{"id":136917,"date":"2021-04-08T01:30:11","date_gmt":"2021-04-08T07:30:11","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=135834"},"modified":"2023-05-10T11:42:52","modified_gmt":"2023-05-10T17:42:52","slug":"1031-exchange-cost","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/1031-exchange-cost","title":{"rendered":"How Much Should You Pay for a 1031 Exchange? [2021 Research]"},"content":{"rendered":"\n\n      <iframe loading=\"lazy\" frameborder=\"0\" height=\"200\" scrolling=\"no\" src=\"https:\/\/playlist.megaphone.fm?e=BIGPOC7972124122&#038;light=false\" width=\"100%\"><\/iframe>  \n\n\n\n\n<p>Everyone enjoys a good bargain. But when it comes to the 1031 exchange fees charged by your qualified intermediary (QI), how can you tell if it\u2019s really a steal?<\/p>\n\n\n\n<p><a href=\"https:\/\/www.biggerpockets.com\/blog\/1031-exchange\" target=\"_blank\" rel=\"noreferrer noopener\">How a 1031 exchange works<\/a> is that a 1031 exchange is a tax-deferred strategy that allows real estate investors to sell one property and purchase another of equal or greater value within a specific time frame, without having to pay capital gains taxes on the sale of the original property.<\/p>\n\n\n\n<p>The value offered by qualified intermediaries can make or break your 1031 exchange experience and feasibility, and their services can be as disparate as their costs. Prices range from $500 to over $2,000 per 1031 exchange. Our 2021 research found that QIs in all price ranges offer a wide variety of fee structures, education, support, and fund-handling practices. Consequently, savvy investors do not make their selection based on price alone.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-css-opacity\"\/>\n\n\n\n<div id=\"hero-block_62ee867235a1c\" class=\"first:mt-0 hero-block py-4    has-background has-slate-300-background-color has-text-color has-slate-800-color\">\n    <div\n        class=\"gap-10 lg:gap-20 flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n\n        <div class=\"relative z-30 lg:w-2\/3 \">\n            <main class=\"py-4\">\n                \n\n<p class=\"has-theme-slate-color has-text-color has-large-font-size\" style=\"font-style:normal;font-weight:800\">Dreading tax season?<\/p>\n\n\n\n<p class=\"my-3 md:my-5 lg:my-8 has-theme-slate-color has-text-color\" style=\"font-size:16px\">Not sure how to maximize deductions for your real estate business? In <em>The Book on Tax Strategies for the Savvy Real Estate Investor<\/em>, CPAs Amanda Han and Matthew MacFarland share the practical information you need to not only do your taxes this year\u2014but to also prepare an ongoing strategy that will make your next tax season that much easier.<\/p>\n\n\n\n<div id=button-custom-event-block_641384b1eb1d8 class='button-custom-event'>\n      <a\n    href=\"https:\/\/store.biggerpockets.com\/products\/tax-strategies-book-bundle?utm_source=blog&#038;utm_medium=blog%20banner\"\n        x-on:click=\"window.analytics.track('Blog Block | Publishing: Taxes Bundle', {\n      referrer: 'https:\/\/www.biggerpockets.com\/blog\/1031-exchange-cost',\n    });\"\n    class=\" btn-shape inline-block no-underline has-background has-theme-gold-background-color has-text-color has-white-color\" target=\"_blank\">Get Yours Now<\/a>\n  <\/div>\n\n            <\/main>\n        <\/div>\n\n                <div class=\"lg:w-1\/3 first:mt-0 relative h-full lg:flex lg:items-center\">\n            <img decoding=\"async\" class=\"object-cover w-full relative z-20 my-0  rounded-md hidden lg:block\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2023\/04\/tax-strategies-books.png\" alt=\"\" title=\"\">\n        <\/div>\n            <\/div>\n<\/div>\n\n\n<hr class=\"wp-block-separator has-css-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\">What are you paying for?<\/h2>\n\n\n\n<p>Let\u2019s focus on the three specific IRS requirements regarding qualified intermediaries. For their fee, the QI should, at a minimum:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>Be involved at or prior to the sale,<\/li>\n\n\n\n<li>Be an unrelated third party, and<\/li>\n\n\n\n<li>Document the exchange.<\/li>\n<\/ol>\n\n\n\n<p>QIs are largely unregulated. In all but nine states, there is no government oversight. As a result, how they deal with you and secure your funds is up to each QI.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What 1031 exchanges cost<\/h2>\n\n\n\n<p>Our research found that the median cost of an exchange, regardless of the level of service provided, is $950. Of the QIs surveyed, 30% were more expensive and 40% were less expensive. The median price for the purchase of second replacement property is currently $295, with 55% of the QIs charging more than the median price.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Optional 1031 exchange services<\/h2>\n\n\n\n<p>You trust your hard-earned capital to the management and control of your QI. With this in mind, here are some questions to consider in addition to price.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Do they guarantee their exchange documentation?<\/h3>\n\n\n\n<p>Documentation of the exchange is an IRS requirement. Consequently, your QI should stand behind their work. Look for those who guarantee that the paperwork they provide will meet all IRS standards.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Will your funds be commingled or secured separately?<\/h3>\n\n\n\n<p>To have a successful exchange, the QI\u2019s management and documentation of the flow of exchange funds must show you did not have actual or constructive receipt of funds. But what about the security of your funds? Traditionally, QIs have commingled exchange funds in a trust or escrow account that is under their exclusive control. But your strongest protection is the use of a dual signatory, segregated, FDIC-insured exchange account.<\/p>\n\n\n\n<p>Above all, ensure that your exchange has its own unique and separate account that takes two signatures to move money\u2014yours and the intermediary\u2019s. This does not rise to the level of constructive receipt by IRS standards.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">What exactly does the exchange fee cover?<\/h3>\n\n\n\n<p>Some QIs charge a set fee for the documentation and support of one sale and one purchase (a typical exchange). Other QIs charge one fee for the sale and another for the purchase. Verify what additional fees, if any, apply. For example, some QIs charge for wire transfers, expedited services, or dual signatory accounts.<\/p>\n\n\n\n<p>If you purchase more than one replacement property, expect to pay an additional fee of around $300. Our research of selected QIs found that all but one of these firms charged for documentation of additional replacement property purchases.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Do they offer audit assistance?<\/h3>\n\n\n\n<p>If your exchange is ever audited, respectable QIs provide support and documentation as needed, typically at no charge.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">How responsive are they?<\/h3>\n\n\n\n<p>Pay attention to how long it takes your QI to answer your phone calls and emails. Avoid firms that are slow to respond or have poor communication skills. Timing is of the essence in a 1031 exchange. When you are at the closing table, you want to know that you can get the assistance you need.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">What is their level of experience?<\/h3>\n\n\n\n<p>You want to look for a QI that has solid and current 1031 experience, a good reputation in the industry, and demonstrated results. Seek current references or online testimonials. Do not select a QI that does not have a history to back up their claims of expertise.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Do they offer education and support?<\/h3>\n\n\n\n<p>If you are new to 1031 exchanges, understanding the process and its rules and regulations is essential to a smooth transaction. Will they remind you of the 45-day and 180-day deadlines, or is that on you? Will they coordinate everything with your title company, or will you be expected to facilitate that communication? Make sure your QI has the resources to address your questions and provide you with tools to maximize the return on your investment.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Different types of qualified intermediaries<\/h2>\n\n\n\n<p>As you research, remember that there are some advantages and disadvantages to different types of QIs.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Online companies<\/h3>\n\n\n\n<p>Internet-based companies may offer you a lower price, but fewer services. These groups specialize in meeting the minimum requirements and streamlining their processes. They tend to offer little or no personal consultation and limited real-time support. If your 1031 hits a snag, there may not be anyone readily available to troubleshoot or provide guidance. When doing your <a href=\"https:\/\/www.biggerpockets.com\/member-blogs\/12255\/90779-the-six-basic-requirements-of-a-1031-exchange\" target=\"_blank\">due diligence<\/a> with such firms, pay special attention to their responsiveness.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Small law firms<\/h3>\n\n\n\n<p>Small law firms that only do a few exchanges a year will usually charge higher rates. They typically provide excellent personal service. However, because they don\u2019t see that many exchanges, their pool of knowledge may be expanded at your expense. This is because so much of 1031 law involves ongoing interpretation and case law, not the original statute. Select a QI with up-to-date experience.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Large national firms<\/h3>\n\n\n\n<p>Large national firms benefit from economies of scale. This can result in lower costs and better response times. But your experience will only be as good as the sales representative assigned to you. Look at online reviews to verify that your representative is a seasoned 1031 consultant with broad experience in the field. One bad piece of advice can jeopardize your entire exchange.<\/p>\n\n\n\n<p>The selection of your QI recalls the story of Goldilocks and the three bears. One QI may offer a bargain price but commingle your funds or have long response times. Another QI may give you great customer service but might be too expensive. Then there\u2019s the QI that\u2019s just right: big enough to competently take care of all your needs, but also responsive and cost-effective. Choose a QI that offers the security and support level for your sound peace of mind.<\/p>\n\n\n\n  <div id=\"posts_lists-block_606e0d030d117\" class=\"  my-10\">\n    <div class=\"\">\n      <!-- Column One -->\n      <div>\n                  <h2 class=\"mt-0 mb-1 js-toc-ignore\">\n            More about 1031 exchanges          <\/h2>  \n                  \n        \n        \n        <div class=\"grid grid-cols-1 gap-y-4 lg:gap-y-7 mt-5\">\n          \n<article \n\tid=\"post-76106\" \n\tclass=\"content-card mb-0 flex flex-col  post-76106 post type-post status-publish format-standard has-post-thumbnail hentry category-deal-analysis\">\n\n\t<header class=\"entry-header\">\t\t\t\n\t\t<!-- Image -->\n        \t\t\t<a class=\"post-thumbnail\" href=\"https:\/\/www.biggerpockets.com\/blog\/2015-12-17-1031-exchanges-rules\" target=\"\" aria-hidden=\"true\" tabindex=\"-1\" target=\"_blank\">\n\t\t\t\t<img loading=\"lazy\" decoding=\"async\" width=\"340\" height=\"163\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2015\/12\/1031-exchange-rules.jpg\" class=\"size-card w-full  m-0 aspect-[68\/45] object-scale-down wp-post-image\" alt=\"2 Make-or-Break Rules to Follow for a Successful 1031 Exchange\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2015\/12\/1031-exchange-rules.jpg 702w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2015\/12\/1031-exchange-rules-300x144.jpg 300w\" sizes=\"auto, (max-width: 340px) 100vw, 340px\" title=\"\">\t\t\t<\/a>\n\t\t        \n\n\t\t<!-- Content Wrapper -->\n\t\t<div class=\"py-4 \">\t\n                            <div class=\"flex gap-4 justify-between items-center\">\n                    <!-- Category  -->\n                                            <a href=\"https:\/\/www.biggerpockets.com\/blog\/category\/buying-selling\/deal-analysis\" class=\"transition-colors bg-themeBlue\/20 text-themeBlue-medium hover:bg-themeBlue hover:text-white px-2 py-1 mb-2 inline-block rounded-sm no-underline text-sm\" target=\"_blank\">Finding Deals<\/a>\n                    \n                                            <span class=\"text-sm text-gray-500 hidden lg:inline-block\">3 min read<\/span>\n                                    <\/div>\n            \n           <div class=\"flex gap-3 items-center my-2 flex-nowrap text-base\">\n                <!-- Avatar and Author Name -->\n                <img decoding=\"async\" src=\"https:\/\/bp-wp-migration.s3.amazonaws.com\/author_avatars\/1178.jpg\" class=\"w-8 h-8 object-cover my-0 inline-block rounded-full\" alt=\"\" title=\"\"><span class='leading-snug text-slate-500 flex items-center'><span class='hidden whitespace-nowrap sm:inline-block md:hidden lg:inline-block pr-1'><span class='posted-on'><time class=\"entry-date published\" datetime=\"2015-12-17T12:00:07-07:00\">Dec 17, 2015<\/time><time class=\"updated\" datetime=\"2021-03-16T11:49:45-06:00\">Mar 16, 2021<\/time><\/span><\/span>&nbsp;<a href='https:\/\/www.biggerpockets.com\/blog\/contributors\/amandahan' class='no-underline line-clamp-1' target=\"_blank\">Amanda Han<\/a><\/span>            <\/div>\n\n            <!-- Post title -->\n\t\t\t<h2 class=\"entry-title js-toc-ignore mt-4 mb-0 text-xl leading-snug text-left\">\n\t\t\t\t<a href=\"https:\/\/www.biggerpockets.com\/blog\/2015-12-17-1031-exchanges-rules\" rel=\"bookmark\"  \n\t\t\t\t\tclass=\"whitespace-normal no-underline font-bold  text-slate visited:text-slate hover:text-themeBlue\" target=\"_blank\">\n\t\t\t\t\t2 Make-or-Break Rules to Follow for a Successful 1031 Exchange\t\t\t\t<\/a>\n\t\t\t<\/h2>\n\t\t\t\n                        <p class=\"text-lg font-normal mt-3 text-slate-500 mb-1 line-clamp-3\">Perhaps you have heard the term 1031 or like-kind exchange, or maybe you have already gone through the process before. Either way, before you jump into your next exchange, make&hellip;<\/p>\n\t\t<\/div>\n\t<\/header>\n     <footer class=\"flex justify-between mt-auto\">\n        <!-- Comment Count -->\n        \t\t<span class='flex items-center space-x-2 text-sm' x-cloak x-data='commentCount()' :class=\"parseFloat(commentCount) < 1 || commentCount == '' ? 'hidden' : 'flex'\">\n\t\t\n            <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"h-5 w-5 text-slate text-opacity-50\" fill=\"none\" viewBox=\"0 0 24 24\" stroke=\"currentColor\">\n                <path stroke-linecap=\"round\" stroke-linejoin=\"round\" stroke-width=\"2\" d=\"M17 8h2a2 2 0 012 2v6a2 2 0 01-2 2h-2v4l-4-4H9a1.994 1.994 0 01-1.414-.586m0 0L11 14h4a2 2 0 002-2V6a2 2 0 00-2-2H5a2 2 0 00-2 2v6a2 2 0 002 2h2v4l.586-.586z\" \/>\n            <\/svg>\n\n            <span x-ref=\"comment_count\" class=\"disqus-comment-count text-slate text-opacity-80\" data-disqus-identifier=\"76106\">\n\t\t\t\t\t\t\t<\/span>\n        <\/span>\n\t    <\/footer>\n<\/article><!-- #post-76106 -->\n<article \n\tid=\"post-114001\" \n\tclass=\"content-card mb-0 flex flex-col  post-114001 post type-post status-publish format-standard has-post-thumbnail hentry category-1031-exchanges\">\n\n\t<header class=\"entry-header\">\t\t\t\n\t\t<!-- Image -->\n        \t\t\t<a class=\"post-thumbnail\" href=\"https:\/\/www.biggerpockets.com\/blog\/1031-exchange-avoid-common-mistakes\" target=\"\" aria-hidden=\"true\" tabindex=\"-1\" target=\"_blank\">\n\t\t\t\t<img loading=\"lazy\" decoding=\"async\" width=\"337\" height=\"225\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/08\/tax-mistake.jpg\" class=\"size-card w-full  m-0 aspect-[68\/45] object-scale-down wp-post-image\" alt=\"3 Common Mistakes Investors Make in a 1031 Exchange\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/08\/tax-mistake.jpg 830w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/08\/tax-mistake-300x200.jpg 300w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/08\/tax-mistake-768x513.jpg 768w\" sizes=\"auto, (max-width: 337px) 100vw, 337px\" title=\"\">\t\t\t<\/a>\n\t\t        \n\n\t\t<!-- Content Wrapper -->\n\t\t<div class=\"py-4 \">\t\n                            <div class=\"flex gap-4 justify-between items-center\">\n                    <!-- Category  -->\n                                            <a href=\"https:\/\/www.biggerpockets.com\/blog\/category\/taxes\/1031-exchanges\" class=\"transition-colors bg-themeBlue\/20 text-themeBlue-medium hover:bg-themeBlue hover:text-white px-2 py-1 mb-2 inline-block rounded-sm no-underline text-sm\" target=\"_blank\">1031 Exchanges<\/a>\n                    \n                                            <span class=\"text-sm text-gray-500 hidden lg:inline-block\">4 min read<\/span>\n                                    <\/div>\n            \n           <div class=\"flex gap-3 items-center my-2 flex-nowrap text-base\">\n                <!-- Avatar and Author Name -->\n                <img decoding=\"async\" src=\"https:\/\/bp-wp-migration.s3.amazonaws.com\/author_avatars\/1673.jpg\" class=\"w-8 h-8 object-cover my-0 inline-block rounded-full\" alt=\"\" title=\"\"><span class='leading-snug text-slate-500 flex items-center'><span class='hidden whitespace-nowrap sm:inline-block md:hidden lg:inline-block pr-1'><span class='posted-on'><time class=\"entry-date published\" datetime=\"2019-08-02T05:00:22-06:00\">Aug 02, 2019<\/time><time class=\"updated\" datetime=\"2023-05-19T12:03:32-06:00\">May 19, 2023<\/time><\/span><\/span>&nbsp;<a href='https:\/\/www.biggerpockets.com\/blog\/contributors\/mattfaircloth' class='no-underline line-clamp-1' target=\"_blank\">Matt Faircloth<\/a><\/span>            <\/div>\n\n            <!-- Post title -->\n\t\t\t<h2 class=\"entry-title js-toc-ignore mt-4 mb-0 text-xl leading-snug text-left\">\n\t\t\t\t<a href=\"https:\/\/www.biggerpockets.com\/blog\/1031-exchange-avoid-common-mistakes\" rel=\"bookmark\"  \n\t\t\t\t\tclass=\"whitespace-normal no-underline font-bold  text-slate visited:text-slate hover:text-themeBlue\" target=\"_blank\">\n\t\t\t\t\t3 Common Mistakes Investors Make in a 1031 Exchange\t\t\t\t<\/a>\n\t\t\t<\/h2>\n\t\t\t\n                        <p class=\"text-lg font-normal mt-3 text-slate-500 mb-1 line-clamp-3\">Something that sounds complicated that a lot of people talk about on BiggerPockets and in the real estate world in general is the 1031 exchange. Let me explain briefly what&hellip;<\/p>\n\t\t<\/div>\n\t<\/header>\n     <footer class=\"flex justify-between mt-auto\">\n        <!-- Comment Count -->\n        \t\t<span class='flex items-center space-x-2 text-sm' x-cloak x-data='commentCount()' :class=\"parseFloat(commentCount) < 1 || commentCount == '' ? 'hidden' : 'flex'\">\n\t\t\n            <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"h-5 w-5 text-slate text-opacity-50\" fill=\"none\" viewBox=\"0 0 24 24\" stroke=\"currentColor\">\n                <path stroke-linecap=\"round\" stroke-linejoin=\"round\" stroke-width=\"2\" d=\"M17 8h2a2 2 0 012 2v6a2 2 0 01-2 2h-2v4l-4-4H9a1.994 1.994 0 01-1.414-.586m0 0L11 14h4a2 2 0 002-2V6a2 2 0 00-2-2H5a2 2 0 00-2 2v6a2 2 0 002 2h2v4l.586-.586z\" \/>\n            <\/svg>\n\n            <span x-ref=\"comment_count\" class=\"disqus-comment-count text-slate text-opacity-80\" data-disqus-identifier=\"114001\">\n\t\t\t\t\t\t\t<\/span>\n        <\/span>\n\t    <\/footer>\n<\/article><!-- #post-114001 -->        <\/div>\n      <\/div>\n    <\/div>\n  <\/div>\n\n  ","protected":false},"excerpt":{"rendered":"<p>Everyone enjoys a good bargain. But when it comes to the 1031 exchange fees charged by your qualified intermediary (QI), how can you tell if it\u2019s really a steal?<\/p>\n","protected":false},"author":3019,"featured_media":136959,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[7359,7119],"tags":[209,5195,7221,5975],"class_list":["post-136917","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-1031-exchanges","category-biggerpockets-daily","tag-business","tag-business-management","tag-business-comm","tag-taxes"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/136917","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/3019"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=136917"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/136917\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/136959"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=136917"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=136917"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=136917"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}