Qualified intermediary for a 1031 exchange

In a 1031 exchange, you sell one investment property, buy another, and the tax on your gain waits. It waits only if you never get the sale money, and never even have the right to take it. If you do, the IRS treats the deal as a plain sale, and the whole gain can be taxed.

That is the job of a qualified intermediary. You sign a written exchange agreement with it before your sale closes. Under that agreement it takes your place in the sale and the purchase, holds the money, and sends it to the closing of your replacement. The agreement must also say that you cannot receive the money, borrow against it or pledge it while the intermediary holds it. You may see the same role called an exchange accommodator, or a QI for short.

Is an intermediary the only way? No. The IRS rules name a few safe harbors, which are set ways to stay clear of the money, and the intermediary is one of them. A qualified escrow account or a qualified trust is another. Still, most delayed exchanges, where the purchase comes after the sale, use an intermediary.

An exchange covers only real estate held for business or investment. For what qualifies and how the 45 and 180 day clocks run, start with the 1031 exchange in Utah.

Most of this work happens out of sight, and each piece has a reason. The intermediary does not have to take title to either property. It counts as the seller and the buyer because your rights in each contract are assigned to it. Every party to that contract is told in writing on or before closing.

1. 1Writes the exchange agreement

   The intermediary drafts the agreement you sign before your sale closes. It sets the limits on the money, who keeps any interest it earns, and the fee.

2. 2Takes over your sale contract

   Your rights in the sale contract are assigned to the intermediary, and your buyer is told in writing. Your buyer still deals with you, and your deed still goes straight to them.

3. 3Sends the title company instructions

   The closing instructions send the sale money to the intermediary instead of to you. Paying normal closing costs from that money, like agent pay, the property tax split and recording, does not on its own break the exchange.

4. 4Holds the money

   The money waits in the account your agreement names until your purchase closes. Part 3 covers when it can come out and who keeps the interest.

5. 5Receives your replacement list

   You can deliver your signed list of replacement properties to the intermediary, which keeps it with the exchange file. A list sent only to your agent, attorney or CPA does not count.

6. 6Takes over your purchase contract

   Your rights in the purchase contract are assigned to the intermediary, and the seller is told in writing. In Utah that step needs the seller's written OK, which Part 4 explains.

7. 7Wires the money and keeps the records

   The intermediary sends the money to the closing of your replacement, and the seller's deed goes straight to you. Its records and both closing statements feed the IRS Form 8824 you file with your return for the year of the sale.

No federal license or IRS certification exists for intermediaries. The tax rules work the other way around. They list who cannot serve, and anyone else who signs a proper written agreement can.

Two kinds of past work do not count against someone. The first is work on your past 1031 exchanges. So an accountant whose only work for you in that window was on exchanges can still serve, but one who did your regular accounting cannot.

The second is routine work from a bank, a title insurance company or an escrow company, like a closing, a title policy or an escrow account. A company owned by the title company that closed your earlier deals is not ruled out just because of those closings.

That rules me out too. If I am the agent selling your property, I cannot be your intermediary, and I do not act as one for anyone.

Once your sale closes, the money sits with the intermediary or in the account your agreement names. The agreement must lock it. You cannot ask for it back because you changed your mind, found another use for it or need it for a few weeks.

• 01
  You named nothing

  If you name no replacement by the end of the 45-day window, the money can come back to you after that window ends. You cannot pull it out before then.

• 02
  You received everything you named

  If you named replacements, the money can come out once you have received all the replacement property you are owed under the agreement.

• 03
  Something you did not control

  After the 45-day window, a serious event tied to your exchange can also free the money. It has to be outside your control and spelled out in writing.

• 04
  Anything left at the end

  Otherwise, money left over stays locked until the exchange period ends. Money you take at the end can be taxed, but the rest of the exchange still counts.

Who keeps the interest the money earns? Your agreement decides. If all of the earnings go to you, you report them as interest income. If not, the rules treat the money as a loan from you to the intermediary, and your CPA works out what that means for your return.

The IRS has warned that some intermediaries have gone bankrupt or failed to do what their contracts said. The people whose money they held then missed their deadlines and lost the deferral.

When an intermediary goes into bankruptcy or receivership, you generally cannot get at your money outside that court case while it runs. Your exchange deadlines do not stop for the court. They bend only for a federally declared disaster.

The IRS did give some relief, for failures on or after January 1, 2009. If you acted in good faith, you report the gain only as money is actually paid back to you. That changes when you owe the tax. It does not save the exchange, and it does not get your money back.

So the questions in the next section are worth asking before you sign anything.

General information, not tax or legal advice. A CPA or an attorney can tell you how a failed exchange affects your own return.

• Is my money kept apart?

  Ask whether your money sits in its own separate account, or in a qualified escrow account or qualified trust.

• Does every withdrawal need my OK?

  Ask whether any money can leave that account without your written approval.

• Is the firm bonded and insured?

  Ask for proof of a fidelity bond and of errors and omissions insurance, and ask what each one covers.

• Who keeps the interest?

  Ask who keeps what the money earns while it waits, and have the answer written into the agreement.

• What is the full fee?

  Ask for the fee and every extra charge in writing before you sign.

• Can I call references?

  Ask for people you can call, and ask how often the firm handles your kind of exchange.

Membership in a national trade group for exchange companies is one more thing to look for. It is a signal, not a guarantee.

Keep in mind that the intermediary does not give tax or legal advice. Your CPA and your attorney do, so bring them in before you sign the exchange agreement.

There is no standard price. Each firm sets its own fee in the written agreement. A plain delayed exchange, where you sell first and buy later, costs less than a reverse or improvement exchange, because those take more work. Ask what costs extra before you sign.

How the fee is paid and how it shows up on your return are questions for your CPA. To see what the sale itself might leave you before the exchange, try the seller net sheet.

In Utah, real estate agents must use the state-approved Real Estate Purchase Contract, though the buyer and seller may agree to change it or use another form. The current form, effective December 4, 2024, has no section about 1031 exchanges or intermediaries.

Section 19 of the Utah purchase contract (as of November 2026) says the buyer may not assign it without the seller's prior written consent. A transfer to a company the buyer holds an interest in, like the buyer's own LLC or family trust, needs no consent. Your intermediary is not that kind of company.

So when you buy your replacement in Utah, plan for the seller's written OK to the assignment, usually in an addendum. The same addendum can say the seller will cooperate with your exchange. Section 19 limits only the buyer, so it does not block assigning your sale contract, though your buyer still gets the written notice.

A Utah closing runs through the escrow or closing office and the title insurance agency named in the contract. That office is the one that takes the intermediary's instructions and its wire. How Utah taxes an exchange is covered in the questions on the 1031 exchange guide.

Sometimes the right replacement comes up before your sale closes. Then a company called an exchange accommodation titleholder holds title to one of the two properties until the exchange finishes. It cannot be you or anyone on the cannot-serve list, and it must be subject to federal income tax.

Its clocks start sooner. You and the titleholder sign the written agreement within 5 business days after it takes title. You name the property you will sell within 45 days, and the whole thing must finish within 180 days.

Many intermediaries offer this through a related company. Whether buying first makes sense for you is a question of strategy, and the 1031 exchange guide is the place to weigh it with your CPA.

I live in Cedar City, and I hold two licenses: one as a REALTOR and one as a mortgage lender. Each purchase gets one of those roles from me, never both, and we settle which before we start. How I Work explains it.

In Iron, Washington, Kane, Garfield or Beaver County, I can be the agent on your sale and on the search for your replacement. Elsewhere in Utah, I connect you with a partner agent I trust in that town, and the notes at the bottom of this page name the referral fee.

Either way, your agent writes the replacement contract around your exchange dates and works with your intermediary and the title company. Your 45-day list goes to your intermediary, not to me and not to your agent.

I can also be the lender on the replacement loan, if that is the role you want from me on that purchase. Financing investment property covers how those loans differ from a home loan.