Home – 1031 Exchange – What Is A Qualified Intermediary? (QI)
1031 Exchange – What Is A Qualified Intermediary? (QI)
As we have already mentioned in previous articles in this section, the 1031 exchange process is a complex one with many rules and regulations that must be followed properly. In order to make sure that this process is handled correctly, in most cases, the use of something called a “Qualified Intermediary” is required to manage the process.
Identifying who will be the Qualified Intermediary (QI), also sometimes referred to as the accommodator or facilitator, is usually one of the first steps in the 1031 exchange process and their role is very clearly defined by the IRS code.
The Qualified Intermediary (QI) is responsible for:
1. Acquiring the real estate property from the taxpayer.
2. Transferring the real estate property to the buyer.
3. Acquiring the replacement property from the seller.
4. Transferring the replacement property to the taxpayer.
This means that they will be responsible for the 1031 exchange process from the beginning and will be responsible for receiving and safeguarding of the funds from the initial property sale, and distributing them with the subsequent purchase.
In addition, the Qualified Intermediary (QI), must be an independent organization that has no other contact with the person exchanging the property with the exception of processing the transaction. This means that friends, relatives, and even your own CPA or attorney are not allowed.
Due to the importance of getting this right, we recommend that you follow some simple advice when selecting a Qualified Intermediary (QI) to handle your 1031 exchange:
1. As mentioned above, you must not use someone that you have conducted personal business with before for other purposes. This must be done by an independent 3rd party.
2. Make sure that your Qualified Intermediary (QI) is bonded and insured. Also, check to make sure that they are current on their payments so if something goes wrong, they have the ability to fix it. We typically recommend that our clients select a large national company with strong financials. Since they are in charge of your funds during this process, you want to make sure that your assets are safe.
3. Make sure that the Qualified Intermediary (QI) that you select has a lot of experience handling 1031 exchanges. This is an obvious one, but often overlooked. You want to make sure that the company that you choose has a strong history of successful transactions. This way, you can be relatively sure that they have seen situations like yours before and know how to handle them.
Of course, we would be happy to help you to identify the right Qualified Intermediary (QI) to facilitate your 1031 exchange. This is a service that we regularly provide to our clients as we help them navigate through this process.
Want to learn more? Take a look at our other articles on the 1031 exchange, contact us at 301-924-2160, or use the form below. We would be happy to answer your specific questions or even provide you with some examples of our world class inventory.