Potential commissions if real estate in a plan is sold

[Guest babs51]

PS plan has the majority of their assets invested real estate, with the outstanding mortgages as liabilities. They also report to us, as a liability, a 7% sales commission if the property is sold. Would appear to be a bit aggressive. Anyone have an opinion?

[Guest b2kates]

why report a contingent liability? Is the property actively being sold/

Also do they update the FMV annually?

[JanetM]

I agree with Bret, unless you are active in marketing the property now it is not a contingent liability. You are definately understating your assets.

Hasn't the plan auditor pointed this out? They would also have to have FMV updated annually for audit also.

With majority of assets in real estate this plan must have an audit, what does the auditor say?

[No Name]

My 2 cents. Had a plan with Real Estate just last year. Got an appraisal with a RANGE of 675-725k. Long time participant was due a payout, and trustee said use the high estimate. Paid out at 725. Property sold 6 months later at $935k.

Yeah, I sleep as well as everyone else... not.

[Guest babs51]

No, the real estate is not being actively sold. Yes, they have it valued every year. They avoid an audit because they have purchased a bond for the full appraised value of the non-qualified assets (over $7M).

[david rigby]

You are definately understating your assets.

Why? If the trustee believes a commission will be paid whenever the property is sold, why not value it at what the plan is expected to receive?

BTW, why does a PS plan a majority of its assets in real estate? Prudent?