In previous posts, we’ve discussed the sorts of fees investors can expect to incur when you conduct a section 1031 exchange of like-kind property. It can also be helpful to know the professionals you can expect to work with during a typical 1031 exchange.
1031 exchanges usually involve a quite a few professionals, although the exact number will depend on the type of exchange you’re conducting and its complexity. If you conduct a reverse 1031 exchange, for instance, you may need more assistance than you would if you were to conduct a traditional exchange.
Let’s look at a few common types of professionals involved with section 1031 exchanges so you can get a sense of who you might hire when you initiate your exchange. This is not an exhaustive list but is intended to get you thinking about the various roles that go together to make a 1031 exchange possible.
1031 Exchange Qualified Intermediaries and Exchange Accommodation Titleholders
Qualified intermediaries (QI) and exchange accommodation titleholders (EAT) are required in almost all 1031 exchanges. The only type of exchange in which a QI may not be needed is a simultaneous 1031 exchange. This is an exchange in which the relinquished property and replacement property are exchanged at the same time. However, even in these exchanges, a QI may add value because the QI can provide consulting services throughout the process.
An EAT is required in reverse 1031 exchanges. The EAT is needed so investors can park title to their property and obtain “safe harbor,” which should ensure the IRS will not challenge the 1031 exchange qualifications of your property. Overall, EATs play a less prominent role in 1031 exchanges compared to QIs and are more limited in their usefulness. But when the situation requires their involvement, a qualified EAT is indispensable to creating a successful transaction.
Lawyers and Real Estate Brokers in Section 1031 Exchanges
Along with QIs and EATs, there are several other types of professionals that appear frequently in 1031 exchanges.
Lawyers play a critical role in being compliant with all existing regulations and promoting smooth transactions. You can encounter lawyers at various points and in different places in the 1031 exchange process. You may decide to privately hire a lawyer as a consultant before or during your transaction just to educate yourself and ensure that your exchange is in compliance with all current regulations. Or, you may encounter staff lawyers who are employed by your QI. Lawyers play an essential role in most exchanges.
Real estate brokers also tend to play an important role in the 1031 exchange process. You will likely want to engage with a real estate broker when you dispose of your relinquished property and when you acquire your replacement property. If you’re working with a real estate investment management firm, be sure to work with one that has built relationships with top brokers in the market you’re doing business in.
Consulting with a broker will help to ensure that you maximize your financial position. It will also help to increase your general understanding of current and future market conditions. Depending on which QI you select, you may have an opportunity to consult with staff agents or brokers who can provide you with ongoing assistance.
Escrow and Communication Services for Like-Kind Transactions
Finally, along with the various professionals referenced above, your transaction will likely involve escrow services to close your transaction. In scenarios such as these, you may incur additional escrow charges.
What’s more, depending on the precise nature of your transaction, you will also incur charges related to communication. For instance, you will likely incur fees for wire transfers, postal delivery, and so forth. These fees will certainly not make up the bulk of your 1031 exchange bill, but they are still worth taking note of. These service providers play pivotal roles in creating a fully compliant, smooth 1031 transaction.
1031 Exchange Expertise: Beginning to End
All of these professionals are smaller pieces of the larger puzzle that is your 1031 exchange, and working with them all separately can be difficult for an individual investor. At CWS Capital Partners, we have the ability to manage your 1031 exchange from start to finish. This helps streamline and simplify the process for you.
From advising you on your investment to due diligence, risk management, compliance, and even property management, our organization is made up of strategic teams that work with you throughout your transaction. We also work with the best brokers in the markets we serve to provide our clients with favorable investment opportunities for strong returns.
Please contact us to learn more about investing with CWS Capital Partners, or view our current offerings by completing our self-certification form for accredited or qualified investors.
The information provided here is for your general informational purposes only. It should not be considered a recommendation or personalized advisory advice. CWS has made this third party information available from authors it believes are knowldgeable and reliable resources. However, its accuracy or completeness cannot be guaranteed and sentiment may change due to legal or economic conditions.
All investments involve risk including the possible loss of principal. You should familiarize yourself with all risks associated with any investment product before investing.
Advisory services are provided by CWS Capital Partners LLC, a registered investment advisor.
Securities offered by CWS Capital Partners LLC are through an affiliated entity, CWS Investments. CWS Investments is a registered Broker Dealer, member FINRA, SIPC.