What a Qualified Intermediary Does in a Like-Kind Exchange
A QI holds your funds and paperwork so your exchange can qualify.
What the QI Actually Does
A qualified intermediary receives your sale proceeds, holds them, and uses them to buy your replacement property. This structure creates a safe harbor under IRS rules so you never touch the cash directly. That separation is what allows the exchange to defer gain recognition.
Who Cannot Serve as Your QI
The IRS disqualifies related parties and anyone who acted as your agent, like your realtor, attorney, or accountant, in the two years before the exchange. Choosing an independent QI protects the exchange from being invalidated. Confirm independence in writing before you sign an agreement.
Set Up Before You Close, Not After
Your QI agreement must be in place before your relinquished property closes. Once you close without one, the safe harbor is gone and the exchange cannot be fixed. Line up your QI early, alongside your real estate timeline, so closing day is not a scramble.
Questions to Ask Before You Sign
Ask how your funds are held, what happens if the QI fails, and how identification and replacement deadlines will be tracked. Get their process in writing. Your CPA and attorney should review the agreement before you sign anything or open escrow.
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 is a qualified intermediary in a 1031 exchange?+
A qualified intermediary is an independent party who holds your sale proceeds and paperwork so you never receive the cash directly. This structure is a safe harbor under IRS rules that supports tax deferral. Your CPA confirms how it applies to your exchange.
Q2Can my real estate agent or CPA act as my QI?+
No. The IRS disqualifies anyone who acted as your agent, including your realtor, attorney, or accountant, within two years before the exchange. Related parties are disqualified too. An independent QI protects your exchange from being invalidated on a technicality.
Q3When do I need to set up my QI?+
Before your relinquished property closes. Once escrow closes without a QI agreement in place, the safe harbor is lost and cannot be recovered. Set up your QI early, alongside your listing and offer timeline, so closing day goes smoothly.
Ready to Map Your Exchange Timeline?
Book a Real Estate Review to walk through your property, equity, and timing before you talk to a QI. 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 QI. Then get the 1031 Readiness Checklist to track every deadline.
Book a Real Estate ReviewNext steps
Keep moving forward
Interview and Verify Your Exchange Facilitator With Confidence
Follow a step by step interview and verification process before you choose a Seattle exchange facilitator. Educational only, not tax advice.
View guide ->Washington Rules for Exchange Facilitators
See Washington's bonding, insurance, and disclosure requirements for 1031 exchange facilitators, and what evidence to request before you sign.
View guide ->Exchange Your Investment Property Without Losing Your Timeline
Plan your 1031 exchange in Seattle or Bellevue. We handle sale planning, replacement search, and closing while your CPA confirms tax treatment.
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