Exchanging Thoughts

Earnest Money Deposits for 1031 Replacement Properties

Posted by Margo McDonnell on Tue, Aug 07, 2012

We are often asked how the earnest money deposit for the replacement property in a 1031 tax-deferred exchange should be handled. If 1031 CORP. is holding the exchange funds, the deposit can be withdrawn from your exchange account provided the Agreement of Sale with the Seller of the replacement property is assigned to 1031 CORP., as your the Qualified Intermediary. The Assignment is often included when the Agreement of Sale is signed but if not, it can be signed by the Seller at any time in order to have the deposit paid from the exchange account. If for whatever reason, the Assignment cannot be signed by the Seller, 1031 CORP. can prepare a written notification of the assignment and have it delivered to the Seller. The notification will include a hold harmless clause assuring the Seller the 1031 exchange will not affect the Seller in any way or increase the Seller’s costs. 

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Topics: earnest money deposits on 1031 replacement propert, 1031 deposits, 1031 Exchange