Every day we receive calls about how a 1031 tax-deferred exchange works and what steps are involved. On this Friday Free for All, I want to take a look at the exchange process and how simple it really is. In fact, it is simply the sale of business use or investment real property followed by the purchase of like-kind property linked together by paperwork.
Here are the steps to a successful 1031 exchange.
- You sign the Listing Agreement to sell your property. This is when you want to start thinking about a 1031 exchange and whether or not it makes sense for you.
- You sign the Agreement of Sale with Buyer. Keep your eyes open for any replacement properties you may want to purchase.
- You retain 1031 CORP. as your Qualified Intermediary (QI). You must engage 1031 CORP. prior to closing on your relinquished property.
- 1031 CORP. reaches out to the closing or escrow officer handling the closing with instructions on how to handle the closing for 1031 exchange purposes.
- Closing takes place on your relinquished property and your exchange proceeds are forwarded to 1031 CORP. and deposited into your own segregated exchange deposit account. 1031 CORP. provides you with written confirmation of your deposit and instructions to view your account on the bank’s website. The bank will provide monthly statement showing monthly activity and interest postings.
- The 45-Day Identification Period and 180-Day Exchange Period begin once the title on the relinquished property switched hands and funds are disbursed. Our Exchange Team will keep you aware of your time deadlines.
- You submit your completed and signed 45-Day Identification letter to 1031 CORP. Our team will acknowledge receipt and address any concerns.
- You sign the Agreement of Sale for the new property and can use exchange proceeds for any earnest money deposits. We will send you the required documentation to release funds for deposits.
- 1031 CORP. provides the closing or escrow officer with instructions on how to handle the transaction and wire transfers exchange funds for the purchase.
- The replacement property is acquired and the exchange is completed. 1031 CORP. provides you and your advisors with a Document Summary package including executed closing statements, assignments and exchange deposit account summary.
Our 1031 CORP. Exchange Team is available to help you every step of the way so that you can focus on selling your old property and buying a new one while keeping the process simple for everyone involved. That is the 1031 CORP. Advantage!
