OUR PROVEN PROCESS
A Simple 5-Step Process
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2
Exchange
Agreement
3
Direct
Proceeds
4
Identity
Replacement
5
Purchase
Replacement
Complete
Exchange
At Closing, The Settlement Agent Will Direct Proceeds To QI To Hold In Exchange Account
Send us the Title Company’s info and we will work directly with them to get you ready for closing. An email from the closing officer works great.
Enter Into An Exchange Agreement With A Qualified Intermediary
We need some quick information from you so we can create an agreement. Send us an email with your name and contact info to DOCS@sunwest1031.com. If you have a signed purchase agreement or a closing date you can include that information. Then, wait for a reply email with further instructions.
Identify A Target Replacement Property Within 45 Days And Give Written Notice To QI
Within 45 days of the closing of the relinquished property send us a list of up to 3 properties that you are wanting to identify as Replacement properties. You are not locked into these properties, but identification is key. An address for each will do just fine.
Purchase A Replacement Property Within 180 Days and The QI Will Send Funds Directly To The Closing Agent
Within 180 days of the closing of the relinquished property you will need to close on the Replacement property, or properties. Again, we will work directly with the closing agent to send funds at closing. You do not need to close with the same closing agent, or title company.
Receive Replacement Property And Complete Exchange
Once the Replacement property has been closed, the investor will receive the Replacement property, or properties, and will receive the paperwork needed for tax purposes.
Rules and Regulations
The 45-day and the 180-day deadlines
If a seller decides to use a 1031 like-kind exchange when selling an investment property, the IRS allows a 45-day period to identify potential replacement properties for the exchange; and up to 180-days to acquire one or more of the identified properties to complete the exchange.
The 3 Property Rule
When identifying potential replacement properties we do not need to state their market value if you only identify 3 properties or less. If you need to identify more than 3 properties you will need to state their total market value to ensure it complies with the 200% rule, or the 95% rule.
The 200% Rule
If you are identifying more than 3 properties you will need to abide by the 200% rule. This rule states that the sum of the market value of all identified replacement properties must less than 200% of the amount of the sold (relinquished) property.
The 95% Rule
If the value of the replacement values exceeds 200% of the relinquished property there is one more rule that comes into play, the 95% Rule. If the identified properties exceed 200% or the value of the relinquished property, then the investor must purchase at least 95% of the value that was identified. This usually results in the investor purchasing all identified properties.
Identifying Replacement Properties
While keeping the rules above in mind, identifying properties is easy. We only need an address, however, the more information, the better.
Here’s a short list of documents we’ll need before closing:
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Contact info for the taxpayer or main point of contact. This is a good place to include your attorney, or tax professional so they can follow the process and have direct access to the documents.
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Taxpayer name and address
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Tax ID number, or Social Security Number
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Title commitment
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Signed Purchase Agreement (including addendums)
Organizational documents (if the property is not held by an individual)
