BiggerPockets

Hi Mark,

Yes, it is true that most 1031 exchanges are completed on a delayed basis. There are very few "two party swaps." They can be done, but it is difficult. Buyers and sellers are usually not willing to accept those type of contingencies.

You might want to consider a reverse 1031 exchange where you can buy your property first and then you have 180 days to sell your existing property. It takes a lot of the risk out of the transaction because you have already bought your property. They are much more complicated and expensive, but can reduce the risk due to the time constraints. Here is a brief article regarding reverse 1031 exchanges: http://www.exeter1031.com/article_why_use_reverse_1031_exchange.aspx

I plan to be conservative, having only a small amount of experience in buying and selling. However I do appreciate the comments.

Actually, what you describe is a direct swap or two party exchange, but it is a 1031 Exchange. The only difference is that you can do it without a professional Qualified Intermediary. It would still be reported on IRS Form 8824 as a 1031 Exchange.

You can identify several properties you intend to replace your relinquished property with.

Several investors I know ran out of time identifying these prospective properties because their relinquished property sold faster than they expected.

I think the 180 days is sufficient to complete everything. Always has been for me. Don't forget your money is tied up after closing the first property until you close the replacement property. I don't really like to have significant funds not drawing interest in the hands of anyone even my best friend.

Lawyers hate the paperwork for a 1031 exchange but they must be on board before the contract is let for the relinquished property so language is inserted notifyin g the buyer that there is a 1031 exchange involved. The HUD is made out in the QI's name and that could freak someone out.

I wanted to clarify one comment made by Dave T.

He is absolutely correct that direct deeding has been around for 20 years (actually since 1990 when Rev. Rul. 90-34 was issued by the IRS).

However, the Purcahse and Sale Agreement (Contract) for both the relinquished property and the replacement property must be assigned to the Qualified Intermediary.

Technically, which means contractually (on paper), the Qualified Intermediary must acquire the relinquished property from the taxpayer and then sell to the buyer, and then acquire the replacement property from the seller and transfer to the taxpayer in order to have a successful and valid 1031 Exchange.

The Qualified Intermediary also should provide the closing agent with instructions as required under Rev. Rul. 90-34 to deed the property directly to the actual recipient rather than thru the Qualified Intermediary.

So, the Qualified Intermediary will never take title to either property unless a Reverse 1031 Exchange or an Improvement 1031 Exchange is being used, but the Qualified Intermediary must be contractually assigned into both transations.