What a Qualified Intermediary Does in an Exchange
A qualified intermediary holds your funds so your exchange can qualify.
What the QI Does
A qualified intermediary holds your sale proceeds and uses them to buy your replacement property. Under IRS rules, you cannot receive the funds directly, or the exchange fails. This structure is described in the IRS like-kind exchange guidance. Confirm your CPA reviews the details for your specific sale.
Who Cannot Serve as Your QI
The IRS blocks certain people from acting as your intermediary, including anyone who served as your agent, such as a real estate agent, attorney, or accountant, in the two years before your exchange. Confirm your intermediary is independent in writing before you sign any agreement or open escrow.
Set Up Before You Close
Your intermediary agreement needs to be signed before your relinquished property closes. Ask how funds are held, what happens if the intermediary fails, and how deadlines are tracked. Get the process in writing, and have your CPA and attorney review it before you sign.
Sources
Educational only, not tax advice. Your CPA must confirm tax treatment, timing, participation, basis, and filing before you act.
Common questions
Clear answers first. If one question changes the deal, bring it into the review before you move money.
Q1What does a qualified intermediary do in a 1031 exchange?+
A qualified intermediary holds your sale proceeds and uses them to buy your replacement property so you never touch the cash directly. This structure follows IRS like-kind exchange rules. Your CPA should confirm how it applies to your specific exchange before you sign anything.
Q2Can my real estate agent or CPA act as my intermediary?+
No. The IRS disqualifies anyone who acted as your agent, including a real estate agent, attorney, or accountant, within two years before your exchange. Related parties are disqualified too. Choose an independent intermediary and confirm that independence in writing.
Q3When do I need to sign my intermediary agreement?+
Before your relinquished property closes. Once you close without an agreement in place, the exchange cannot be fixed afterward. Line up your intermediary early, alongside your listing and offer timeline, so closing day is not a scramble.
Ready to Map Your Exchange Timeline?
Book a Real Estate Review to walk through your property, equity, and timing before you talk to a qualified intermediary. Then get the 1031 Readiness Checklist to track every deadline.
Ready to Map Your Exchange Timeline?
Book a Real Estate Review to walk through your property, equity, and timing before you talk to a qualified intermediary. Then get the 1031 Readiness Checklist to track every deadline.
Book a Real Estate ReviewNext steps
Keep moving forward
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