Monday, October 01, 2007

The Cost of a 1031 Exchange

To do a 1031 exchange, you must file paperwork with a Qualified Intermediary prior to close of escrow. The QI receives the money from the sale of your relinquished property and holds it until you purchase the exchanged property. They release the funds in escrow at the close of the exchange. You must never have possession of these funds per IRS 1031 exchange rules.

There are not enough regulations to govern those acting as Intermediaries. Property sellers in Idaho found out the hard way. Below is the link to the article describing how many exchangers lost their entire investment.

There is a way to insure your funds. It is in associating with an experienced QI who is educated, insured and bonded and also pays interest on your funds while they are being held.

Fees differ even within the same state. The most expensive one is not necessarily the best. I refer my clients to a well known national firm who charges a flat $400.00 fee per exchange. I receive no compensation from these referrals. I just know they know what they are doing, the client is taken care of and that the money will be safe.

Another way a poor intermediary can harm you is if they do not keep up with your particulars and work with you to insure all of the deadlines are met. Many will leave it up to you to keep track of important dates and will only inform you it is too late if you should fall outside the IRS parameters.

Learn from the unfortunate mistakes of others. Enlist the help of experienced professionals who will guide you through whatever process you choose and make sure all is done correctly, legally and timely. It’s taken me a long time to develop a team I can count on. When we work together they become your team as well.

Paula Straub
Fill out a Qualification Questionnaire and see if you qualify to save capital gains tax. Go to

Find the “Definitive Beginner’s Guide to Potentially Saving Hundreds of Thousands of Dollars in Capital Gains Tax” at