Due Diligence and the 1031 Exchange

Services for Real Estate Pros with Malbur Exchange Group & Assoc.

A word to the wise; always do your due diligence before beginning your §1031 Exchange.  There are a Federal Investigations underway on a number of very large qualified intermediaries (QI).  The dollar amounts are staggering and in one case, nearly One Hundred Million Dollars.  The problem is always the same, the mishandling of the client's funds.

 In order to protect yourself, be sure to ask the following questions:

 1)  Are segregated accounts setup for each individual 1031 Exchange? This is an absolute must to protect yourself if the QI gets in legal trouble.

2)  Is the Qualified Intermediary carrying appropriate Bonding?  Be sure to review the policy and call the provider.

3)  Is the Qualified Intermediary carrying appropriate Errors and Omissions Insurance?  Again, be sure to review the policy and call the provider.

4)   References, references, references...  From CPA's, attorneys, banks, the local Better Business Bureau. Call each of them and verify!

5)  Check to make sure that the QI is a member in good standing with the Federation of Exchange Accommodators (FEA)  www.fea.org.  

6)  How is the interest on the 1031 Exchange Proceeds paid?  Do you receive it, and how much?

7)  Can you check on your funds directly via the bank's website, 24 hours a day?  


Taken as a whole the above items can give you a much clearer picture of just who will be holding your money. 

 The §1031 Exchange is an amazing tool for investors, but be careful out there!






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