Navigating the intricacies of a 1031 exchange can be challenging, especially when dealing with time-sensitive matters and complex financial details. To ensure a smooth process, it’s vital to thoroughly understand the role of your Qualified Intermediary (QI) and to ask the right questions. The following points highlight key inquiries you should make when selecting a QI, from understanding their fees and insurance coverage to ensuring reliable communication and the secure handling of your funds. By addressing these areas, you can improve your chances of picking the best QI for your exchange.
What are your fees?
Sometimes, the fees can be higher than they initially appear. Be sure to ask if there are any additional costs. Specifically, inquire if the advertised exchange fees cover the purchase of replacement properties. If not, find out the cost for each additional property.
Will there be a team or dedicated point person?
It’s crucial to ensure you have a reliable contact, especially for time-sensitive matters. Ask if there will be a dedicated point person or a team available to assist you. Understand their hours, holidays, and vacation schedules to ensure support is available throughout your 45-day window.
Where is my money being held?
Find out if your funds will be held in a segregated account in your name or pooled with other investors. Knowing how and where your money is stored is essential for understanding the security of your funds.
What is your insurance coverage?
Confirm if there is FDIC insurance and whether the QI is insured in all 50 states. It’s also beneficial to know if a parent company guarantees your money in case of unforeseen events.
Can you provide a few references?
A QI’s customer service is a key quality. Request a few references to gauge the QI’s accessibility, knowledge, and attention to detail. Speaking with past clients can provide valuable insights.
Do you accept electronic signatures if I am traveling?
If you find yourself traveling and without access to a printer, being able to complete documents electronically is crucial. Ensure you understand how the QI receives ID information and what needs to be included when identifying properties.
Selecting the right qualified intermediary is an important part of a 1031 exchange. Knowing the right questions to ask to properly assess which QI is best for you will greatly enhance your probability of completing a smooth transaction as quickly as possible.
Disclosure
1031 Exchange Risk
Internal Revenue Code Section 1031 (“Section 1031”) contains complex tax concepts, and certain tax consequences may vary depending on the individual circumstances of each investor. RM Securities and its affiliates make no representation or warranty of any kind with respect to the tax consequences of your investment or that the IRS will not challenge any such treatment. You should consult with and rely on your own tax advisor about the tax aspects with respect to your particular circumstances.Please note that RealtyMogul does not provide tax advice.
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