What to Consider When Selecting a Qualified Intermediary

September 27, 2024

Selecting a good Qualified Intermediary (QI) is critical to the success of your 1031 exchange. Here are some attributes to consider as you decide who you will be partnering with:"

  • Experience and Expertise: Choose a QI with a proven track record and extensive experience handling 1031 exchanges. Familiarity with the process, tax laws, and documentation is crucial.
  • Reputation and References: Research the QI’s reputation by reading reviews, asking for references, or consulting with real estate professionals who have worked with them. You want to ensure they are reliable and trustworthy.
  • Security of Funds: Confirm how the QI handles and protects your exchange funds. Ensure they are using segregated accounts, have sufficient insurance (such as fidelity bonds), and follow best practices for security.
  • Compliance and Licensing: Verify that the QI complies with federal and state laws. While no formal licensing is required for QIs, it's important to ensure they follow IRS guidelines and applicable state regulations.
  • Fee Structure: Understand the QI’s fee structure upfront. Fees should be transparent and reasonable. Be aware of any potential hidden fees that may arise during the exchange process.
  • Customer Service: Strong communication and responsive customer service are essential. The 1031 exchange process is time-sensitive, so it’s important that your QI is accessible and available to answer questions quickly.
  • Location: While not a necessity, selecting a QI who is familiar with the region where the exchange properties are located may be beneficial for a smoother transaction.
  • Backup Plan: Ask about their contingency plans. A reliable QI will have procedures in place to protect your exchange in case of unexpected disruptions (e.g., the company going out of business).
  • National 1031 is your expert in guiding you through a 1031 exchange and serving as your Qualified Intermediary. Contact us today with your 1031 exchange questions using the form below.

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