Buyer's Guide
How to Choose a Qualified Intermediary
Qualified intermediaries are almost entirely unregulated at the federal level. Nobody is vetting them on your behalf, which makes the questions you ask before signing the only real safeguard you have.
The short answer
Why this choice carries real risk
There is no federal licensing requirement for qualified intermediaries. Only a handful of states impose bonding or registration rules. In practice, anyone can open a company, call themselves a qualified intermediary, and take custody of seven figures of your money for six months.
Investors have lost entire exchanges to intermediary failures — funds commingled into an operating account, then gone. The nine questions below are the diligence that nobody else is going to do for you.
The nine questions
01Are my funds held in a segregated account, or commingled?
A segregated account holds only your exchange. Commingled accounts pool many clients' funds, which makes your money harder to trace and harder to recover if the intermediary fails.
A good answer
A segregated deposit account opened in connection with your exchange, named in the exchange agreement.
A warning sign
"All client funds are held in our master trust account." Ask what happens to your balance if the firm becomes insolvent.
02Which bank holds the funds, and how much FDIC insurance applies?
FDIC coverage is per depositor, per bank, per ownership category. A seven-figure exchange in a single standard account is largely uninsured unless the intermediary uses a structure that extends coverage.
A good answer
A named commercial bank, plus a specific insured amount — Easy1031 cites up to $175M in FDIC coverage.
A warning sign
A vague reference to "a major national bank" with no coverage figure.
03What happens to the interest earned on my funds?
This is usually the largest economic term in the relationship. Up to 180 days of interest on seven figures runs to tens of thousands of dollars.
A good answer
A written answer in the exchange agreement — either a stated share paid to you, or a clear statement that the intermediary retains it.
A warning sign
Deflection, or "the rates are negligible." On a $5M exchange they are not.
04What are your fidelity bond and E&O limits?
A fidelity bond covers theft or misappropriation by employees. Errors & omissions covers professional mistakes. These are what actually stand behind your exchange if something goes wrong.
A good answer
Specific limits you can verify — Easy1031 carries a $10M fidelity bond and $5M E&O.
A warning sign
"We're fully insured" with no numbers attached.
05What is the all-in fee, including wires and extra properties?
The quoted setup fee often excludes per-property charges, wire fees and rush fees that surface after you have signed.
A good answer
A written fee schedule covering every scenario in your exchange.
A warning sign
A single number quoted verbally with "plus standard costs."
06Who will actually handle my exchange, and how do I reach them?
The 45-day identification clock does not pause for weekends. You need a named human who answers when a deal moves.
A good answer
A named exchange officer, direct contact details, and stated coverage hours.
A warning sign
A general support inbox and weekday-only business hours.
07How many exchanges have you completed, and since when?
Experience with reverse, improvement and multi-property structures is not interchangeable with volume on simple forward exchanges.
A good answer
A specific operating history and experience with structures like yours.
A warning sign
Reluctance to answer, or experience limited to the simplest cases when yours is not simple.
08Can I see the exchange agreement before I commit?
Every term that matters — fund handling, interest, fees, liability — lives in that document, not on the website.
A good answer
The full agreement sent on request, in advance, for your attorney to review.
A warning sign
The agreement produced only at signing, under time pressure.
09Are you a disqualified person under the IRS rules?
If your intermediary is a disqualified person, the exchange fails outright and the entire gain becomes taxable.
A good answer
An independent firm with no agency relationship to you in the prior two years.
A warning sign
Your own CPA, attorney, real estate agent or employee offering to hold the funds.
Who is not allowed to be your intermediary
This one is not a judgment call. Treasury Regulation §1.1031(k)-1(k) defines a “disqualified person” who cannot serve as your qualified intermediary. Use one and the exchange fails outright:
- You, or any agent acting on your behalf
- Anyone who has been your employee, attorney, accountant, investment banker or real estate agent within the two years before the transfer
- A person related to you under IRC §267(b) or §707(b) — generally family members and entities you control
- An entity in which you or a related person holds more than a 10% interest
This is why your own CPA or closing attorney cannot simply hold the funds for you, however convenient that would be.
When to make the decision
The exchange agreement must be signed and the intermediary in place before your relinquished property closes. If the proceeds hit your account, or your attorney’s trust account, the exchange is over. No intermediary can retroactively repair constructive receipt.
| Stage | What to do |
|---|---|
| Property listed | Start comparing intermediaries. Request written fee schedules and exchange agreements. |
| Under contract | Select your intermediary and have your attorney review the exchange agreement. |
| 1–2 weeks before closing | Exchange agreement signed; intermediary coordinates with the closing agent. Avoids rush fees. |
| Closing day | Proceeds wire directly from closing to the intermediary — never to you. |
| After closing | Too late to select or switch. Day 1 of the 45-day identification window has started. |
Qualified Intermediary Questions
Qualified intermediary FAQs
What is a qualified intermediary in a 1031 exchange?
A qualified intermediary is an independent third party that holds the proceeds from your relinquished property sale and uses them to acquire your replacement property. The IRS requires one because you cannot take actual or constructive receipt of the funds without triggering tax on the gain. The intermediary also prepares the exchange agreement, assignment documents and identification notices.
Who cannot be my qualified intermediary?
Under Treasury Regulation §1.1031(k)-1(k), a disqualified person cannot serve as your intermediary. That includes you, your agent, and anyone who has acted as your employee, attorney, accountant, investment banker or real estate agent within the two years before the transfer. Certain family members and related entities are also disqualified. Using one voids the exchange.
Are qualified intermediaries licensed or regulated?
There is no federal licensing regime for qualified intermediaries. A handful of states — including California, Nevada, Colorado, Virginia, Washington and Idaho — impose bonding, insurance or registration requirements, but most do not. That absence of regulation is exactly why the diligence questions on this page matter: nothing external is checking the intermediary for you.
What happens if my qualified intermediary goes bankrupt?
Your exchange funds may become part of the bankruptcy estate, particularly if they were commingled with other clients' money. Investors have lost substantial sums this way. Segregated accounts, a named depository bank, meaningful FDIC coverage and a large fidelity bond are the practical protections — verify all four before your sale closes.
When should I choose a qualified intermediary?
Before your relinquished property closes — ideally as soon as it goes under contract. The exchange agreement must be in place before the sale closes. If the proceeds reach you or your attorney's trust account first, the exchange is dead and no intermediary can retroactively fix it.
Can I change qualified intermediaries mid-exchange?
It is difficult and risky once funds have been wired. Before your sale closes you can switch freely. After closing, moving funds between intermediaries raises constructive-receipt questions and can jeopardize the exchange. Do the comparison work up front.
Ready when you are
Ask us all nine questions
The Easy1031 exchange desk will answer every one of them in writing, before you commit to anything.
Next Steps
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