A qualified intermediary helps structure and administer a deferred Section 1031 exchange before the sale closes—preparing documents, coordinating the closing team, receiving exchange proceeds, and funding the replacement-property purchase.
An independent link between the sale and purchase.
In a typical delayed exchange, the QI enters into a written exchange agreement with the exchanger, receives an assignment of the relinquished-property contract, and coordinates with the title company, attorney, or other closing professional. At closing, the proceeds are directed to the QI under the exchange documents instead of being paid to or controlled by the exchanger.
When replacement property is ready to close, the QI coordinates the assignment and disbursement of exchange proceeds to the replacement-property closing. The QI also receives the exchanger’s written property identification and helps the transaction team track the federal exchange deadlines.
Constructive receipt
Why the proceeds cannot pass through your hands.
The deferred-exchange rules restrict the exchanger’s right to receive, pledge, borrow, or otherwise obtain the benefits of the sale proceeds during the exchange period. This is broader than physically receiving a check: having unrestricted control can constitute constructive receipt.
The safe-harbor structure
A qualified-intermediary arrangement is one recognized way to limit the exchanger’s access to the proceeds while the exchange is pending. The written agreement and closing instructions must be in place before the relinquished-property transfer.
What the QI does not decide
The QI does not determine whether your property or transaction qualifies, calculate gain, or advise which replacement property to buy. Those decisions belong with your tax and legal advisers.
Documents and coordination
What the QI prepares and manages.
01
Exchange agreement
Defines the exchange arrangement, the QI’s duties, and the exchanger’s restricted access to proceeds.
02
Assignments and notices
Assigns the relevant sale and purchase contract rights to the QI and provides notice to the other parties.
03
Closing instructions
Coordinates document flow and directs the relinquished-property closing to send the exchange proceeds to the QI.
04
Identification receipt
Receives the exchanger’s signed, unambiguous written identification of potential replacement property by day 45.
05
Replacement closing
Coordinates the assignment and authorized disbursement of exchange proceeds for the acquisition.
06
Exchange record
Maintains the exchange documents and transaction record for delivery to the exchanger and advisers.
Typical fund flow
Sale closing → QI → replacement closing
The sale proceeds move from the relinquished-property closing to the QI under the exchange agreement. Subject to the agreement and authorized closing instructions, the QI then sends exchange funds to the replacement-property closing. The exchanger should independently verify all wiring instructions using a known telephone number before any transfer.
Ask direct questions about independence, documents, deadlines, fund controls, wire verification, insurance, fees, and who will coordinate with your closing team.
Engage a qualified intermediary before the sale of the relinquished property closes and before you receive or control the sale proceeds. Earlier contact gives the QI and closing team time to prepare the exchange documents and instructions.
Can I receive the sale proceeds and put them into an exchange later?
Generally, no. Actual or constructive receipt of the sale proceeds can prevent the transaction from qualifying as a deferred exchange. A properly structured exchange should be in place before the relinquished-property closing.
Does a qualified intermediary give tax or legal advice?
A QI coordinates the exchange mechanics. Your own CPA, tax adviser, attorney, broker, lender, and closing professional should advise you on tax, legal, financing, title, and property-selection decisions.
Does the QI choose my replacement property?
No. The exchanger and the exchanger's advisers select and evaluate replacement property. The QI receives the written identification and coordinates the exchange documents and funding for the acquisition.
Sale under contract?
Set up the exchange before closing.
North Oak Exchange coordinates delayed, reverse, and improvement exchanges nationwide, with particular experience in farms, timberland, recreational land, and commercial real estate.
General educational information only—not individualized tax, legal, accounting, investment, or real-estate advice. Consult your own professional advisers.
