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Hi,
I was encouraged to post here by my cousin, and HumbleDollar columnist, Ed Marsh so here goes – I’m considering a reverse 1031 exchange. I’d have preferred it be a straight 1031 exchange but timing hasn’t worked in my favor in that my wife and I found the replacement property unexpectedly and had not intended on selling the relinquished property so quickly. My question is twofold. First – can the QI take title to the relinquished property instead of the replacement property ahead of the sale of said property so that I don’t have title to both properties? The reason I think I’d prefer this is I’m not paying cash for the replacement property and lenders don’t like a 3rd party holding title to the property they’re lending on it seems. Second – is there then a holding period that the QI must hold the funds received for the relinquished property before they can transfer back to me? I’m familiar with the 45/180 day limitations on the 1031 but I’m asking about how quickly the funds will flow to me from the relinquished property. Additionally, any recommendations for a QI that is reputable, knowledgeable, and reasonably priced (do all three exist simultaneously!) is much appreciated.
Thanks in advance,
Chris Marsh
Fayetteville, GA
We used IPX1031 when we did an ordinary 1031 5 years ago and were very pleased with their expertise. Below is a link to a reverse 1031 from their FAQ page.
https://www.ipx1031.com/the-reverse-exchange/
Thank you for sharing.
The banks are usually accustomed to using QI’s. They should have no issue letting you borrow money with the QI in the middle. As long as you are actually the borrower and they have the right to use the property as collateral. I don’t see this question as all that important. I’ve done a reverse 1031 and this didn’t ever come up.
The second question… The 1031s can get complicated depending on the $ amounts of the sale and purchase. Thus extending the timelines of relinquishment of monies. It should be very fast but it absolutely depends on the details of the 1031. I have used several intermediaries and having a good one is worth the extra money when the transactions are more complicated. So if your trading up to a bigger property then no big deal. Should be simple. Cheers!
Thank you Bill.
Chris, I looked up the 1031 Exchange Specialist that I spoke to. Their website says they are QIs throughout the US, and their site has a section on Reverse 1031s. They may be worth a call.
https://www.1031esi.com/home.html
Hi Chris. Welcome to HD. I have looked into1031s, and thought about writing about them, but I’ve never executed one. In the beach town where we have our second home they are fairly common. When I was considering one, I checked with a local realtor and he directed me to a local company (South Jersey) called The 1031 Exchange. They had great expertise in 1031s, and gave me a free 30 minutes of consultation. I would check with a realtor in the location of the sale to see if there is a good Qualified Intermediary in the area. Good luck.
Thank you Rick. I did that and found a local company that spent 30 minutes giving me my options. It can be very complicated but likely worth it to save the taxes of course – and she was very patient with me.