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One cardinal rule of a #1031 exchange is that the investor cannot have actual or constructive receipt of the relinquished property proceeds during the pendency of the exchange. To accomplish this, the investor must retain the services of a qualified intermediary. Given the financial duty of the qualified intermediary, you can see how important it is to hire a reputable individual for the role.

One of the biggest questions any investor should be asking before they settle on a Qualified Intermediary to assist them with their 1031 exchange is “how will my funds be protected?” After all, the QI will take custody and control of the sale proceeds from the relinquished property and hold them in escrow until closing on the replacement property.

So it makes sense that a responsible investor would want to know what safeguards are in place to protect their investment resources. (And if you are an investor NOT asking that question, you SHOULD be!)

Before picking your QI, be sure to ask them for proof of the following:

  • How much experience do you have facilitating exchanges as a qualified intermediary?
  • Are you insured against loss?
  • Are you bonded?
  • Do you have references?

Selecting a qualified intermediary without first asking these questions can expose you, the investor, to unnecessary risk. Be sure to do your homework, so you don’t end up with a terrible story to tell after the fact.

If a 1031 exchange is in your future, visit our website to learn more about these powerful tax deferral tools and our qualified intermediary and replacement property locator services.

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