What to consider when selecting a Qualified Intermediary
September 27, 2024
Experience and Expertise: Choose a QI with a proven track record and extensive experience handling 1031 exchanges. Familiarity with the process, tax laws, and documentation is crucial.Reputation and References: Research the QI’s reputation by reading reviews, asking for references, or consulting with real estate professionals who have worked with them. You want to ensure they are reliable and trustworthy.Security of Funds: Confirm how the QI handles and protects your exchange funds. Ensure they are using segregated accounts, have sufficient insurance (such as fidelity bonds), and follow best practices for security.Compliance and Licensing: Verify that the QI complies with federal and state laws. While no formal licensing is required for QIs, it's important to ensure they follow IRS guidelines and applicable state regulations.Fee Structure: Understand the QI’s fee structure upfront. Fees should be transparent and reasonable. Be aware of any potential hidden fees that may arise during the exchange process.Customer Service: Strong communication and responsive customer service are essential. The 1031 exchange process is time-sensitive, so it’s important that your QI is accessible and available to answer questions quickly.Location: While not a necessity, selecting a QI who is familiar with the region where the exchange properties are located may be beneficial for a smoother transaction.Backup Plan: Ask about their contingency plans. A reliable QI will have procedures in place to protect your exchange in case of unexpected disruptions (e.g., the company going out of business).
