If you've attended any economic forecast events over the past few months, I'm sure you've heard about the concern with real estate inventory - or lack thereof. I have certainly heard my fair share on this topic, so this Tuesday Tip will focus on getting your ideal property under contract as soon as possible to ensure a successful and timely 1031 exchange.
Once you sell your relinquished property, your proceeds are put into a segregated exchange account. You can utilize the proceeds to put an earnest money deposit down on the replacement property you wish to purchase. To ensure superior security and avoid any issues with constructive receipt of funds, 1031 CORP. will request the following:
- The executed Agreement of Sale for the replacement property;
- An executed Assignment of the Agreement of Sale which assigns your rights, but not obligations, in the Agreement to 1031 CORP. as the Qualified Intermediary;
- A signed authorization granting 1031 CORP. permission to release funds from your exchange account.
Once 1031 CORP. receives these items, we will process the earnest money deposit as soon as possible.
But wait! What if you find the perfect replacement property before your relinquished property sells? No worries! You can use out-of-pocket funds for the earnest money deposit and when you go to closing on that property our team will instruct the closing agent to reimburse you that deposit. This will allow you to secure your replacement property and walk away from closing with that check for the earnest money deposit in hand.
Whenever you decide to do a 1031 exchange it is always best to keep your eye on the market so that you don't miss out on the property that best suits your needs. When in doubt, never hesitate to contact our 1031 CORP. Exchange Team to discuss strategies on how to get the most out of your exchange.
