1031 Exchange Purchase Rental and Security Deposits

[Mike Kratz]

When I look into a 1031 Exchange it seems that the funds from selling a property are meant to pay for costs of buying a replacement property.

Ex. Purchase price, Agent commissions,

Title insurance fees for the owner’s policy of title insurance, Escrow fees, Appraisal fees required by the purchase contract, Transfer taxes, Recording fees

Attorney’s fees incurred in connection with the sale or purchase of the property, etc.

Items excluded would be items that are not required to purchase the property.

My question is specific to buying a building that has existing tenants. That would mean that their security deposits and pro-rated rents would be transferred at closing.

I was advised by the Qualified Intermediary that the only money I could get at closing was my original escrow funds. I think that I also should have received the security deposits and pro-rated rents since they have nothing to do with the property purchase. Is that right?

I now have a balance leftover in the QI account... if the rents and security deposits were removed from the transaction I would of used all of the funds.

Sorry for the being so wordy...hopefully my question makes sense.