In this 1031 FAQ video, Jeff Peterson answers some common questions title closers have about 1031 exchanges. Watch more 1031 educational videos here.
Sometimes title closers have questions about the 1031 documents and what their responsibilities are to get the closing done correctly so they don't mess up the 1031 exchange.
One of the most important things that the treasury regulations require is that the exchange or the party doing the exchange must sign their rights in the purchase agreement to their qualified intermediary.
Well that's great, but under the old English common law, an assignment was not considered effective until all of the other parties to the purchase agreement had been given written notice and the IRS adopted the same requirement in the treasury regulations.
So at the time of closing that notice of assignment that the exchangor has assigned their rights in the purchase agreement to the intermediary - that notice must be given to the other parties. So for the relinquished property the notice would go to the buyer as well as any assignees of the buyer.
Further, if there are co-sellers (other parties conveying the relinquished property that are parties to that purchase agreement), they too should be given written notice. Now how do we prove that we gave all these people written notice? We ask them to sign an acknowledgement stating we have received this notice in writing.
So that's part of the closing documents qualified intermediary send to the seller to make sure that all of the proper parties are given the requisite notice.
- 1031 Hotline: If you have questions about 1031 exchanges and closing documents, feel free to call me at 612-643-1031.
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