Who Cannot Be A Qualified Intermediary For Your 1031 Exchange?

Recently we discussed the role of the Qualified Intermediary and how to select the right one for your 1031 exchange. The QI plays an important role in the process, and he or she is the individual who will temporarily hold the sale proceeds until closing occurs on the replacement property. In the eyes of the IRS, this role is non-negotiable anytime an exchange does not happen simultaneously – which is almost always.

Presuming you read our previous article, you now understand what the QI does and you know the right questions to ask to perform appropriate due diligence before selecting your exchange partner.

But now you have to ask yourself…are there limits on who can serve as a Qualified Intermediary?

Yes. Although the IRS does not put governing controls over the QI function, they do put limitations on who can serve.

Many inexperienced 1031 exchange investors attempt to use their own realtors, lawyers or certified public accountants. However, this is not permitted under IRS code. According to the IRS, the qualified intermediary must be an “independent, third-party” who will facilitate the exchange.

This means that your network of professionals, including lawyers and real estate agents, are off-limits when it comes to performing the qualified intermediary role. Using them will jeopardize the overall exchange. To ensure the legitimacy of your exchange, it is important to seek out the services of an experienced and independent qualified intermediary.

To learn more about 1031 exchanges or our qualified intermediary and replacement property locator services, please visit our website.