All Forum Posts by: Bill Exeter
Bill Exeter has started 31 posts and replied 1953 times.
Post: 1031 Exchange suggestions?
#2 1031 Exchanges ContributorPosted - 1031 Exchange Qualified Intermediary
- San Diego, CA
- Posts 1,985
- Votes 1,334
Good afternoon everyone,
One of the most important things to know is that the qualified intermediary industry has no licensing or regulatory capabilities. There are only a handful that are regulated. It is extremely important to work with a QI that is licensed, regulated and subject to regulatory exams and supervision.
The bankruptcy judge in the LandAM 1031 case ruled that client funds were actually corporate funds for several reasons. This would not have happened had their been regulatory oversight of LandAm 1031.
Post: What’s the Minimum Amount Where a 1031 Exchange Makes Sense?
#2 1031 Exchanges ContributorPosted - 1031 Exchange Qualified Intermediary
- San Diego, CA
- Posts 1,985
- Votes 1,334
I agree with @Ricardo R. The individual needs to decide what is right for them, but Ricardo did an excellent job of summing it up.
Exchange fees have changed quite a bit over the least couple of years. Fees are usually $1,000 to $1,500.00. Be careful that you are not being penny wise and pound foolish as cheaper providers do not have the safeguards necessary to protect your funds.
There are very few qualified intermediaries that have any kind of regulatory oversight.
Post: 1031 exchange help
#2 1031 Exchanges ContributorPosted - 1031 Exchange Qualified Intermediary
- San Diego, CA
- Posts 1,985
- Votes 1,334
Hi @Jeffrey Audije,
It is especially important that you work with a qualified intermediary that has some form or regulatory oversight. Happy to chat if you have questions.
Post: Looking to sell 3 properties for 1031
#2 1031 Exchanges ContributorPosted - 1031 Exchange Qualified Intermediary
- San Diego, CA
- Posts 1,985
- Votes 1,334
Quote from @Jason Zundel:
I don't have specific recommendations on the investor side, but do want to encourage you to find and work with a really good qualified intermediary (QA). Whenever the 1031 includes multiple properties on one side or the other of the exchange, things can get complicated.
Great advice. Most investors do not know that the 1031 exchange qualified intermediary (QI) industry has no licensing or regulatory capabilities and that most QIs therefore have no regulatory oversight. I've been in the business for 41 years, and most of the QI failures would have been prevented had their been government oversight combined with an annual independent regulatory audit. Select carefully!
Post: Seeking Qualified Intermediary
#2 1031 Exchanges ContributorPosted - 1031 Exchange Qualified Intermediary
- San Diego, CA
- Posts 1,985
- Votes 1,334
It is also important to note that the qualified intermediary industry has no licensing or regulatory capabilities. There is no oversight of qualified intermediaries. There are a few that have taken other steps so that they are regulated. It is extremely important to choose a qualified intermediary that has regulatory oversight.
Post: 1031 Exchange for Barndominium
#2 1031 Exchanges ContributorPosted - 1031 Exchange Qualified Intermediary
- San Diego, CA
- Posts 1,985
- Votes 1,334
Actually, the IRS issued three Private Letter Rulings (PLRs) that did allow the investor to build on property they already own. There is no way to do this without some level of risk, but it is possible. It is most frequently referred to as a Leasehold Improvement 1031 Exchange.
The regular or safe harbor Improvement 1031 Exchange is certainly much safer.
Post: 1031 Exchange - Third Party Companies
#2 1031 Exchanges ContributorPosted - 1031 Exchange Qualified Intermediary
- San Diego, CA
- Posts 1,985
- Votes 1,334
Yes, you must use a Qualified Intermediary to administer your 1031 exchange transaction. If you open a bank account under your name and receive the funds, you will have actual receipt of the funds and the transaction will be taxable.
The purchase and sale agreement must be assigned to a Qualified Intermediary and the Qualified Intermediary must receive and hold the funds for your benefit to defer the taxes.
Make sure that you use a Qualified Intermediary that has some type of regulatory oversight. Regulatory oversight is critical. I've been doing 1031 exchanges for 41 years and most of the "QI's" that have failed would have been prevented with regulatory oversight.
Post: Qualified Intermediary choice
#2 1031 Exchanges ContributorPosted - 1031 Exchange Qualified Intermediary
- San Diego, CA
- Posts 1,985
- Votes 1,334
Quote from @Gp G.:
Hi,
How to choose good Qualified Intermediary.
What are various factors I need to consider to be safe side with lot of money.
Check to ensure they are regulated. You want to make sure they have some form of regulatory oversight. I have been doing this for 41 years and I can tell you that most of the QI failures would have been prevented had there been some form of regulatory oversight.
Check to ensure they have fidelity bond, errors and omissions insurance, cyber/wire fraud insurance/bonding coverage, etc. People focus more on the fidelity bond, but the errors and omissions is more important. People are human and make mistakes, so you need to make sure that you are covered by E&O insurance.
Check online reviews to see what others have experienced with the QI.
Check to see if the QI that you are working with has been part of a past QI failure. There are numerous QIs that have failed and later get back into the business under a different name. People and behaviors generally do not change.
Does Qualified Intermediary supposed to provide all the insurances, also account details where they are putting money?
Yes, ask prospective QIs for evidence of their insurance coverage AND check with their insurance agent to make sure that the insurance is in full force and effect.
Yes, ask where they deposit the funds. Most deposit the funds at just one bank so that you only have $250,000 in FDIC insurance coverage. Those that are regulated generally can provide more than $250,000 in FDIC insurance coverage.
Ensure that the QI is holding your funds in a Qualified Trust Account. This is critical. It ensures that your funds are held as client trust funds and not QI corporate funds in the event the QI goes into bankruptcy.
Do they keep money in FDIC insured accounts right?
They absolutely should. The challenge is that many of the QIs that have failed have not done that. They have "borrowed" the funds for other purposes. This is why regulatory oversight is critical. Regulators ensure that the QI is operating in a safe and sound manner.
I saw some Qualified Intermediary charge more some less and some no charge as well.
Do not get hung up on the fees. Fees generally vary between $1,100 and $1,500. A small difference when you are dealing with large amounts of funds. Focus on the safety, expertise and experience of the QI and not the fees. Remember, you get what you pay for.
Most QIs are just processors. They "process" your transaction. You need a QI that is more consultative and can answer very technical questions.
I am trying to find good qualified intermediary at reasonable price and same time safe with whole transaction and responds well.
Please advise
Post: 1031 exchange On a quick flip?
#2 1031 Exchanges ContributorPosted - 1031 Exchange Qualified Intermediary
- San Diego, CA
- Posts 1,985
- Votes 1,334
The requirement is that you intend to hold the property for rental, investment or business use. If your intent was to buy, rehab and then sell (flip), it will not qualify for 1031 exchange treatment.
Post: Attorney refusing 1031 two days before closing
#2 1031 Exchanges ContributorPosted - 1031 Exchange Qualified Intermediary
- San Diego, CA
- Posts 1,985
- Votes 1,334
Hi
Most Qualified Intermediaries should be able to do it within a day or so. We have done it with only a few hours notice on the day of closing. You can also push back closing if all parties agree to that. We do get comments like that somewhat often from east coast closing attorneys. They do not like to get stressed out. Remember, you are the client and not the attorney!