What is a Qualified Intermediary?
Facilitates the Exchange
The QI coordinates the sale of the original property and the purchase of the replacement property, ensuring that the transaction meets all 1031 exchange requirements.
Holds Sale Proceeds
When the original property is sold, the QI holds the proceeds in escrow. The investor cannot have direct access to these funds, as this would disqualify the exchange. The QI then uses these funds to purchase the replacement property on the investor’s behalf.
Prepares Legal Documents
The QI prepares and manages all necessary documents, including the exchange agreement, assignment of contracts, and notices of assignment, to ensure the exchange is legally compliant.
Ensures Timeline Compliance
The QI helps the investor adhere to the strict timelines of the 45-day identification period and the 180-day exchange period, which are critical to maintaining the exchange’s tax-deferred status.
Neutral Party
The QI must be an independent third party and cannot be the investor, a relative of the investor, or anyone with a significant prior relationship with the investor, such as their attorney, accountant, or real estate agent.