A Qualified Intermediary (QI) is the independent party who holds sale proceeds on a delayed 1031 exchange so those funds do not go to the investor. NESI is title and escrow. We are not a QI and we do not decide whether the exchange is taxable.
Tax results belong to the investor’s CPA and tax attorney. The QI’s documents belong to the QI.
What the QI Usually Does
A Qualified Intermediary handles specific critical steps in a 1031 exchange transaction:
- Signs an exchange agreement with the investor.
- Gets named in the escrow instructions so sale proceeds are wired to the QI, not to the seller.
- Holds those funds and sends them toward the replacement purchase.
- Tracks the dates the investor and the QI have agreed to watch (agents often hear “45 days” and “180 days”).
- Keeps its own exchange file.
The QI does not set the purchase price, choose the replacement property, or guarantee tax deferral.
What Escrow and Title Do Next to the QI
Title and escrow teams work alongside the QI to execute the closing process smoothly:
- Open the sale and the purchase as instructed.
- Wire proceeds to the QI when the instructions say to.
- Take replacement funds from the QI at closing.
- Handle title and signing.
If sale money hits the investor’s account, the tax advisor not escrow has a problem to unpack. Do not “fix” it by asking escrow to reverse a wire after the fact.
When a QI Is on the File
Most delayed exchanges use a QI. Whether a given structure needs a QI is a tax-counsel question. Bring the QI in before the relinquished property records. After closing is too late to reroute a check the seller already received.
Who Usually Cannot Serve as a QI
IRS rules limit related parties and people who have acted as the investor’s agent. The following entities typically cannot serve as a QI:
- Real estate agents
- The investor’s own attorney or accountant
- Close family members
Do not use this list as the final test. The investor’s tax counsel must always pick the QI.
Instructions for Listing Agents, Buyer’s Agents, and Loan Officers
To ensure a seamless process on residential investment and commercial files with title and escrow:
- Write “1031” and the QI’s name on the order.
- Send the QI’s wiring and assignment papers with the opening package.
- Call or text if anyone asks that proceeds go to the seller “just for a day.”
Frequently Asked Questions (FAQs)
Can the investor pick the QI?
Yes, subject to the tax rules their advisor applies.
Does the QI charge a fee?
Yes. It is their invoice, often paid directly from exchange funds.
What if proceeds go to the investor?
Stop and call the QI and the tax advisor immediately. Escrow cannot declare the exchange valid.
Is a QI required on every 1031 exchange?
This is not a question escrow answers. However, delayed files almost always require one.
This article is general information only. It is not legal, tax, or insurance advice and is not a commitment to act as a Qualified Intermediary, issue title insurance, or close any transaction. Section 1031 eligibility, timing, related-party rules, and constructive receipt are determined under federal tax law and the investor’s own facts. Readers should consult their own qualified attorney, CPA, and Qualified Intermediary. NESI Title and Escrow Company assumes no liability for reliance on this content. Services are provided subject to applicable law, underwriting, and written escrow instructions.
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