How to Find a Qualified Intermediary for Your 1031 Exchange

Your Qualified Intermediary (QI) may be the most important — and most overlooked — professional in your 1031 exchange. They hold your sale proceeds, facilitate the transfer, and keep your exchange IRS-compliant. Choose the wrong one and you could lose everything.

Here’s exactly what to look for and the questions you must ask before signing.

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What Is a Qualified Intermediary?

A Qualified Intermediary (also called an Exchange Accommodator or 1031 Exchange Facilitator) is a neutral third party required by IRS regulations to hold your exchange funds between the sale of your relinquished property and the purchase of your replacement property.

Under IRC Section 1031, you cannot receive the proceeds from your sale — even temporarily. The QI steps in to:

1. Receive the sale proceeds directly from the title company
2. Hold the funds in a segregated escrow account
3. Transfer funds to acquire your replacement property
4. Prepare and maintain all required exchange documentation

Without a QI, there is no 1031 exchange.

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Who Cannot Be Your QI

The IRS has strict “disqualified person” rules. The following cannot serve as your QI:

• Your real estate agent or broker (on this transaction)
• Your attorney (if they’ve represented you in the past 2 years)
• Your CPA or tax advisor (if they’ve represented you in the past 2 years)
• Your employee
• Any family member
• Any entity you control

This means you cannot use your regular attorney or accountant to facilitate the exchange, even if they’re willing. You need a dedicated, independent QI.

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8 Questions to Ask Every QI Before Hiring Them

1. How do you hold exchange funds?

What you want to hear: Funds held in segregated, FDIC-insured accounts in your name. Not commingled with the QI’s operating funds.

2. What insurance do you carry?

What you want to hear: Fidelity bond (protects against employee theft) + Errors & Omissions insurance (professional liability). Ask for certificates of insurance.

3. Are you a member of the FEA?

The Federation of Exchange Accommodators is the industry’s professional association with a code of ethics and best practices. Membership isn’t a guarantee, but absence is a yellow flag.

4. How many exchanges have you completed?

What you want to hear: Thousands of completed exchanges, ideally over many years. Experienced QIs have seen every scenario and know how to handle complications.

5. What happens to my funds if your company fails?

What you want to hear: Funds are held in your name in segregated accounts — not subject to QI’s creditors in bankruptcy. Get this in writing.

6. Do you have experience with DST exchanges specifically?

DST exchanges involve working with multiple sponsors and understanding private placement requirements. Not all QIs have this experience.

7. What are your fees?

QI fees typically range from $750–$2,500 per exchange. Be wary of QIs who charge much less — they may be cutting corners on insurance or security. Be equally wary of excessive fees with no clear justification.

8. What is your turnaround time for documentation?

You’re working under strict deadlines. You need a QI who can prepare and deliver identification and closing documents quickly and accurately.

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Red Flags to Watch For

🚩 Funds commingled with the QI’s operating accounts
🚩 No insurance certificates available upon request
🚩 Pressure to use a specific replacement property they’re affiliated with
🚩 Vague answers about where funds are held
🚩 No written agreement before you sign your sale contract
🚩 Very low fees with no explanation of how they make money (they may earn from float on your funds)

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When to Engage Your QI

This is critical: you must engage your QI before your relinquished property closes.

The exchange agreement must be signed and in place before the sale transaction closes. If you call a QI after closing, it’s too late — you’ve already received the funds and the exchange cannot be structured retroactively.

The ideal timeline:

• 6-12 months before sale: Begin researching QIs and DST options
• 30-60 days before closing: Select and engage your QI; sign the exchange agreement
• At closing: Title company wires proceeds directly to QI
• Days 1-45: Identify replacement property (DST or traditional)
• Days 1-180: Close on replacement property

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Where to Find Qualified Intermediaries

Professional referrals — your real estate attorney, CPA, or financial advisor often have QIs they’ve worked with successfully. This is the most reliable source.

FEA Member Directory — search at 1031.org for members in your state.

DST Sponsors — if you’re planning to exchange into a DST, the sponsor’s team can often recommend experienced QIs who handle DST exchanges regularly.

National QI firms — companies like Asset Preservation Inc., Investment Property Exchange Services (IPX1031), and Equity Advantage operate nationwide and have strong track records.

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The Bottom Line

Your QI holds your entire exchange fund — potentially your life savings from a property sale. This is not the place to go cheap or move fast. Take time to vet your QI as carefully as you’d vet any financial professional handling your money.

Planning a 1031 exchange into a DST? Download our free DST 1031 Guide — it includes our full QI vetting checklist and the complete exchange timeline so you never miss a deadline.

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This article is for educational purposes only and does not constitute legal or tax advice. Always consult a qualified attorney and tax professional before executing a 1031 exchange.