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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Free to set up. No credit card.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
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