Steps to Complete an Exchange

Steps to Complete an Exchange

  1. Seller (Exchanger) reviews proposed transaction with financial, tax and legal advisors.
  2. Seller signs a contract to sell a relinquished property to the buyer.
  3. The Exchanger enters into an exchange agreement with a Qualified Intermediary (QI) and the Exchanger assigns the Exchanger’s rights in the sale contract to the QI.
  4. At closing of the relinquished property, the exchange funds are wired to the QI and the QI instructs the settlement officer to transfer the deed directly from the Exchanger to the Buyer.
  5. The Exchanger has a maximum of 180 days in the exchange period to acquire all replacement property including a beneficial interest in a Delaware Statutory Trust (DST).
  6. The Exchanger must identify potential replacement properties in writing to the QI within the 45 day identification period subject to the requirements of one of the following rules: 3-property, 20% or 95% rule.
  7. The Exchanger signs a contract to purchase the replacement property with the seller or a subscription agreement with the sponsor of a DST and the Exchanger assigns the Exchanger’s rights in the purchase contract to the QI.

A QI is an agent that is in the business of facilitating §1031 tax-deferred exchanges and plays a pivotal role throughout the exchange process.