I need help choosing a 1031 QI and avoiding scams

[Robert L.]

Hi All,

Like many people needing to do a 1031, I am skeptical and concerned about scams.  

How should I choose a true Qualified Intermediary and know I am getting someone good at a reasonable price and know I wont get scammed?

Because my transaction is fairly simple, could I just do the papers myself and simply have the title/escrow companies transfer the funds from one office to another?

Or maybe I could use a QI to do my paperwork, but never send the money to the QI.  Instead, just have one title company send the sales proceeds to the other title company for the purchase?

The details about my 1031 are fairly simple... I have a vacant lot I am about to put under contract to sell in St Augustine Fl. I also have identified a vacant lot in Tampa Fl to purchase and negotiated verbally that is about to put in writing under contract. Both properties are selling/purchasing for $65K.

Thank you in advance for any help.

[Sean Ross]

@Robert L.,

This is a really important question.  QI failures can fall into several categories: scammers who steal money or information, ineffective operators who can blow your Exchange and get the IRS after you, weak QI infrastructures that don't have adequate insurance or safety protocols against outside fraudsters, etc. 

It's a lot to navigate. Not enough people ask the questions that you're asking.  

How to find a reputable QI:

- reviews and Google searches are a good starting point, but not the end of the road

- referrals from a source you trust

- call and speak to your prospective QI. Ask for proof of insurance.  Ask for details about security.  Ask for references. Find out where they are holding your funds. 

- There are a lot of good folks on BP who have been in the game a long time and can vouch for different QIs

As for your DIY model: you can't do 99% of exchanges on your own, the IRS won't let you.  It's why companies like ours exist - we are creatures of the tax code.  You need an independent third party to act as QI.  And, even if you could, you wouldn't want to.   1031 rules are opaque and deeply unintuitive when taken as a whole.  The room for error is very large.  Lots of trip wires.  

Do you know what your tax liability would be if you sold without a 1031?

There are

[Dave Foster]

@Robert L., There have been a proliferation of QI start ups in the last few years.  So it's good to ask questions.  The best indicator of how they'll handle your exchange is how they've handled others.  So talking to people who have actually worked with them is important.  Bigger Pockets is one of the best formats for this because you can go to a QIs profile page and scroll down to the bottom to the reference section.  There you will see references written by members that you can actually interface with.  Longevity in the industry is also a good indicator.

But if you want to know what the sure first way to keep your money protected is. Then find the QI that will open up an FDIC insured bank account in your name that only has your money in it. You don't want a QI that has a pooled trust account where they have the opportunity to invest that money and use it for good or nefarious purposes.

All the insurance and bonding in the world (which are important) are only beneficial after a bad event has happened.  You want a way to prevent a bad event.  I'm with you and that's why we developed the segregated dual signatory accounts for our clients.  Money cannot move from that account without the clients signature. 

But you cannot DIY a 1031 exchange.  The IRS requires that you use the unrelated 3rd party qualified intermediary.  So you are going to have to work through that fear and find a Qi who has the demonstrated experience and protections to make you comfortable.  

[Alex Olson]

@Robert L. I recommend @Dave Foster and send all of my seller and buyer clients to him. 

[Chris Mury]

Hey Robert,

I’ve used Claudia Kiernan at IPX1031 for a previous 1031 exchange. I’ve referred her to my customers as well and have had good experiences. Her office is in St. Augustine. (904) 417-9093. Best of luck. 

Chris

[Natalie Bender]

@Robert L. I am a Registered Rep and have worked with many clients that have used, Dave Foster and IPX1031. Both of which have been great and no complaints from clients or Sponsors. I would also like to recommend my go to QI; Weiming Peng with Excel1031. He goes above and beyond in terms of communication and education for his clients. He is in the Bay Area, but can process exchanges nationwide. 510-316-8078 ; [email protected]

[Dave Foster]

@Robert L.,  I appreciate that kind shout out from @Alex Olson and @Natalie Bender.  I've sent you a pm colleague request.