How REALTORS® Can Add Value and Generate Referrals by Identifying Blind Spots

Charles, Christopher updated

By: Christopher J. Charles, Esq.
& special guest John Skabelund, Esq.


Successful REALTORS® know that ecstatic clients are the best sources for referrals.  Delivering unexpected value to your clients is the easiest way to exceed a client’s expectations.  Identifying a real estate transaction’s “blind spots” is a cost-effective way to create loyal clients.  Blind spots are potential problems that your client is not aware of.   Here are three easy ways REALTORS® can add value to every transaction.

1.  Pay Attention to How Your Buyers Intend to Hold Title.

Ask your investor clients who are buying real estate how they intend to take title to the property.  And ask your investors selling a property whether they plan on buying another property soon.

These two questions will help you identify potential asset protection and tax issues.  Your client is unnecessarily exposing their assets to creditors if their property is in anything other than a dual-member limited liability company (LLC), a limited partnership, (LP) or an irrevocable trust.  In our experience, the most common mistake investors make is holding property in a corporation or as the sole member of an LLC.  (Caution: married couples owning an LLC are considered one member due to Arizona community property laws.)

Unlike an LLC, a corporation is controlled by its stockholders.  If the company’s stock is owned personally by the client, their creditors can seize the stock with a judgment and take control of the company and sell its assets.  On the other hand, under Arizona law, the exclusive remedy of an LLC’s judgment creditor is a charging order.  A.R.S. § 29-655(C).  A charging order acts like a lien on any distributions from the LLC.  A creditor cannot take ownership of the LLC away from its owner.  And, unlike a corporation, a creditor cannot control the LLC or sell its assets.  Limited partnerships enjoy similar protection.   In most cases, an LLC or an LP is the most effective way of protecting property from outside creditors.   In addition, it helps protect your client’s other assets from any judgment resulting from the investment property.

Ask your sellers if they are buying another property.  If the answer is yes, they may be able to defer or potentially eliminate taxes due on the sale of qualifying properties.  This is accomplished by a Section 1031 “like-kind exchange,” named after the Internal Revenue Code, Title 26, Section 1031.  However, there are several formalities and deadlines that require advance planning.  It is important that your client seek legal and tax counsel well before the closing of any sale of property.
If your client is not immediately buying another property, then they should consider holding the proceeds from the sale in cash in an LLC or LP.  For the same reasons discussed for investors above, holding cash in an LLC or LP allows your client to invest their money while providing protection.

2.  Remind Your Clients to Determine Whether the $250,000 Principal Residence Tax Exemption Applies.

During the “Great Recession,” this issue rarely came up.  But now that the market has rebounded, don’t forget to ask your sellers if they have lived in their residence for “periods aggregating” at least two of the last five years.  If they have not, they may be subject to significant capital gains tax that can be avoided by delaying the sale of their residence until two years have passed.  26 U.S.C. §121.

3.  If Your Client is Purchasing a Primary Residence, Encourage Them to Think About How They Should Hold Title and Protect Their Equity.  

Typically, married couples hold title as community property with right of survivorship.  This helps to avoid probate following the death of one of the spouses.   Your clients, however, may not know that upon both of their deaths, probate will still be necessary.  Probate is expensive and time consuming.  Your clients should strongly consider seeking legal counsel to transfer their property into a revocable trust or at least record a beneficiary deed to avoid probate.

If your client has more than $150,000 in equity in their primary residence, a judgment creditor can still foreclose on their home (A.R.S. § 33-1101 only protects up to $150,000 of your client’s equity).  Thus, if your client applies a large down payment or pays cash for the property, your client should seek legal counsel regarding how to protect their equity.

By prompting your clients to think about these issues, you will help them save money and headaches.  Your clients are likely unaware that they have these blind spots.  Help your clients think through these issues and turn a happy client into a referral source for years to come!


For more Laying Down the Law articles, click here.


Please visit Mr. Charles’ attorney page at for additional materials regarding real estate law.  Or call us at 480-344-4596 to schedule a consultation with Mr. Charles.


Mr. Charles is an experienced real estate lawyer and a former “Broker Hotline Attorney” for the Arizona Association of REALTORS® (the “AAR”).  He has an “AV Preeminent” rating by the Martindale-Hubbell Peer Review Ratings system, which connotes the highest possible rating in both legal ability and ethical standards.  He is a Partner with the law firm Davis Miles McGuire Gardner, PLLC where he serves as the chair of the Real Estate Practice Group. Mr. Charles is a licensed real estate instructor and he teaches continuing education classes at the Arizona School of Real Estate and Business.


Mr. Skabelund helps property owners save taxes, protect their assets, and avoid probate.  Please visit Mr. Skabelund’s attorney page at for more information.  Or call 480 733-6800 to schedule a consultation with Mr. Skabelund.


Mr. Skabelund practices real estate law, business law, trust & probate administration and estate planning.  Prior to becoming an attorney, he was a real estate developer and licensed realtor.  Mr. Skabelund earned an “Excellent Rating” on and enjoys raving reviews on numerous review websites.


Christopher’s company website: