§1031 Exchange
Mechanics

HOW DOES A TYPICAL §1031 EXCHANGE TRANSACTION WORK?

With a Forward / Delayed §1031 Exchange, the process is very straightforward.

With a
Forward / Delayed §1031 Exchange, the process is very straightforward.
  • Step

    Ideally, the Exchanger should contact Madison 1031 and arrange for us to act as the Qualified Intermediary. If we are contacted before the Contract of Sale is signed, we can provide customized language (Relinquished Property Addendum) to the contract so that the buyer of the Relinquished Property is aware of the §1031 Exchange. However, the Exchanger can also contact us after the Contract of Sale is signed, but before the property closes/is sold.

  • Step

    Madison 1031 prepares the Exchanger’s §1031 Exchange documents and coordinates with the attorney, lender, Realtor and/or Closing Agent to prepare for the closing of the Relinquished Property.

  • Step

    At closing, Madison 1031 — as the Qualified Intermediary for the Exchanger — receives the proceeds from the sale of the Relinquished Property and places those §1031 Exchange funds into a secure, dual-signatory account.

  • Step

    Within the next 45 days from the sale of the Relinquished Property, the Exchanger must identify the potential Replacement Property/ies and begin negotiations on which to purchase.

  • Step

    The Exchanger then decides on a specific Replacement Property and agree to terms with the seller. This information is then provided to the Exchanger’s attorney and to Madison 1031. Closing must be scheduled no later than 180 days after the date of sale of the Relinquished Property.

  • Step

    At closing, Madison 1031 transfers the §1031 Exchange funds to the seller of the Replacement Property, and the Exchanger then takes title ownership of the Replacement Property.