Qualified Intermediary Coordination

A qualified intermediary has to hold the exchange proceeds and prepare the exchange agreement before a New York City relinquished property closes, or the taxpayer risks constructive receipt of the funds. This service coordinates the paperwork, the closing-day wire instructions, and the assignment notices between the taxpayer, the QI, the closing attorney, and the buyer, so nothing is left to be resolved at the closing table.

What Has to Be in Place Before the Relinquished Closing

The exchange agreement, the assignment of the purchase and sale contract to the QI, and notice of that assignment to the buyer all need to be signed and delivered before the relinquished property closes in New York City. Missing any one of these at closing can put the entire exchange at risk of failing the safe harbor rules that protect the taxpayer from constructive receipt.

We build the signing sequence backward from the scheduled closing date so the title company, the closing attorney, and the QI are all working from the same document set instead of exchanging drafts the morning of closing. In a New York City transaction, where multiple parties often review documents up until the day of closing, this sequencing matters more than it would in a market with a simpler closing process.

How Proceeds Move Through the QI

Sale proceeds from a New York City closing are wired directly to the QI's segregated account, never to the taxpayer, and stay there until they are used to fund the replacement property purchase.

Closing attorney confirms wire instructions in writing with the QI directly
QI issues a written receipt of funds to the taxpayer's advisor
Funds are held in a qualified escrow or trust account, not commingled
Release instructions are prepared in advance of the replacement closing
Any unused funds are only returned after day 45 or day 180 under the exchange agreement's limited access provisions

We confirm wire instructions verbally with the QI as a fraud check before funds move, since wire fraud targeting real estate closings has become common enough that a written instruction alone is not treated as sufficient confirmation.

Coordinating the 45-Day and 180-Day Notices

The written identification notice has to reach the QI by midnight on day 45, and the replacement closing has to be completed by day 180, both measured from the New York City relinquished property's closing date. We track both deadlines against the actual calendar, including weekends and holidays, rather than relying on a rough estimate.

If a reverse exchange or an improvement exchange is involved, the QI's role shifts and a separate exchange accommodation arrangement is needed. We flag that early so the taxpayer's team is not assembling a parking structure with only days left before a closing, since setting up an accommodation titleholder entity and a qualified exchange accommodation agreement takes real lead time.

Aligning the QI With Title and Closing Teams

New York City closings typically involve a title company, a closing attorney, and often a separate escrow agent for transfer tax filings, which means the QI is one of several parties handling money and documents on the same day. We keep a single closing checklist that names who holds each document and who confirms each wire, so nothing is assumed to be someone else's responsibility.

We also confirm the QI's fee structure and any interest earned on held funds is documented in writing before the exchange begins, since disputes over held-fund interest are a common source of friction late in an exchange if the terms were never spelled out clearly at the start.

Common 1031 Exchange Questions

What happens if a New York City seller receives sale proceeds directly instead of through a QI?

Direct receipt of funds generally triggers constructive receipt, which disqualifies the exchange for tax deferral purposes. The proceeds must go to the qualified intermediary's segregated account at closing, not to the taxpayer, and this cannot be corrected after the fact once the funds have touched the taxpayer's own account.

Can the same qualified intermediary handle both a New York City sale and an out-of-state replacement purchase?

Yes. The QI's role is not tied to a specific market. The same intermediary can hold funds from a New York City relinquished property and disburse them for a replacement closing anywhere in the country, which simplifies coordination when the START EXCHANGE REVIEW extends beyond the metro.

How early should the exchange agreement be signed before a New York City closing?

We aim to have the exchange agreement and assignment documents finalized several days before closing so the title company and closing attorney have time to confirm wire instructions rather than resolving them at the closing table, which reduces the chance of a last-minute delay.

Does the QI get involved in identifying replacement properties?

No. The QI's role is limited to holding funds and preparing exchange documents. Identifying and evaluating replacement properties is handled separately by the taxpayer and their advisory team, then delivered to the QI as a written notice once the taxpayer has made a decision.

What if the New York City replacement property falls through after day 45?

If a properly identified replacement fails after the 45-day window closes, the taxpayer generally cannot substitute a new property and may need to complete the exchange with a backup candidate from the original identification list or accept a failed exchange, which is why we encourage naming a genuine backup rather than a single candidate.