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View serviceThe Qualified Intermediary Role
Guides
What a qualified intermediary does in a 1031 exchange, who cannot serve as one, and how Orange County investors select and work with a QI.
A qualified intermediary is the independent third party required to facilitate a valid deferred exchange under Treasury Regulation 1.1031(k)-1(g)(4). The qualified intermediary holds exchange proceeds so the investor never has actual or constructive receipt of the funds, which would otherwise disqualify the exchange immediately. Because this rule is strict, engaging a qualified intermediary is not optional for a delayed exchange, it is a structural requirement.
Certain people cannot serve as the qualified intermediary. An investor's attorney, CPA, real estate agent, or employee who has acted as the investor's agent within the two years before the exchange is disqualified from serving in the role. The qualified intermediary drafts the exchange agreement, prepares the assignment of the relinquished and replacement property purchase contracts, and holds exchange funds in a segregated or qualified escrow account until they are needed to close the replacement property.
Selecting a qualified intermediary deserves the same diligence Orange County investors apply to selecting a lender or title company. Look for a fidelity bond, errors and omissions insurance, and written procedures describing how exchange funds are held and secured. The exchange agreement must be executed at or before the relinquished property closes, so the qualified intermediary should be engaged well ahead of that closing date, not the week before.
What Is Included
- Qualified intermediary vetting and referral coordination
- Exchange agreement review before the relinquished property closing
- Assignment of contract rights preparation for relinquished and replacement property
- Coordination of exchange fund security procedures and account verification
- Timeline coordination between the qualified intermediary, escrow, and title companies
- Documentation handoff support for identification and closing deadlines
- Review of qualified intermediary fee structures and insurance coverage
- Coordination with CPA and attorney on exchange agreement terms
Common Situations
- Orange County investor who has not yet engaged a qualified intermediary ahead of an upcoming closing
- Investor whose real estate agent or CPA cannot serve as qualified intermediary due to the two year disqualification rule
- Investor evaluating qualified intermediary fund security procedures before committing exchange proceeds
Frequently Asked Questions
What does a qualified intermediary do?
A qualified intermediary holds exchange proceeds, prepares exchange documents, and ensures the investor avoids actual or constructive receipt of funds.
Who cannot serve as a qualified intermediary?
The investor's attorney, CPA, real estate agent, or employee who acted as an agent within the two years before the exchange cannot serve as the qualified intermediary.
When must the qualified intermediary be engaged?
The qualified intermediary should be engaged before the relinquished property closing, since the exchange agreement must be executed at or before that closing.
What happens if an investor receives exchange funds directly?
Actual or constructive receipt of exchange funds disqualifies the exchange and the gain becomes immediately taxable.
How are exchange funds protected?
Reputable qualified intermediaries use segregated qualified escrow accounts, fidelity bonds, and written security procedures.
Can a qualified intermediary also give tax advice?
No, a qualified intermediary facilitates exchange mechanics and does not provide tax or legal advice.
Example of the type of engagement we can handle
Example Capability
Service type:
Qualified Intermediary Coordination
Location:
Orange County, CA
Scope:
Vet and engage a qualified intermediary ahead of a Costa Mesa office property sale closing in three weeks
Client situation:
Investor selling a Costa Mesa office property needed a qualified intermediary engaged and the exchange agreement executed before closing
Our approach:
Reviewed qualified intermediary fund security procedures and insurance coverage, coordinated exchange agreement execution before closing, confirmed segregated qualified escrow account setup
Expected outcome:
Qualified intermediary engaged and exchange agreement executed before the relinquished property closing, exchange eligibility preserved
Contact us to discuss your situation in Orange County, CA. We can share references upon request.
Educational content only. Not tax, legal, or investment advice.
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Identification rules
Three Property Rule
Identify up to three candidate properties anywhere in the United States, regardless of value, within 45 days.
Two Hundred Percent Rule
Name more than three properties as long as the combined value stays within 200 percent of the relinquished sale price.
Ninety Five Percent Rule
If you exceed those limits, acquire at least 95 percent of the total value identified to keep the exchange compliant.
Identification letter helper
Identification Letter 7/21/2026 Qualified Intermediary, Please accept this written identification for my pending Section 1031 exchange in Newport Beach, CA. Replacement properties: 1) ____________________ 2) ____________________ 3) ____________________ I confirm these properties meet the like-kind and value requirements as of today. Signature ____________________
Timeline tracker
Day 0
Close relinquished property in Newport Beach, CA.
Day 15
Secure intermediary receipts and wire instructions.
Day 30
Begin physical and financial due diligence on preferred assets.
Day 45
Submit identification letter with up to three properties.
Day 90
Lock financing, finalize PSA adjustments, order closing docs.
Day 180
Complete closing with escrow and intermediary coordination.
Kick off The Qualified Intermediary Role today.
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