A Successful 1031 Exchange in 10 Easy Steps

The basic process to complete a successful 1031 exchange

  1. SCHEDULE A CONSULTATION WITH US
    Bangerter Financial can help you understand your exchange options, the rules and pitfalls, and start you on the right path.
    2.  
  2. DECIDE TO DO A 1031 EXCHANGE; ENLIST PROFESSIONALS
    Bangerter Financial is a great resource for 1031 exchanges. But we can’t offer tax or legal advice. Therefore, it’s important you find a tax and/or legal advisor who can work alongside Bangerter Financial to give you the advice you need. Retaining these specialists isn’t mandatory, but we highly recommend it. We can refer you to experienced professionals if necessary.
    3.  
  3. LIST YOUR PROPERTY
    Contact a listing broker and put your property on the market. We can help you find a specialist who can list and sell your property.
    4.  
  4. FIND A QUALIFIED INTERMEDIARY
    You must use a qualified intermediary. A qualified intermediary will help you identify and close on a replacement property. At Bangerter Financial, we can refer you to one of the trusted intermediaries we work with, that are experienced and bonded.
    5.  
  5. START LOOKING FOR REPLACEMENT PROPERTIES
    Remember, the 45-day countdown begins the moment escrow closes on your relinquished property. We suggest you start looking for a replacement property even before your relinquished property is sold.
    6.  
  6. NEGOTIATE AND ACCEPT AN OFFER ON YOUR PROPERTY
    Although it’s not required, it’s good practice to modify your sale contract or purchase and sale agreement to reflect your 1031 exchange. This language is commonly known as an Exchange Cooperation Clause. We will review your documents to ensure the language is correct in the contract.
    7.  
  7. ON THE SALE OF YOUR PROPERTY (TIMELINE STARTS)
    Your title company or attorney will handle your closing. Your qualified intermediary must also be involved in the process, and the funds will transfer to their escrow account – not yours. You can never take constructive receipt of sale proceeds.
    8.  
  8. IDENTIFY REPLACEMENT PROPERTIES (WITHIN 45 DAYS)
    You must identify potential replacement properties by midnight on the 45th day from the close of your relinquished property. Because this timeline is so tight, you’ll likely want to identify a variety of properties and back-ups. Bangerter Financial will help you employ different identification strategies that will increase your likelihood of desired results.
    9.  
  9. ENTER INTO CONTRACT OR PURCHASE AND SALE AGREEMENT
    After you’ve decided on a replacement property (or properties), you must enter into a contract to purchase that property. These contracts should also contain the Exchange Cooperation Clause.
    10.  
  10. CLOSE ON YOUR REPLACEMENT PROPERTY (WITHIN 180 DAYS)
    Finally, your intermediary will wire money to the appropriate recipient, and they’ll close on the property as they would normally – deferring your need to pay taxes until some point in the future (if ever). You can repeat this process again and again, acquiring new properties and deferring taxes indefinitely.