To initiate an exchange, the investor must decide that exchange must be made prior to closing of the relinquished property. The exchange agreement must be in place and delivered to all parties before the relinquished property transfer of title. There are several steps on how to initiate an exchange.
First, you must find an experienced professional Qualified Intermediary to assist you with the exchange as early in the sale process as possible. In finding a Qualified Intermediary, you should consider that he/she is knowledgeable and experienced staff; the local assistance for your real estate agent, CPA and attorney; and especially the safety of your funds. You also require the Qualified Intermediary to provide fidelity bond insurance coverage.
Instruct your real estate agent to include an Exchange Cooperation Clause as a supplement to the purchase and sale agreement on the relinquished property. An example of Exchange Cooperation Clause is when the buyer hereby acknowledges that it is the intent of the Seller to affect an IRC 1031 tax deferred exchange which will not delay the closing or cause additional expense to the buyer. The seller?s rights under this agreement may be assigned to Investment Property Exchange Services, Inc., a Qualified Intermediary, for the purpose of completing such an exchange. Buyer agrees to cooperate with the seller and Investment Property Exchange Services, Inc. in a manner necessary to complete the exchange.
Contact your Qualified Intermediary as soon as possible after escrow is opened or after entering into the purchase and sale agreement and advise them of your intent to do an exchange well in advance of the closing date. The Qualified Intermediary will draft the appropriate Exchange Agreement, Assignments and Exchange Closing Instructions that must be executed prior to closing on the property being sold.
You must start searching for acceptable replacement property immediately to insure that you can meet the strict time frame for the 45-day identification period.
Begin the Exchange Process
Preparation is the name of the game when it comes to 1031 exchanges. If you have a piece of real estate that you’re considering for 1031 exchange, get the ball rolling as soon as possible by consulting with a qualified intermediary. The intermediaries at Commercial Partners Exchange Company have more than two decades of experience helping people through their like-kind exchanges. We can put that experience to work on your exchange. Give us a call today at our downtown Minneapolis office to learn more about the services we provide.
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.
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