C.
Feature Articles
                                                          “Anything Can Be Divided”
      “Your Transaction Went Bad?”                        Chuck Sutherland, S.E.C.
      Steve England, S.E.C.
                                                   In the Spotlight
      “Selling Land to a Developer”
      Phil Corso, S.E.C.                                  Jim Crowley, S.E.C. - A Biography

      “The CRT – Another Planning Tool”            The S.E.C. History Files
       Virgil Opfer, S.E.C.
                                                          “Handle “Paper” Right
      “On Becoming Rich”                                  William Martin, S.E.C.
      Chet Allen, S.E.C.
                                                          “The Society and 1031 Exchange”
Society Columns                                           Hunter Quistgard, S.E.C.

      “My Mentor Told Me”                          The S.E.C. Education Foundation
      Bill Stonaker, S.E.C., CCIM
                                                          “S.E.C. Education - A Powerful Idea”
      “Caution – State Taxes vs. 1031”                    Phil Corso, S.E.C.
      Virgil Opfer, S.E.C.                                President, The S.E.C. Education Foundation

Ideas and Formulas                                        2003 S.E.C. Education Program News

       “An Effective Have-Want Presentation”       Society News Briefs
       Ed Berlinski, S.E.C.
                                                          SEC Invitational Marketing Meeting News
       “Hidden Treasure”                                  Atlanta, Georgia May 5th – May 8th, 2003
       Virgil Opfer, S.E.C.
                                                          Atlanta Education Program News
       “Profit In The Package”                            “Due Diligence, S.E.C. Style”
       Ed Berlinski, S.E.C.                               Presented by Steve England, S.E.C.,
                                                          John Brennan, S.E.C. and Vicki Klein, S.E.C.

I. S.E.C. President’s Message                                             A. It’s Your Decision

                                   It’s Your Decision
                                 Mark Johnson, S.E.C., CCIM

Picture yourself on the bank of small lake early in the morning. The water is clear and smooth,
the birds are singing and the world appears to be perfect in many ways. You pick up a rock and
throw it into the lake. Is there a change? Of course there is, the water is no longer clear, no
longer smooth, and the birds have stopped singing. You have changed your environment. Just
as your decision to toss the rock created ripples in the lake, your marketing decisions can create
changes in your business environment.

Imagine for a moment, that your client comes to your office and, over a cup of coffee, tells you
that she has a million dollars to spend and she requires a 10% return on any future real estate
investments. You explain to her that the real estate market has changed and an investment that
returns 10% is nearly impossible to locate. Will your client be forced to change her way of
thinking or will you decide to change your way of marketing and find the product that produces
her desired yield?

How do you provide the product that will satisfy your client’s needs? How do you tap into the
resources of experienced commercial brokers across the U.S.? The Society of Exchange
Counselors (S.E.C.) can assist you in getting the answers to your questions. The S.E.C. is an
organization of independent commercial real estate professionals from all parts of the U.S. and
Canada who pride themselves on solving problems and providing alternative solutions. For the
past forty years, the Society of Exchange Counselors has held five (5) marketing meetings every
year in various locations throughout the United States. At these meetings brokers meet for three
days in organized marketing sessions where hundreds of properties are presented representing
hundreds of millions of dollars in property values. Our next meeting will be in Atlanta, on May
4th through May 8th. It is very likely that you will find the property that meets your client’s
needs at the meeting.

Now, imagine sitting in your office a few days following your attendance at the May S.E.C.
meeting and you receive a call from another of your clients to explain that he is not earning
enough interest on his investment dollars and wants to know if you have any solutions. He has
challenged you. With a smile on your face, you glance over at the S.E.C. Marketing book on
your desk. You know that in the marketing book there are hundreds of properties and from that
selection there are probably dozens of high cap rate properties that will meet his requirements
and located in areas where he will be proud to be an owner. Did you answer his challenge? Yes,
you now have the ability to provide him with the return he is seeking. Could you have
completed the task without attending the S.E.C. Marketing Meeting? Only you can answer that

question, just like making the decision to access the unique S.E.C. broker-to-broker marketing
forum is a decision that only you can make.

Please be aware that attendance at a S.E.C. Marketing meeting is by invitation only. If you
know an S.E.C. member, ask them to invite you to join us at one of our meetings. If you
don't, then go to the S.E.C. web site,, and submit a "Request for a
Meeting Invitation" to the Society for consideration. Better yet, contact me directly at and I'll tell you all about the benefits of attending one of the Society's
marketing meetings.

Mark Johnson, S.E.C, CCIM is the 2003 President of the Society of Exchange Counselors. He is
president of Border Properties, Inc based in Brownsville, Texas; active in industrial development
specializing in NAFTA based warehousing on the Mexican Border. He is an active nationwide
investor and provides property management services for retail, commercial and industrial
property. Mark serves as a director of the S.E. C. Education Foundation.

II. Feature Articles                                          A. Your Transaction Went Bad?

                              Your Transaction Went Bad?
                                      Steve England, S.E.C.

As entrepreneurs and risk takers we admit that occasionally great projections and optimism fades
into reality. This investment isn’t working. It is a bad deal. What should we do? How should
we handle this situation? How do we save face? Save our assets? Can we save important

As many who lived through the real estate collapse of the 1980’s, I witnessed and felt pain from
investments gone sour. During those dark days, I observed and counseled clients in numerous
stressed financial situations. Times like that aren’t as unique as we would like to think.
It is really hard for anyone to keep their head in these situations. As the old saying goes “When
you are up to your rear in alligators it is hard to remember that the original intent was to drain the

Have you wondered how some people can get into a bad investment, but work their way through
it without a disaster? There are some who are soon investing with the same partners. They are
borrowing again from the same banks. While others, in similar situations, seem to crash and
burn completely. Their personal finances go down in flames. Their bankers have them in court.
Their partners hate their guts and their reputation is shot.

What can one do to improve a bad situation? The goal should always be to keep your personal
and professional life in tact. You hope that your friends, associates, family, and bankers can still
stay on your side. It may not always be possible, but we have all seen the high costs of doing

I believe that you must evaluate the legal and moral aspects of your responsibility in the
investment. A lawyer once pointed out to me that your legal options are not the same as your
moral options. From purely a legal point of view you can get out of a lot of things without
financial damage. You may legally save assets and minimize your financial bath, but if it is done
at the expense of lenders, friends, partners, and associates, then what is the true loss? A short-
term decision to place personal financial costs above others may linger throughout your career.

I don’t believe there are moral questions with good asset protection strategies. However, these
protections should be planned for going into the investment. If risk of loss is different for each
partner, then that variation in risk should be agreed upon while structuring the investment. It is
acceptable for risks to vary. However, efforts to divide losses based on blame or legal
technicalities pretty much terminates the relationship forever.

I think one of the main actions of people who successfully negotiate their way through failed
investments is their willingness to treat everyone in the transaction as it had originally been
structured. They wait until it is totally behind them before analyzing or worrying about mistakes
made. These are just filed in the experience memory bank to hopefully not be repeated.

Another positive action taken by the business survivors is timely communication with partners,
lenders, associates, note holders, and everyone involved. People would much rather know the
truth than deal with uncertainty. If you keep people informed and talk through all of the options,
then you can become part of the solution, rather than the person they blame for the problem.
Even lenders, note holders, and partners can be agreeable to giving you another chance in most
cases. But, if lack of communication allows the pressure to build and the distrust to breed, then
that that high level of trust can never be recovered.

A third action that I observed is that the people who are successful in disaster management are
those who seem to just take problems in stride. In the mid-1980’s, farmers were declaring
bankruptcy regularly. Most were deeply depressed, stressed, and overcome with grief for their
plight. However, we had one client who filed Chapter 12, but showed up to our meetings with a
smile on his face. He told jokes, asked about our kids, and seemed much too happy for the
situation. This puzzled me until I learned that three years earlier he had lost a leg to cancer. He
had put his situation in the proper perspective. He had been through worse. Yes, it was a bad
time, but he just needed to work through it. He communicated well with bankers and his
creditors and, as a result, he is still in business today. The successful ones look ahead to beyond
the current situation. To partners and associates, lenders, and creditors they project an air of
confidence that today’s challenge is a learning process, we learn from our mistakes, and the same
mistakes will not be repeated. They work with all involved to put the bad times behind them and
move forward.

A lot of our success in life is measured by how we handle ourselves in bad situations. The
Society of Exchange Counselors emphasizes the people side of the business. We have the
counseling skills. We have the integrity. We have a great SEC family willing to help. We have
the tools to overcome challenges, work our way through tough situations and come out on the
other side with our reputations, partners, friends, and associates still in tact. We must just
remember not to overlook our skills and strengths in times of stress.

Steve England, S.E.C., is an expert in Land with a specialty in Agricultural properties, including
the modern dairy business. In 1994, he served as National President of the REALTORS Land
Institute. His general expertise is in counseling clients about their real estate investments and
using the creative S.E.C. marketplace to solve problems or accomplish their goals no matter the
situation or the types of property. Mr. England is a member of the Board of Governors of the
Society and a director of the SEC Education Foundation.

II. Feature Article                                              B. Selling Land to a Developer

                              Selling Land to a Developer
                                        Phil Corso, S.E.C.

So, you have this great parcel of land you just listed. It is the best site in the marketplace. The
seller told you that zoning and all entitlements are in place; all right-of-way has been fully
dedicated; a clean title report, current survey, soils report and environmental report are all
available, the parcel is free and clear, there are no liens, and it is ready to be developed. What a
great listing … this one should sell quickly, right?

So you place your sign on the property, create a little flyer, and wait for the phone to ring off the
hook. Maybe you’ll even send the flyer to the developers in your database or take the property
to a marketing meeting and look for a buyer.

As a developer, when I call, this is what you will say to me when I want to make an offer. You
will tell me everything you think you know about the parcel and expect me to believe you.
When I ask you for copies of the information you say exists, you will hem and haw and tell me
that the seller told you all this information. No, you really don’t know for a fact that the zoning
is in place because you didn’t make copies of the zoning history file at the city. And sorry, you
don’t have a copy of the zoning and land use regulatory requirements, general plan and zoning
maps of the city, county and state.

I ask you for a copy of the survey and the other information you told me exists. You call back
three days later and gee, guess what? You thought there was a current survey, but you guess that
you just assumed one must exist, but you were wrong. Oh, and about that Level One study and
the soils report, well, the seller told me that the previous owner had one done, but no one can
find a copy anywhere.

And about that title report, well, no you really did not order a preliminary report and didn’t
personally review it, so you are sorry about the fact that there really are a couple of liens on the
property, and an old set of CC&R’s that you are sure can be abdicated and removed from the
chain of title, and a water and sewer agreement that requires advance payment prior to closing,
and just a little bit of land that must be dedicated due to plans for future roadway expansion.

You also didn’t realize that there are three public hearings required in order to vest the zoning
and that the land use category you thought this parcel fell under was modified last year. Oh, and
about those entitlements, well, you are surprised to find out that they are contingent upon site
plan and design review approval. No, you didn’t realize that the public hearing process of
applying for land use approvals takes almost 8 months; building permits another 4 or 5 months
after that; or that the fee to apply is $5,000 and an applicant must submit a full set of construction
documents including site plan, elevations, civil engineering, traffic mitigation study, noise

calculations, site lighting and photometric studies, line of sight analysis, new landscape plans and
native plants re-vegetation mitigation plans.

Oh, and one more thing you didn’t know about; the City Council and the Planning Commission
now requires a three dimensional video using computerized modeling submittal showing how the
completed project will fit into the existing neighborhood prior to any public hearings for project

I ask you if your client is aware of theses issues and you tell me you really haven’t talked to your
client about this entire process so you are not sure he will give me much time to figure this
puzzle out. I tell you that I am still interested in the site and submit my letter of intent.

When you get the offer, the first thing you tell me is that my earnest money deposit is not quite
enough, that I am asking for too much time to complete my due diligence and much too much
time to close the transaction. You assure me that you just know so much about this parcel and
the process to develop it that you are sure that I will be successful.

Well, as an experienced developer, this simply doesn’t work for me, the failure to provide solid
verifiable information combined with a lack of time to develop the information, is a deal breaker
for any developer. I have no alternative but to take a pass on this site. Guess what? After a few
months, and a series of disappointed developers later, you lose the listing to another broker.

But what if you had taken another approach? What if you had adopted the philosophy and
attained the training that is characteristic of a special group of Brokers? What if you were a
Member of the Society of Exchange Counselors? If so, then this whole scenario plays out
somewhat differently.

As a S.E.C. Member, before you agreed to take the listing on the land, you would have fully
counseled with your new client about the property, his ownership situation, his motivations, the
benefits he seeks and how he visualizes the transaction unfolding. You would have asked for
and received full access to the owner’s files and you would have conducted your own “pre-
marketing” due diligence review on the parcel. You would have helped educate your client on
the development process so that he would be better able to make knowledgeable decisions about
any proposal to acquire his property. You would have conditioned your client to the needs and
expectations of all experienced developers – the need for information and the time to assure
themselves that the proposed project is both possible and profitable.

As a S.E.C. Member, you would have created a full and accurate back up package and you
would have done your homework. You would have spent some time with the folks on the
regulatory side, gathered copies of zoning regulations, applications, and schedules. You would
have made copies of the minutes of past public hearings on the parcel so everyone would know
whom the players are and how the entitlement game was played in the past. If a survey does not
exist, you will have obtained a bid for the work. You would have received bids for other
consultants and studies that you know, based on your research, you know will need to be done.
You will have a list of the members of the Planning Commission and City Council and all the

neighborhood leaders and organizations that are stakeholders in the public process. In short, you
would have fully prepared to take the property to the market.

And do you know what, as a S.E.C. Member, you do when I make an offer? You will meet with
me and give me this great three ring binder with everything I ever wanted to know about this
parcel. You will listen to my ideas for development of the parcel and probably set up a meeting
of the principals so we can attempt to work out a satisfactory transaction. Since your client is
now well counseled on what to expect from a developer and how the transaction must be
structured for success, everyone’s confidence level will be sky high and we will begin our
adventure together.

The moral of this story is that selling land to a developer is both an art and a science. The better
prepared you are as a broker, the better counseled your client is and the more information you
can gather on the people and the process of development for your land listings, the more likely
you will find yourself on the path to earning that six figure fee at the closing table.

Phil Corso, S.E.C. is President of P.C.I Associates, Ltd. and a real estate developer, investor and
educator based in Scottsdale, Arizona. He is currently engaged in self-storage ownership and
development and is an active Walgreens Developer. He is a past president of the Society of
Exchange Counselors and presently serves as president of the SEC Education Foundation. He
teaches several real estate related courses and was the 2002 SEC Counselor of the Year.

II. Feature Article                                     C. The CRT – Another Planning Tool

                       The CRT – Another Planning Tool
                                        Virgil Opfer, S.E.C.

Many property owners face the problem of disposing of property that has appreciated so much in
value that a sale would result in a huge tax liability. Even if the real estate is returning only a
small return on their equity, they are still unwilling to sell because of the large tax bill. The most
common answer for that situation is a tax deferred exchange under Code Section 1031.

However, for those owners who would like to totally divest themselves of all of their investment
real estate, even if the replacement property might be better suited to their current needs, a
Section 1031 exchange does not provide a solution. For those owners who would like to convert
the real estate into a lifetime of management-free, steady income, often at a higher level of
income than provided by the real property, without paying a tax on the capital gain, there is only
one solution — the Charitable Remainder Trust (CRT).

Here’s how the CRT works. The CRT is a separate, income-tax-exempt, legal entity and is
controlled by a trustee. In most cases, if desired, the donor can name himself as trustee and
control and manage the assets of the trust. During the lifetime of the donor, the trust distributes
earnings from trust assets to the donor according to the terms individually designed for that
particular trust. Eventually, a qualified charity receives the balance of the trust upon the death of
the last remaining donor. Unless you grant it authority, the charity has absolutely no control over
the trust during the lifetime of the donor. In fact, in many trust arrangements, it is possible for
the donor to re-designate the charity at any time, and/or name multiple charities. These features
provide a great deal of flexibility in the trust.

The donor can gift an appreciated asset into a CRT and, because of the charitable donation,
instead of paying taxes on the gain in the asset the donor receives a tax deduction to be used
against his other income. The amount of tax deduction is based on an IRS-defined calculation
that takes into account the fact that the gift will not actually benefit the charity until the death of
the donors. Therefore, the age of donor is an important factor in determining the amount of the
charitable tax deduction. The older the donor, the higher the tax deduction. Keep in mind; once
the gift is made to create the trust, it is irrevocable.

Since the trust is exempt from income taxes, once the asset is in the trust, the asset can be sold —
tax-free. Therefore, the entire net proceeds from the sale, without reductions from state and
federal taxes, can be put to work to earn an annual income for the donor. While it’s true that the
earnings inside the trust are not taxed, the donor’s annual income derived from the trust is
taxable income to the donor. The trustee (keep in mind that the donor can be the trustee)

manages the assets of the trust to produce the income for the donor. Any type of prudent
investment, including debt-free real estate, is permitted in the trust.

Most retired people would rather have a professional investment counselor act as trustee and
manage the assets, under the supervision of the donor. In those cases, the trustee will most likely
invest in stocks, bonds, and other securities. Therefore, most of the time the real estate
contributed to the trust will be sold. In a weak real estate market, the tax-free aspect of the trust
means that the trust can be very competitive with respect to pricing the real estate. In a tax-
exempt trust, a sale of the real estate priced slightly below market will still net more cash than a
similar sale by an individual who did not have the tax-exempt status.

For married couples with estates in excess of the lifetime exclusion (the amount varies from year
to year), the estate tax takes a large share of the excess over that threshold level. Since the gift to
the CRT is irrevocable, once the gift is made, the asset is no longer a part of the donor’s estate.
Therefore, for those who have larger estates, the CRT eliminates the heavy estate tax that would
otherwise be imposed on the asset at death. Thus, the CRT not only eliminates the capital gains
tax on any sale, but it also eliminates the estate tax at death.

To answer the concerns of those who wish to pass their estate on to their heirs, a Wealth
Replacement Trust can be created to hold life insurance policies on the donors to provide cash to
the heirs. Often the tax savings derived from the charitable donation and increased earnings
from the trust are sufficient to pay for the life insurance policy. Properly structured, the
insurance proceeds will not be a part of the donor’s estate and will flow, tax-free, to the heirs.

The use of this valuable tool needs careful and thoughtful planning and the assistance of
experienced professionals from several disciplines.

Virgil Opfer, S.E.C., is President of G5 Enterprises, Inc., a San Diego based investment company
that specializes in the syndication of real estate projects. He is a co-author of "100 Equity
Marketing Formulas," a compilation of creative approaches to real estate transactions. Virgil
currently serves as Vice President of the Society of Exchange Counselors and is a director of the
SEC Education Foundation.

II. Feature Article                                                       D. On Becoming Rich

                                   On Becoming Rich
                                       Chet Allen, S.E.C.

Most of us are not spectacular athletes, software gurus, or CEOs of major corporations. We
have not patented a marketable invention, starred in a major motion picture, or won a lottery.
Most of us spend our working lives trying to keep our bills paid, educate our kids, and provide
enough for a meaningful retirement.

For most of us in real estate, we live a feast and famine existence. Often the big commission
check is solely used to pay back bills, and perhaps put a little aside awaiting our next payday. A
few of us have bought and kept the occasional property, and, if market conditions are right,
have realized a nice profit.

But we in real estate have an opportunity that those in most other professions lack. We have
the opportunity to use our talents and professional skills to become rich. If we look around at the
wealthy in our country, we see that much of the great wealth has been created in real estate
development and ownership. And unlike those who became wealthy inventing computer chips
and software programs, those who have become wealthy through real estate do not necessarily
possess exceptional intellect and advanced college degrees.

What is real estate development? It is not only entitling a tract of land and constructing
improvements. It includes rehabbing an existing building or complex, converting a property
from a low demand use to a more profitable one, or just changing the zoning.
Real estate development is not brain surgery. It requires common sense, patience, organizational
ability, salesmanship, and some daring. And, equally as important, it requires many of the
same skills that those of us in real estate sales use every day.

Let's look at these elements. Common sense dictates that we don't build office space when
a community has 25 percent office vacancy. It also dictates that we don't spend years
attempting to get zoning and permits for a use in a community that is staunchly opposed to
that use on that property. It also dictates that we don't attempt to develop a million square
foot mall as our first development project. Common sense dictates that we look around our
community and find a need and then locate a property, improved or unimproved, that can be
developed to fill that need.

Once a need is identified and a property is located the developer “runs the numbers.” At this
point the numbers are very preliminary. However, this preliminary number running is
important as it keeps the developer from spending weeks on impossible projects. If you live in
an apartment 10 percent cap rate community, and bidding costs are $40 per square foot, and

800 square foot units rent for $550 per month, even if the land is free, the project won't
“pencil.” It requires patience to sort through dozens of impossible projects to land on the

No developer, when starting, has all, or even many of the skills necessary to complete a
successful development. So, what we do is put together and organize a team. The team may
include a lawyer, accountant, land planner, engineer, contractor and mortgage broker. The
"team" can be compensated in ways that won't defeat the project through heavy front-end

Organization and salesmanship are required to create and fund an entity that provides equity
investors with a relatively sale and profitable investment.
Finally, daring is required to make the change from salesperson to principal, from wage-earner
to capitalist, from "getting by" to getting wealthy. As Pearl Bailey once said, "I've been rich and
I've been poor — and rich is better.”

Chet Allen, S.E.C., is a builder, developer, and real estate problem solver. He is a CCIM and
former winner of both the Snyder Award for Best Exchange in the USA and Campbell Award for
the country's Best Commercial-Investment Transaction. He authored and teaches a seminar
entitled Developing & Syndicating: Big Money Real Estate, and his book, "The Guide to
Becoming Real Estate Rich" is available at He is a past president of the S.E.C.
and the 1982 S.E.C. Counselor of the Year.

III. Society Columns                                                   A. My Mentor Told Me

                                  My Mentor Told Me
                                 Bill Stonaker, S.E.C., CCIM

Why two ears and only one mouth?

God gave you two ears. They are for listening. God gave you one mouth. It is for talking. Why
do you think He gave you double the ears? Maybe you should listen twice as much as you talk.
This must have been some old Chinese proverb or something. But it is so true.

Bill Stonaker, S.E.C., CCIM

A salesman needs to be liked, a counselor likes to be needed.

My real estate training, before I took the six-day exchange course in the mid-1970s, was that of a
real estate “salesman.” I attended the popular seminars, read books, watched videos, and learned
how to convince people, to overcome objections, and learned the tricks of the salesman trade to
get customers to do what I wanted them to do, to list or to buy. However, I have never possessed
the outgoing, people-pleasing personality that most successful salesman seem to acquire at birth.
The role of a salesman was never right for me. It fit me like a bad suit. Furthermore, my
training before real estate was that of an aerospace engineer, a role much better suited to my
personality. I was also concerned that my 20 years of experience in math, critical analysis, and
problem solving was being wasted in my uncomfortable pursuit of real estate sales.

Then, I attended the exchange course offered by Jim Brondino, and five other top-notch
instructors. In that class, one of the sessions was focused on the difference between a salesman
and a counselor. One point really hit home with me. They brought to our attention that the
personality of a successful salesperson is unique in that they are very people-oriented and
typically have a physiological need to be liked by others. They also discussed the fact that
people who counsel for a living are often more analytical, less people oriented, and are more
inclined to feel comfortable when others have a genuine need their services. The instructor
summarized by saying, a salesman needs to be liked, a counselor likes to be needed.

Wow, for me, right on! Not only were they giving me valuable, money-saving information
vitally needed by clients, they were providing me with access to a special marketplace that was
also needed by clients. Moreover, they were telling me that I no longer had to play the role of
salesman! Since that moment, I have always thought of myself as a counselor, never as a

Virgil Opfer, S.E.C.

Listen, pause, listen!

When working with a client, always listen to what the client says. Don’t try to impress him with
what you know. Once you know what he knows, you can counsel with knowledge.
When a client interrupts you, stop and listen. Pause. Let him get it all out. When he interrupts
you again, pause again. Sooner or later, he will listen to what you have to say.
Many times clients are emotional about their real estate decisions. They take it personally. Did
they “win” or “fail” when they acquired the property you are working on? Let them exhaust
their emotions before trying to guide them.
From the old CCIM 104 Course (since canceled) Computers can’t teach us things like this!

Bill Stonaker, S.E.C., CCIM

Jack of all trades, master of none.

Early in my career, a broker friend observed that my company had a residential division, a
syndication division, a property management division, and I was just getting started in the
exchange field. One day, he asked me how I expected to be proficient in all of these arenas
when I was competing with experts who had limited themselves to only one field. My naïve
answer was that there are clients out there who need these services and why shouldn’t my
company try to provide them all. In the next few years, I discovered that he was right. I dropped
the residential offices, eliminated the property management services, assigned part of the
partnership management to a partner and concentrated on tax-deferred exchanges. I tried to learn
as much about the equity marketplace as I could. I stopped trying to be all things to all people. I
learned that I could be more successful, make more money, and have more leisure time if I
concentrated on one thing that I was passionate about.

Virgil Opfer, S.E.C.

He who cares least wins.

In a class on negotiations presented years a go by Dan Harrison, he made a strong impression on
me with the simple words, “He who cares least wins.” He was referring to the fact that in any
negotiations, it is usually true that the party with the least at stake who has the physiological
advantage. Therefore, if you are acquiring a property, don’t fall in love with it until after all of
the negotiations are over. Tipping your hand to the seller that you really need or love the
property gives the seller the top cards. On the other hand, if you are the seller, you need to avoid
the appearance of any urgency to sell.

One of the most difficult negotiations is when the buyer is under the time pressure of a delayed
exchange, the escrow has closed, and the 45-day clock is ticking. Many buyers in this situation
often feel that their “cash is king” and their cash (held by an accommodator) can command a
discount from the seller of the replacement property. After all, the buyer probably grudgingly
conceded a discount when he sold his relinquished property for cash. However, knowledgeable
sellers understand that the time constraints imposed by the tax code tip the power to the seller’s
side of the negotiating table, so try to avoid disclosing the buyer’s requirement to acquire a
replacement property until it is absolutely necessary.

Virgil Opfer, S.E.C.

Bill Stonaker, S.E.C., CCIM is a Dallas based real estate broker, exchangor and developer
specializing in land development, retail and commercial projects and syndication. Bill is the
managing member of Wilson & Stonaker; L.L.C. and also serves as a Governor of the Society of
Exchange Counselors.

III. Society Columns                                     B. Tax Planning and 1031 Exchanges

                           Caution – States Taxes vs. 1031
                                        Virgil Opfer, Editor

Robbie Robertson, S.E.C. recently shared a report he had read that made it clear that, as real
estate investors and exchangors, we need to be knowledgeable about the state-by-state tax
aspects of like-kind exchanges of real estate.

In most states, 1031 exchange transactions that are exempt from federal income tax are also
exempt from state tax ramifications. In those states, the state tax law closely parallels the federal
tax code. However, pitfalls exist in a number of states. For example, the states of Georgia,
Mississippi, and Vermont, each impose tax liabilities on real estate exchanges if out-of-state
property is involved. Another state, Indiana, bars deferred exchanges involving intermediaries
from tax-free treatment.

Hal Morrison, S.E.C. reports that he had a personal experience that illustrates this point. Hal was
a Virginia resident and owned a property in South Carolina he was exchanging. He could have
completed a fully tax deferred exchange with respect to South Carolina real estate taxation if his
replacement property had been in South Carolina. The state would still have direct access to the
deferred gain at some later date (if sold). However, Hal’s replacement property was located in
Georgia, so he had a South Carolina tax liability in that tax year. Clearly, South Carolina wanted
to tax the gain in the year it occurred, since the deferral would be "lost" in the paperwork shuffle
over multiple tax years. They may have also been concerned that if Hal moved out of state,
South Carolina might not be able to enforce reporting by a non-resident. Therefore, at settlement
and closing of the relinquished property transaction in South Carolina, Hal had to sign affidavits
for the state of South Carolina, in order for the state to track the transaction through that tax year.

Word of Caution: As a real estate investor and exchangor, your best defense is to check with
your tax adviser before you set up a like-kind exchange involving out-of-state property so you
don't inadvertently create a state income tax liability that might have been avoided with proper
tax planning.

Virgil Opfer, S.E.C., is President of G5 Enterprises, Inc., a San Diego based investment company
that specializes in the syndication of real estate projects. He is a co-author of "100 Equity
Marketing Formulas," a compilation of creative approaches to real estate transactions. Virgil
currently serves as Vice President of the Society of Exchange Counselors and is a director of the
SEC Education Foundation.

IV. Ideas and Formulas                             A. An Effective Have-Want Presentation

                    An Effective Have-Want Presentation
                                       Ed Berlinski, S.E.C.

Your time in front of the marketing session is precious, so make it count! Here are some
suggestions to further strengthen our skills in presenting Have-Wants.

1. BE PREPARED! A typical Have-Want only takes one minute, so those 60 seconds are
crucial to your success. The opportunity to present a Have-Want to a group of knowledgeable
and creative brokers is invaluable. You need to know the property and owner’s situation
thoroughly. Decide on the most important aspects of the property and situation relative to the
audience, not to you and your client! Don’t waste any of your limited presentation time telling
the audience about what your owner wants. That’s not what the audience wants to hear. This is
your chance to be a one-minute salesperson, so, be prepared.

2. USE A VISUAL. A picture is worth a thousand words. With a color transparency, you can
capture the interest of the audience and avoid a lengthy description of the property. An overhead
with a map or aerial photograph will also save time and clarify your presentation. Let your
picture speak for itself and spend your limited time talking about BENEFITS.

3. PRESENT THE BENEFITS. In presenting a property, appeal to as many in the audience as
possible by describing briefly the benefits that might attract a taker. The more benefits that you
can identify, the more likely you are that you will find a taker. Be as SPECIFIC as possible in
your description of the benefits. For example, simply saying, “The property can be developed
with thirty-seven apartments,” will not get their attention nearly as much as telling the audience
that, “The property has the potential to build thirty-seven 2-BR units under current zoning.
Plans can be processed in four months, there is a 3% vacancy factor in the area, and rents
average $875 per month. If the developer wants to sell the project when complete, the market is
a 9% cap rate, so the potential profit is about $750,000.” Review the “Profit in the Package”
checklist (see article this issue) to clarify potential property benefits or client capabilities that
might stimulate audience interest.

4. FOLLOW UP WITH A FLYER. Have your flyer, mini-backup package, or a full backup
package ready to pass out after your Have-Want. People will remember only l0% of what they
HEAR, and they will remember 50% of what they SEE and HEAR. While, adding visuals will
greatly enhance your presentation, delivering written information at the meeting to those who
express an interest will dramatically increase the odds that your Have-Want will be remembered.

Have-Wants present an opportunity to increase your business. By following these four simple
steps, you can make your valuable 60 seconds powerful and productive!

Ed Berlinski, S.E.C., is an Associate Broker for RE/MAX 1st Commercial in Rochester, NY. He
is a member of the Board of Governors of the S.E.C. Ed is involved in real estate counseling,
general brokerage, real estate finance, and investor representation.

IV. Ideas and Formulas                                                       B. Hidden Treasure

                                      Hidden Treasure
                                       Virgil Opfer, S.E.C.

Is there anything more exciting than finding money? When I acquired my apartments in
Phoenix, that’s just what happened to me. I found a big chunk of cash in a most unexpected
spot, in the laundry room. No, it wasn’t lying on the floor or stuffed in a laundry hamper, it was
hidden in a new contract with the laundry company that owned and serviced the washers and

Here’s what happened. I acquired an 80-unit apartment project in Phoenix by way of a
foreclosure on the first deed of trust. In the foreclosure, all of the junior liens and encumbrances
were wiped out by foreclosure law.

One of the junior liens eliminated at foreclosure was the last two years of a 10-year lease on the
laundry room with a company, let’s call ABC Laundry, that owns the 8 washers and 8 dryers,
and services and maintains the machines. The owner provides the space, in this case 200 sq. ft.,
as well as the water, gas, and electricity. The old contract provided for a 50/50 split of the gross
income from the machines.

There are no provisions in the apartments themselves for washer and dryer hook ups. Therefore,
the laundry room is the only conveniently located laundry facility available to the tenants.

I asked my property manager, David, to inform ABC Laundry of the foreclosure and the
resulting elimination of their contract. He was to let them know that we would be willing to
negotiate a new long term contract, but that we were also going to solicit proposals from a couple
of the other large coin laundry companies in Phoenix. To prepare for the negotiations, I wanted
the records of payments under the old contract for the past two years. I already knew that the
former owner had been reporting to his limited partners an income of about $300 per month
during that period. However, I wanted the actual records to get a more accurate number.

After playing telephone tag with ABC Laundry for several days, David wrote a letter to the
company and sent a copy to me. David’s letter contained a couple of sentences that really caught
my attention, as they referenced two concepts totally new to me. The letter read, “Please provide
a proposal for a 10-year contract. It may be possible to obtain non-disturbance language from
our lender or a guaranty against any up front funds which you may provide to us.”

Non-disturbance language from our lender? What was that all about? Given the fact that they
had just lost their lease through foreclosure, I assumed that it might mean that we could get the
lender to agree to keep the lease intact in the event of another foreclosure. Later, it turned out
that my assumption was correct.

The more intriguing provision was the reference to “any up front funds which you may provide
to us.” I had not even contemplated a cash amount paid up front. I thought how much could that
be? $1,000, maybe $2,000?

The next day, before I could call David and ask him about his letter, he called me and said that
he had just received a response from ABC Laundry. They had faxed him the records of
payments for the past two years. The average payment to the former owner during that period
was $800 per month. That was $500 per month higher than the general partner had been
reporting to his limited partners. To me, that news was like finding $500 per month income that
I had not expected.

Wait, it gets even better! David went on to say that ABC Laundry was requesting a 12-year
lease, which, in their minds, was the remaining two years on the old lease plus an extension of 10
years. Based on the same 50/50 split, they were willing to pay an up front fee, or signing bonus,
of $20,000.

My response was an exclamation of, “$20,000!”

Over the phone, David misunderstood my expression of surprise for one of displeasure and
quickly said, “Don’t worry, Virgil, that is only their opening offer. We both know it is worth a
lot more than $20,000 to them to keep this site in their portfolio.”

I quickly regained my composure and said, “Of course it is! How much do you thinks its worth
for signing the contract?”

He answered, “Probably $30,000, maybe more. There are some big bucks in those machines.
We need to do the math.”

Over the next several weeks, the negotiations continued and the signing bonus grew from
$20,000 to $25,000, then to $32,000. At that point, I was looking for ways to get an even larger
bonus, as every dollar would be very helpful in meeting my cash requirement for the rehab work
that we already had underway.

I told my manager, “David, if they are willing to pay $32,000 for a 50/50 split, let’s ask them to
propose a bonus for a 60/40 split where I receive 40% rather than 50%.”
A week or so later, ABC Laundry increased the ante to $38,000 for a 12-year lease with a 60/40

I asked David to tell ABC, “$40,000, and we have a deal.”

A few days later, David called and said, “We have a deal and they are preparing the paper work.”

A few weeks later, we have received their check for $40,000, which was deposited in my
working capital account and used to make improvements to the property.

With $40,000 cash in the bank, and $650 per month income on a 200 square foot room with only
8 washers and 8 dryers, I now look at laundry rooms in apartment projects in a whole new light.

There was indeed hidden treasure in the laundry room.

Virgil Opfer, S.E.C., is President of G5 Enterprises, Inc., a San Diego based investment company
that specializes in the syndication of real estate projects. He is a co-author of "100 Equity
Marketing Formulas," a compilation of creative approaches to real estate transactions. Virgil
currently serves as Vice President of the Society of Exchange Counselors and is a director of the
SEC Education Foundation.

IV. Ideas and Formulas                                                  C. Profit In The Package

                                 Profit In The Package
                                       Ed Berlinski, S.E.C.

In counseling with your client and preparing your package for market, it is important to identify
profit incentives or other strong reasons for an investor to take your client’s property. It is also
an excellent counseling tool to bring your client into the real world.

You might want to tell your client, “You know, at the meetings, the audience is going to want to
know why they should be interested in your property. The most common incentive is profit.
Since we are in competition with other properties being offered at the meeting, it would be
helpful to identify the profit in your property. To do that, I need your help. Let’s go over this list
together and try to identify as many ways as possible to offer a profit to the taker of your

The following is a list of some of the ideas that you could explore with your client before
bringing the package to the market.

   o   Increasing income through better management.
   o   Increasing rents in property where rents are under the market rent.
   o   Increase income by cutting expenses.
   o   Increase income by doing something creative to reduce vacancies.
   o   Increase income by adding other services such as:
           o Child care for apartment buildings.
           o Laundry facilities.
           o Executive suites in office buildings:
                       Conference room availability
                       Secretarial services
                       Computer availability
   o   Increasing income through fix up and remodeling.
   o   Increasing property value through a change of use.
   o   Increasing property value by changing its zoning.
   o   Increase value by processing subdivision map to the tentative approval stage.
   o   Increase value by processing subdivision map to the final approval stage.
   o   Improve value by processing building plans to the final approval stage.
   o   Increasing value by making building sewer, water mains, and street improvements for
       vacant lots.
   o   Increasing its value by constructing buildings on vacant property.

   o   Offering the property to a taker at less than its current appraised value.
   o   Offering carry-back financing on very soft terms.
   o   Building additional rentable space.
   o   Converting the property to condos.
   o   Converting the property to timeshares.
   o   Offering to remain in co-ownership in a residential property as an equity share investor.
   o   Offering to stay in the property as joint venture partner.
   o   Making the property more desirable by offering to de-finance the property.
   o   Offering to guaranty the income for a period of time.
   o   Offer to carry any negative cash flow for a period of time.
   o   Offering to discount the property with an option to repurchase at a later date.
   o   Offering to lease back the property on a long-term lease.

While the above is only a partial list of ways to create a profit, it should get the conversation
going about making the property more marketable. On the other hand, if the client cannot help
you identify any reasons for someone to acquire their property, what does that say about their
property? Either way, the list will help bring the owner into a more realistic perception of his
property, prepare the owner for a reasonable offer, and increase your chance of closing a

Ed Berlinski, S.E.C., is an Associate Broker for RE/MAX 1st Commercial in Rochester, NY. He
is a member of the Board of Governors of the S.E.C. Ed is involved in real estate counseling,
general brokerage, real estate finance, and investor representation.

IV. Ideas and Formulas                  D. Putting Together an Exchange That Will Close

                  Putting Together an Exchange That Will Close
                                          Virgil Opfer, S.E.C.

When listening to a formal presentation, we sometimes limit our thinking to finding the benefits
in the presented package for our own client. We may hear very powerful reasons for our client
to acquire the presented property, but, if there is no compelling reason for the other owner to
accept your client’s property, or property that can be acquired by using your property in a three-
way exchange, then the transaction will never go together. In order to negotiate a successful
exchange, it is essential to consider the benefits in a transaction for the other party, as well as the
benefits for your own client.

It is critical that you identify and communicate the reasons why the other owner would prefer
owning your client’s property more than his own. By carefully listening to the presentation and
later conferring with the presenter, you can learn the motivation and the needs of the other client
and how to meet those needs.

Review both your property and your client’s capabilities to find the benefits in your package that
will be attractive to the other party, based on the needs and desires of the other party. Often, it is
your client’s capabilities, rather than the property alone, that will make the transaction work.
Then, point out the reasons that your client’s property can satisfy the other owner’s needs. When
preparing your mini-offer or long-form offer, be sure to write down those reasons, either in the
mini-offer or in a cover letter, even if the reasons are obvious to you, as they may not be obvious
to the other owner.

You may also want to include some information to the other party as to why your client would
like to own their property. Remember, there is a high probability that the other party is
dissatisfied with his property, or has an ownership problem associated with it, otherwise it
probably wouldn’t be available. Therefore, there is a tendency for the other owner to think,
“What’s the problem with the property being offered to me, if they are willing to take my
property in exchange?” You need to answer that nagging question in their mind. For example,
if the other property is a rundown property in need of major repairs, you might say, “My client
has the time, experience, and cash to make the necessary improvements to your property, and
hopes to make a profit by making these additional investments.” This would help the other party
understand why someone would be willing to accept his property.

During negotiations, build on the theme of how your client’s property can meet the needs of the
other broker’s client. If both parties truly believe that they are significantly improving their
position, then both sides will make extraordinary efforts to close the transaction.

Virgil Opfer, S.E.C., is President of G5 Enterprises, Inc., a San Diego based investment company
that specializes in the syndication of real estate projects. He is a co-author of "100 Equity
Marketing Formulas," a compilation of creative approaches to real estate transactions. Virgil
currently serves as Vice President of the Society of Exchange Counselors and is a director of the
SEC Education Foundation.

IV. Ideas and Formulas                                           E. Anything Can Be Divided

                              Anything Can Be Divided
                                   Chuck Sutherland, S.E.C.

Owner has older duplex with $30,000 appraised value and $18,000 first mortgage.
Tenants have lived in both units for several years.

Owner needs cash.
There is limited availability of financing for investment property.
No market for older duplex in this price range without carry-back financing.

Owner checks subdivision regulations and obtains survey dividing the Duplex into two separate
parcels (cost of survey = $1,500). Attorney creates common wall agreements. Owner sells Unit
“A” to tenant for $20,000 with $2,000 in “painting credit” as down payment and assumption of
existing first mortgage.

Lender releases Unit “B” from first mortgage. Owner sells Unit “B” for “painting credit” as
down payment and $18,000 new first mortgage from same lender.

Owner sells $30,000 duplex for $40,000 gross sales price ($34,500 net after expenses). Owner
receives cash instead of carry-back financing.
Tenants purchases own home with no cash down payment and no change in monthly payments.
Lender changes existing investment loan into owner-occupied loan. Also, lender makes new
owner-occupied loan.

P.S. From the above property values, you might have already guessed that this formula has been
around a long time.

Charles E. Sutherland, S.E.C., is a commercial real estate investor and developer based in Dallas,
Texas. In the real estate business since 1971, Mr. Sutherland has been involved in the successful
development of single and multi-family, commercial, retail, industrial, hotel and mini-storage
projects. As either an investor/developer or consultant, Mr. Sutherland has participated in the
completion of over $200 million worth of real estate developments.

V. In The Spotlight                                                   A. Jim Crowley, S.E.C.

                        Jim Crowley, S.E.C. – A Biography
                                          Bob Elder

H. J. "Jim" Crowley was born in Chickasha, Oklahoma in 1924. His father was a railroad man,
and worked for the Rock Island Railroad, while his mother was a housewife tending to the
family needs. His father's employment created several moves for the family during his school
years. In addition to Chickasha, Oklahoma he attended school in El Reno, Oklahoma, before
moving to Kansas City, Missouri. He graduated in 1942 with 1,000 other students from
Southwest High School, in Kansas City.

Jim attended Kansas City Junior College for one year before enlisting in the United States Navy.
He was assigned to the South Pacific Theater for duty during World War 11. A special Navy
program enabled Jim to enroll in college toward the end of his tour of duty. He attended the
University of Colorado in Boulder, Colorado, and he graduated in 1947 from the University with
a degree in finance.

Gulf Oil Company offered young Mr. Crowley a position after graduation, and he was assigned
to their office in Tulsa, Oklahoma, where he remained for twelve years. He was promoted to
Director of Budget and Economics for Gulf Oil Company, and transferred to Houston, Texas.
After five additional years with the company, he resigned his position and departed the corporate
environment for the exciting world of real estate.

In 1963 Jim was licensed as an agent to sell real estate in the State of Texas. He continued to
improve his real estate skills over the years by aggressively pursuing available educational
course offerings. This pursuit of education led him to the Commercial Investment Real Estate
Institute. He completed the demanding course schedule and other certification requirements to
be awarded the coveted designation of Certified Commercial Investment Member (CCIM) in

During the same period of time, Jim was invited to be a member of the Society of Exchange
Counselors. After twenty-five years of membership, Jim remains very active in the Society and
attends many of the scheduled marketing sessions. He and his wife, Mary, swell up with pride as
they retell stories of the many good times they have enjoyed with the S.E.C. family.

Harold James Crowley was wed to Mary Elizabeth Oden in 1949. Mary Elizabeth was born and
raised in Waco, Texas. She is a graduate of the University of Texas, with a degree in accounting.
Mary Elizabeth and Harold have two daughters, Sharon and Libby, who have blessed them with
four grandchildren. Mary is a licensed agent, and works side by side with Jim in their business.

Jim's love for excellence in education led him to form a firm known as Real Estate Career
Development Institute. His firm develops courses that meet the mandatory continuing education
requirement for the State of Texas. His 1031 exchange course has been taken by most of the
Realtor Land Institute members in the State of Texas.

Jim is also one of the few licensed 1031 facilitators in the State of Texas. His firm, Exchangers
Intermediary Services, Inc. has earned a favorable reputation within the state exchange societies.
The word on the street is: if you want the exchange to stand up to IRS scrutiny, call Jim

Jim Crowley has had a great influence on my life. His friendly engaging personality allows him
to transmit information to those he comes in contact with, many times without people even
realizing that the transfer is occurring. Jim Crowley's willingness to share his information and
his knowledge with me led directly to my completing the CIREI courses and earning my CCIM
designation. He has continued to be my mentor as I develop my skills as a property exchangor.
Jim is never too busy with a deal to not stop and assist a fellow broker with an exchange

Jim and Mary operate Crowley/Sprinkle, Inc., a real estate brokerage firm in Houston, Texas.
Their team concept has allowed them to pursue their real estate careers during the difficult
economic times that were experienced in Texas during the 1980's.

Time permitting, Jim is an amateur photographer. Jim also has a jewelry hobby, in which he
repairs and manufactures jewelry items.

VI. The S.E.C. History Files                                         A. Handle “Paper” Right

                                Handle “Paper” Right
                                  William W. Martin, S.E.C.

You have just completed a creative, well executed, real estate exchange. You may have
been the principle or the agent, but the end result is, you now have paper. It may be a
personal note, or a note secured by a Trust Deed or mortgage.

You are proud of your transaction and the end result was exactly what you had planned,
ownership of paper. You are now ready to move on to the next transaction, to counsel the
next client, and to prepare your homework for the next exchange meeting.

What about the paper you just received in the previous transaction. I believe now is the
time to do some self-analysis and planning.

First, why did you want to acquire the paper?
Most Exchangors have several reasons for paper in their portfolio. Paper gives monthly
income plus interest. Paper is normally easy to exchange for other things, both real and
personal. If structured properly, paper can be sold in the cash market.

I believe the above reasons, plus many others, have sufficient benefits to justify your desire for
paper. The only negative aspect is that it is a diminishing asset.

If you are like the majority of brokers I know, you will put your newly acquired asset in a
desk drawer or perhaps in your safe deposit box and then hope the payor makes
payments, or that you may find a transaction at an exchange meeting which will have more
benefits to you than ownership of said paper.

I would like to suggest a professional way of handling the paper you acquire.

First, set up a file labeled with the Trustor/Beneficiary and Property Address which
secures said note and Deed of Trust. This folder should contain a copy of every document
pertaining to the transaction. This folder would be in addition to your exchange folder,
and must include, but not be limited to the following:

   1. Copy of escrow statement and instructions.
   2. Copy of title policy
   3. Beneficiary statement of first Trust Deed loan if your note is a second.
   *4. Copy of note and Deed of Trust.
   5. Copy of request for notice (if you do not have one, draw and record same).

   6. Copy of fire insurance (if applicable).
   7. Two photographs of property.
   8. Two payment books. One to mail between you and the payor and one for your master
   9. Copy of letter you mail to payor with his payment book.
  10. Copies of all correspondence regarding your paper and any other pertinent

  *Originals are to be kept in a safe deposit box at your bank. They should he put in an
   envelope clearly marked as to its contents.

If we are dealing with personal paper, you may use the same checklist only modified by
getting a complete financial statement, type of work, years on job, etc., on the individual

This article was published in the Real Estate Observer in March, 1973.

Bill Martin, S.E.C., has been an active real estate broker for 43 years. He specializes in 1031
Exchanges, Real Estate mortgage lending, and buying existing notes secured by real property.

VI. The S.E.C. History Files                              B. The Society and 1031 Exchange

                       The Society and the 1031 Exchange
                                       Hunter Quistgard, S.E.C.

The 1031 Exchange and the “delayed exchange” are tools that have been available since the
founding of the Society of Exchange Counselors. The delayed exchange was not so rigorously
defined with respect to the timing of replacement property selection and “must-close time” as it
is today. However, Charles Considine (Richard Reno's CPA from San Diego) used to come to
our meetings and give classes on the various case law to accomplish delayed exchanges using to-
be-built buildings, the "ultimate bailout" formula, and other creative techniques.

However, more than 60% of transactions completed in the 60's and 70's were motivated for
exchanging" was certainly a benefit to client counseling, it was the motivation to change an
owner's circumstances that prompted the transactions found through SEC brainstorming for
alternative solutions. Part of the reason for the proliferation of exchange groups and related
education was that there was not as strong a cash market for other than prime properties as there
has been in recent years. The Exchangors were completing transactions and others were not, so
the industry gravitated toward the SEC success pattern.
Today, things that have changed: A more efficient capital market for real estate and loans now
exists with better technology to find product and money. A clear definition of the 1031 rules by
our friends at the IRS both helps and hinders the process. More efficient Real Estate firms
created through franchising and training make up larger segments of our business.

Yet, certain things haven’t changed: The need for training brokers and clients to be willing to
operate OUTSIDE THE CASH SALE MARKET for all of the additional alternative benefits is
more important today than ever. The technique of flexing every client, broker, and property to
be able to do "transaction art" in 1,000 ways other than to expose to the market for a buyer, still
exists. The cultural resistance to alternatives to “cash value thinking” still needs to be
overcome. The knowledge and talent related to alternative transaction approaches is still
sequestered in the minds of very few practitioners.

The SEC's unique contribution to the real estate industry is our desire to see an expansion of our
members’ and guests’ transaction capacity. High integrity and reliability are the keys to
success. The Society provides a great way to “live the real estate life.” Integrity, Service,
Experience and Counsel are the SEC way… It’s been that way for 40 years and will be for
another 50.

Hunter Quistgard, S.E.C., is a semi-retired investment Realtor/exchange counselor. Licensed in
1960, and formed Hunter Associates in 1962, which managed, brokered, syndicated, and
exchanged investment real estate. Hunter won the Counselor of the Year Award in 1984, and
was President of S.E.C. in 1988. Motto: "A motivated owner with a knowledgeable and
connected exchange counselor can manufacture a solution out of whole cloth."

VII. The S.E.C. Education Foundation                  A. S.E.C. Education- A Powerful Idea

                       S.E.C. Education – A Powerful Idea
                                      Phil Corso, S.E.C.
                         President, The S.E.C. Education Foundation

“The wisdom of the ages tells us that learning is a lifelong adventure; that we learn best when
 we learn from each other; that effective learning only takes place when the mind is open to
   creative thought; that intellectual curiosity is the best motivation for learning and that
  Powerful Ideas are the net result of the desire to achieve what others say can’t be done.”

Where do “Powerful Ideas” come from? Are they a result of some mystical experience where
you wake up one morning and say “Eureka!” and there it is, a powerful idea? Or, are powerful
ideas the result of the learning, knowledge, and wisdom acquired by your life experiences?

I prefer to think that powerful ideas are generated by a creative, open mind … a mind that
recognizes opportunity and acts … a mind that seeks out new knowledge for knowledge’s sake
never knowing when you might use that something new you learned on your journey. Powerful
ideas are the result of intellectual curiosity and a mindset that sees the potential for success and
measures the risk of failure. Powerful ideas are part of the sum total of who you are and the
belief system you trust to lead you life.

So, how do you find powerful ideas? The first step is taking the journey called life-long
education. Powerful ideas come from a variety of places but are almost always the result of a
“teachable moment” … that fleeting moment when a friend shares a thought or an experience …
when an instructor shares a formula or some tidbit of knowledge that rings your bell. Powerful
ideas are stored in your subconscious mind waiting for that moment when you are just sittin’
around thinking about a particular challenge or project.

Powerful ideas come from being mentally, physically, and emotionally prepared to accept the
idea when it surfaces. They are the direct result of having a positive mental attitude all the time.
They come from having goals … clear, concise, written goals.

There is an old saying I like that says it all … ”If you don’t know where you are going, you will
probably end up somewhere else.” Powerful ideas will come, but only if you are prepared to
welcome them into your life.

So what do you do when you have a powerful idea? Well, you do something about it. You act!

First, let your powerful idea sort of percolate for a while to see if it has traction. Next,
champion your powerful idea with the passion to take it to the next level ... wherever that may

lead. Remember, powerful ideas are often scoffed at and rejected before applying the creative
energy to think the idea through to some logical conclusion.

Powerful ideas need discussion ... and brainstorming ... and positive thinking in order to survive.
Don’t let the naysayers convince you that your powerful idea is wrong, or not feasible, or crazy.
Determine the outcome your self through facts and logic. Understand that there are negative
people who live to see others fail and cut them out of your life

S.E.C. Education Foundation programs are one place where you will find powerful ideas that
will change your life. We invite you to join us on our life long adventure as we share our
creative real estate experiences with all who seek learning, wisdom, and knowledge in their
search for powerful ideas.

Don’t let your powerful idea die as a result of other people saying it can’t be done. Combine
your powerful idea with powerful action and make it happen!!

Visit the S.E.C. Education Foundation web site, for a listing of
courses and instructors and for the latest schedule of S.E.C. Education Programs throughout
the nation.

Phil Corso, S.E.C. is President of P.C.I Associates, Ltd. and a real estate developer, investor and
educator based in Scottsdale, Arizona. He is currently engaged in self-storage ownership and
development and is an active Walgreens Developer. He is a past president of the Society of
Exchange Counselors and presently serves as president of the SEC Education Foundation. He
teaches several real estate related courses and was the 2002 SEC Counselor of the Year.

VII. S.E.C. Education Foundation                       B. S.E.C. Education Program News

                             Overwhelming Success

S.E.C. Education Programs have enjoyed overwhelming success thus far in 2003. According to
Chuck Sutherland, S.E.C. Education Chairman, the response to programs sponsored by the
S.E.C. Education Foundation has “exceeded our expectations.” Sutherland said, “We have been
extremely proud of the acceptance of S.E.C. Education Programs that we have offered to date.”

Starting with a sell out program taught by Bill Broadbent in Scottsdale; and followed by
programs by Ken Vidar in San Antonio, Chet Allen in Denver, Ted Blank in Ohio, Chuck
Sutherland in Atlanta and Bob Giniecki in Albany; S.E.C. Education programs have attracted
real estate professionals from around the nation.

The S.E.C. Education Foundation, the 501 (c) 3 nonprofit affiliate of the Society of Exchange
Counselors, has teamed up with the Mile High Exchangors in Denver, The Association of
Georgia Real Estate Exchangors and the Ohio Creative Real Estate Association, to offer creative
real estate programs in their cities. The Foundation also sponsors programs offered by the
Society in conjunction with S.E.C. Marketing Meetings in cities throughout the United States.
Courses are offered across a wide spectrum of topics and presented by instructors who are active
real estate investors, exchangors, brokers and counselors.

The Foundation continues to seek opportunities to assist local real estate organizations in
sponsoring and promoting creative real estate programs. According to Ted Blank, S.E.C., and a
Foundation Board member, the Foundation “Is ready to assist financially in a program’s
success.” The Foundation can provide instructors, marketing assistance, and other services to
real estate groups seeking advanced education for their membership.

For additional information on Foundation Programs and Instructors, please visit the S.E.C.
Education Foundation web site, or contact the Society offices for

Information on upcoming education programs can be found in the “Upcoming Events” section of
the S.E.C. Real Estate Observer.

I. Society News Briefs                 A. S.E.C. National Invitational Marketing News

                   National Invitational Marketing Session

                                  Atlanta, Georgia
                                   May 4-7, 2003
                              The Westin Atlanta North
                       7 Concourse Parkway, Atlanta, GA 30328

Social Functions

Sunday evening from 6:00 to 7:00 p.m. we will host a "Getting to Know You" reception at the
hotel for all participants; and there will be evening functions for networking and fun on Monday
and Tuesday. The "Spouses/Friends" Luncheon will be held on Tuesday.

The room rate is $109.00 single or $119.00 double. Call the hotel to make your reservations at
888-733-7666, their local number is (770) 395-3900 Ext. 500. The fax number for guests is (770)
395-3918. Make your plans early; we have a limited number of rooms available. The cut off day
for reservations is April 9, 2003. Visit the hotel's web site at to learn more
about the hotel & visit or to learn
more about Atlanta. If you need a rental car call AVIS at (800) 331-1600 and mention our
AWD# D833386 for special rates.


IMPORTANT NOTICE: Invited guests must now register and enter their packages online
through our website! Please contact the SEC Office for your personal Guest ID Number and
further instructions.

Make your commitment early! $350.00 meeting participation fee. Spouse/Friend fee: $50.00. All
fees must be received, and all packages must be entered, by 5:00 p.m. on THURSDAY, April 24,
2003, in order to be included in the first marketing book. If you cancel your registration after
4/24/2003 a $100.00 cancellation fee will apply. Please Note: Business attire is appropriate
during your attendance at the marketing conference; casual attire for the social functions.

Marketing • Production • Benefits Sessions

       7:30 a.m. - 5:00 p.m. Monday
       9:00 a.m.- 5:00 p.m. Tuesday
       9:00 a.m. - 4:00 p.m. Wednesday

The Production Committee promises a rewarding and productive meeting. Insuring that this
meeting will be a success will be such nationally recognized moderators as:

       Virgil Opfer, S.E.C.
       Jim Brondino, S.E.C., CCIM
       Hank Haden, S.E.C.
       Mark Johnson, S.E.C.
       Ted Blank, S.E.C.
       William E. Stonaker, S.E.C.
       Ron Bowden, S.E.C., CCIM
       Harry Kennerk, S.E.C.
       Steve England, S.E.C., A.L.C.

The Society has been in existence for over 40 years and is known for its creative use of different
marketing and transaction formulas. The focus is on designing transactions that will close.

I. Society News Briefs                        B. Due Diligence and Investment Properties

                Due Diligence and Investment Properties
Instructor Stephen R. England, S.E.C., will present "Due Diligence - Agricultural Land." Steve is
an expert in land with a specialty in agricultural properties, including the modern dairy business.
In 1994, he served as National President of the REALTORS Land Institute. His general expertise
is in counseling clients about their real estate investments and using the creative S.E.C.
marketplace to solve problems or accomplish their goals no matter the situation or the types of

Instructor Vicki Yeomans-Klein, S.E.C., will present "Due Diligence - Industrial Buildings."
Vicki is the managing partner of Yeomans Realty and Industrial Suites. Yeomans Realty owns
and manages mini-storage facilities in Texas and Louisiana. Industrial Suites develops multi-
tenant office warehouse properties in Houston, Texas. Ms. Yeomans-Klein has an MBA with a
focus on finance and holds the CCIM designation.

John Brennan, S.E.C., will present "Due Diligence - Shopping Centers." John is the President
and owner of The Brennan Company, a full service commercial real estate investment company
founded in 1988, specializing in the acquisition, leasing, management, and operation of retail
centers and commercial investment properties. John is also a CCIM, and a CPA, and has been in
the commercial real estate business in Dallas since 1984.

   WHERE:                                               WHEN:
     The Westin Atlanta North Hotel                       May 4, 2003
     7 Concourse Parkway                                  Sunday, 9:00 a.m. to 3:00 p.m.
     Atlanta, GA 30328
     (The site of the S.E.C. Marketing Session,         COST: $75.00
     May 4-7, 2003)

To make your reservation for "Due Diligence and Investment Properties" please register online

You may also print the downloadable registration form available at Please fax the printed form to the S.E.C. Office at
(858) 488 8063, or mail the printed form and your check to:

Society of Exchange Counselors
5580 La Jolla Blvd. #110
La Jolla, CA 92037


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