Title closers perform an essential role in the 1031 exchange process, but there are a few things they may overlook if they’re not accustomed to dealing with like-kind exchanges. In this article, we are going to briefly discuss three things title closers need to pay close attention to when dealing with a 1031 exchange of real estate.
Taxes, Security Deposits & Prorated Rents
The three most overlooked items that a title closer should be aware of when dealing with a like-kind exchange are:
Taxes. The person selling the property is responsible for paying real estate taxes for the time during which they owned the property. These tax payments need to be kept separate from the sales proceeds when conducting a 1031 exchange. Ideally, they should be paid with cash out-of-pocket at the closing table.
Security Deposits. When the 1031 exchange property is a rental property, it’s important to take special care with security deposits. Again, it’s essential to keep these security deposits separate from the sales proceeds to avoid any boot issues.
Prorated Rents. Similarly to security deposits, when a rental property is involved, the seller needs to pay the collected rents over to the buyer. But again, these should be kept separate from the sales proceeds. In general, it’s always a safe plan to pay these out-of-pocket at closing.
Find a Qualified Intermediary for Your Next 1031 Exchange
Find a qualified intermediary for your next 1031 exchange of like-kind investment real estate by contacting CPEC1031, LLC. Our intermediaries can help guide you through the 1031 exchange process from start to finish, answering all your questions along the way. Our team is ready and waiting to help you. Reach out to us to set up a time to chat. You can find us at our Twin Cities office location in downtown Minneapolis. We are here to help you through the intricacies of your next 1031 exchange of real estate.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
© 2026 Copyright Jeffrey R. Peterson All Rights Reserved