What are the necessary steps?
The process of performing a 1031 Exchange is reflected below. These steps are reflective of the most common type of Exchange known as Forward (or Regular). The process for a Reverse or Improvement Exchange will have additional steps.
- The Exchanger signs a sales agreement with the buyer to sell a relinquished real estate property.
- An Exchange Agreement is signed where the Exchanger assigns their rights in the sales contract to the Qualified Intermediary(QI).
- At the (sale) closing of the relinquished property, funds are transferred to the QI and the property deed is transferred directly from Exchanger to the buyer. The Exchanger has 180 days from this initial close to acquire all replacement property.
- The Exchanger must identify possible replacement properties in writing to QI within the 45-day identification period.
- The Exchanger signs a sales agreement with the seller to purchase the replacement property and the Exchanger again assigns their rights in the sales contract to QI.
- At the (purchase) closing of the replacement property, funds are transferred from QI to the closing agent.
- QI instructs settlement officer to transfer the deed directly from the seller to the Exchanger.