Qualified intermediary
A neutral third party who holds the sale proceeds during a 1031 exchange. The taxpayer can never touch the money themselves, or the exchange fails. Every 1031 needs one lined up before the first sale closes.
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Part 1 of 4
Why a seller cares
A 1031 exchange fails the moment the seller touches the money, so a qualified intermediary holds it from closing to closing. They have to be in place before the first sale closes, not after.
Part 2 of 4
A simple example
You sell a rental. The closing statement shows proceeds going to the intermediary, not to you, and the intermediary later wires them to the replacement's closing.
| What happens | What it does to the exchange |
|---|---|
| The intermediary is engaged before closing | The proceeds never touch you; the exchange is intact |
| The proceeds are wired to you, then to an intermediary | The exchange fails; the gain is taxed |
| The intermediary holds the money for 180 days | Time to close on the replacement |
The intermediary is the wall between you and the money. It has to be built first.
Part 3 of 4
What people get wrong
That a title company can just hold the funds. A qualified intermediary is a specific role with specific rules, and the title company is not one.
Part 4 of 4 · where to read next
Where it appears in the sale
What a definition is, and what it isn't
Keighbor is a software company, not a law firm, brokerage, or tax adviser. This is general information, not legal, tax, financial, or real estate advice about your sale. Your situation may differ. Before acting on a contract, disclosure, title, tax, or pricing question, ask an appropriately licensed professional in your state.
Written and researched by Keighbor Research · drawn from the reference glossary · how we research and check what we publish
In your Room, this word explains itself where it appears.
Your Room defines qualified intermediary in the step you meet it in, beside the document or the date it belongs to. Free to set up, with an agent or on your own.
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