Who is a Qualified Intermediary?

Being an investor yourself, you may be aware of Section 1031 of IRC that allows investors to defer capital gains tax on exchanging an investment property for another like-kind property. However, what you should not forget is that 1031 exchanges aren’t possible without the involvement of Qualified Intermediaries. Yes, that’s correct. It’s mandatory to involve a Qualified Intermediary in every single 1031 exchange.

A Qualified Intermediary is generally an individual responsible for handling 1031 exchanges on behalf of investors. From finding a buyer for your relinquished property to locating a potential replacement property and then acquiring it, everything is done by the Qualified Intermediary.

Role of a 1031 Qualified Intermediary

  • A Qualified Intermediary’s job begins from the very first day of a 1031 exchange. It’s the QI, who closes on the sale of your relinquished property.
  • The Qualified Intermediary holds the proceeds of the relinquished property. Investors aren’t allowed to take possession of the proceeds, as doing so will eliminate the possibility of tax deferment.
  • At the time of closing on the sale of the relinquished property, a special document is signed, which recognizes the Qualified Intermediary as the ‘seller’ of the property.
  • The next job of the Qualified Intermediary is to identify a potential replacement property on behalf of the investor within 45 days. This lifts the burden of identifying a replacement property within such less time from the investor’s head.
  • Upon successfully identifying the replacement property, the next task of a Qualified Intermediary is to acquire it within the next 180 days (starts from the date when the relinquished property is sold).
  • On the last day of the exchange, the Qualified Intermediary deposits the funds and acquires the replacement property as the buyer of the property.
  • Once the 1031 exchange is completed, the Qualified Intermediary transfers the property title to the investor without a constructive receipt of the funds utilized in the exchange.

The importance of a 1031 Qualified Intermediary exchanges can be estimated from the fact that a 1031 exchange is impossible without their participation. The reason why Qualified Intermediaries can’t be separated from 1031 exchanges is that there are handsome chances of investors not getting appropriate replacement properties within the limited time. Therefore, the involvement of a Qualified Intermediaries ensures that the exchange will complete within the given deadlines. As a Qualified Intermediary’s job requires experience and knowledge of the real estate market, it’s important not to rush to a decision while choosing a 1031 Qualified Intermediaries.

What You Should Look in a 1031 Qualified Intermediary Exchanges?

  1. Real estate market is all about contacts. The reason is obvious, finding an ideal property under limited budget and time is an art that not everyone is the master of it. A good Qualified Intermediary is likely to have lots and lots of contacts. So, the problem of finding a replacement property within 45 days is solved the moment you enter a Qualified Intermediary’s office.
  2. An experienced individual is certainly a better choice for the role of a Qualified Intermediary than some newcomers. Things, like a person’s experience, number of 1031 exchanges they have been a part of, etc. should be checked properly before finalizing a Qualified Intermediary. Individuals with less than 6 years of experience shouldn’t be in your list.

As you can see, Qualified Intermediaries play a vital role in 1031 exchanges. That’s why it’s important that you consult a highly experienced QI for your 1031 exchange. But before you proceed, you must know how you can reach to best Qualified Intermediaries present in the market? For that, you may need the assistance of a 1031 exchange advisor or expert, and we can help you with that. We, at www.triplenetproperty.com, can match you with up to three highly qualified 1031 exchange experts and one out of them will help you in finding the best QI for your 1031 exchange.

For consultation and assistance regarding qualified intermediary benefits & NNN properties, you can call 888-993-2835 or contact one of our advisors to know more about NNN properties. You can also email us at info@triplenetproperty.com.

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