Qualified Intermediary Coordination

Qualified intermediary coordination connects Orange County investors with vetted, independent qualified intermediaries and manages the documentation flow between the investor, the intermediary, and every other party in the exchange. A qualified intermediary, often called a QI or accommodator, is a required participant in nearly every 1031 exchange because the IRS treats an investor who has actual or constructive receipt of sale proceeds, even briefly, as having completed a taxable sale rather than a tax deferred exchange. The QI solves this by entering into an exchange agreement with the investor, taking an assignment of the investor's rights in the purchase and sale contracts, holding relinquished property sale proceeds in a segregated account, and releasing those funds directly to escrow for the replacement property purchase, so the investor never has direct control of exchange funds between the two closings.

Who Cannot Serve as a Qualified Intermediary

Not just anyone can serve in this role. IRS regulations disqualify anyone who has acted as the investor's employee, attorney, accountant, investment banker, broker, or real estate agent within the two years before the exchange, along with anyone related to the investor under the family and entity attribution rules that apply elsewhere in Section 1031. This disqualified person rule exists because the IRS wants the party holding exchange funds to be genuinely independent, not someone whose existing relationship with the investor could create pressure to release funds early or otherwise compromise the arm's length structure the safe harbor depends on. We screen intermediary candidates against these disqualification rules before presenting options, and we verify bonding, fidelity insurance, and how exchange funds are held, since QIs are not federally regulated the way banks are, and the strength of an intermediary's internal controls over client funds varies meaningfully across the industry.

Coordinating Documentation Across the Exchange Timeline

Once an intermediary is selected, coordination continues through the life of the exchange: the exchange agreement and assignment documents need to be in place before the relinquished property closes, written identification needs to reach the intermediary within the forty-five day window in a form the intermediary will accept, and closing instructions for each replacement property need to correctly reference the exchange so funds release without last minute correction requests from escrow. We maintain a single point of communication between the investor, the intermediary, escrow, and, when authorized, the investor's CPA or attorney, so documentation does not fall through gaps between parties who are each focused on their own piece of the transaction. This service does not provide tax or legal advice, and investors should confirm that any specific qualified intermediary meets their own risk tolerance and that the overall exchange structure satisfies their CPA or attorney's requirements before signing an exchange agreement.

Fee structures also vary across the intermediary industry, from a flat fee per exchange to tiered pricing based on the number of properties identified or the complexity of the structure involved, and we help investors compare pricing alongside the qualitative factors, since choosing an intermediary on price alone without confirming how funds are safeguarded can expose an investor to unnecessary risk on a transaction where the amounts held often run into the millions of dollars. For investors selecting an intermediary for the first time, we also explain in plain terms what the exchange agreement actually obligates each party to do, since these agreements are often standardized documents that investors sign quickly without a clear understanding of the fund release conditions, the intermediary's liability limitations, and what happens procedurally if a deadline is missed. Getting the intermediary relationship right at the start of the exchange reduces the coordination burden for every deadline that follows. We also confirm how the intermediary handles interest earned on held exchange funds, since some intermediaries credit interest back to the investor and others retain it as part of their compensation, a detail worth understanding upfront on larger exchanges where funds may be held for weeks or months between closings.