Waterford 1031 Exchange Services, LLC makes Starting an Exchange a simple process using simple straight forward language. Waterford 1031 Exchange Services, LLC, as your Qualified Intermediary, will guide you every step of the way, from preparing instructions for the firm holding settlement of your Relinquished Property (property exchanger wishes to sell) through settlement of the Replacement Property or Properties to complete your exchange. Waterford 1031 Exchange Services, LLC's experience will guide you through a successful exchange with no out of pocket
expenses, and no hidden fees.
This checklist is intended to provide a brief overview of the steps involved in an IRC §1031 tax deferred exchange.
Investors should always seek the advice of their tax and/or legal advisors regarding their specific situation.
- SHOULD YOU DO A 1031 EXCHANGE?: Does your property qualify for a 1031 Exchange? Does a 1031 Exchange make financial sense for you? Our Free 1031 Calculator will help you measure the advantages of doing a 1031 Exchange for your particular situation.
- MEET & REVIEW WITH ADVISORS: Review the entire transaction with tax and/or legal advisors.
- DEVELOP REPLACEMENT PROPERTY CRITERIA: Are you looking for income, no-management properties, added-value properties or properties that have the potential for rapid appreciation but less income? Is your portfolio diversified to minimize risk? Carefully consider the risk reward of each property type and strategy. Call 1 (877) 466-1031 to discuss acquisition.
- Client Worksheet: Fill out the client worksheet via our website and fax it back along with a copy of your sales agreement.
- SALE CONTRACT: Enter into an “assignable” contract to sell your relinquished property. Execute contract with the exchanger’s name “and/or assigns”.
- NOTIFY WATERFORD 1031 OF YOUR EXPECTED CLOSE: When your property goes under contract click Closing Date or call 1 (877) 466-1031. Based on your replacement property needs we will start sending details on prospective replacement properties for your review.
- ASSIGN WATERFORD 1031 AS SELLER, CLOSE ESCROW: WATERFORD 1031 is assigned into the transaction as the seller and sale closes.
Pursuant to the assignment agreement and exchange documents, WATERFORD 1031 instructs the closing officer to directly deed the relinquished property to the buyer.
Exchange proceeds are transferred directly to the WATERFORD 1031 via wire transfer.
- BEGIN IDENTIFICATION PERIOD: Both the 45-day identification and 180-day exchange period begin on close of the sale on the relinquished property. The 180 day period (or the date the tax return is due, whichever is earlier) is the period during which your replacement property must close.
- REPLACEMENT PROPERTY IDENTIFICATION PROCESS: By the close of escrow you should have a good selection of replacement properties to review. Plan on executing LOIs (letter of intents) to secure your replacement property and start your due diligence process within 10 days from the close of escrow.
- PURCHASE CONTRACT: Enter into an “assignable” contract to purchase replacement property. Execute contract as exchanger’s name “and/or assigns”.
- CONTACT WATERFORD 1031: After signing the replacement property contract, contact your WATERFORD 1031.
- IDENTIFY PROPERTY: Specific written identification, signed by the taxpayer, is forwarded to WATERFORD 1031. Click here for the Identification Form to to be submitted to your WATERFORD 1031 no later than midnight of the 45thday of your exchange.
EXCHANGE PAPERWORK DRAWN: WATERFORD 1031 will prepare the exchange documents for purchase.
- The original documents will be forwarded to the closing officer who will coordinate the
signatures.
- Copies of documents are forwarded to the exchanger.
REPLACEMENT PROPERTY CLOSES: WATERFORD 1031 is assigned into the transaction and purchase closes.
- Pursuant to the assignment agreement and exchange documents, WATERFORD 1031 instructs the closing
officer to directly deed the replacement property from the seller.
- WATERFORD 1031 wire transfers exchange proceeds to the closing officer
COMPLETION: If all exchange funds are used to acquire the replacement property or properties, and all the exchange requirements are met, the exchange is complete.
WARNING: Most failed 1031 Exchanges happen because suitable replacement property is not identified in the 45 days allowed.
This most frequent is a result of waiting until the last moment to identify the Replacement Property or identifying properties that do not have a high certainty of closing.
Ideally all due diligence should be completed on the Replacement Property(ies) and a binding contract to buy should be in place no later than the 45thday from the close of escrow on the relinquished property.
There is LITTLE reason to have a failed 1031 Exchange providing that you start your Replacement Property Search in a timely manner, have access and use the right resources and have realistic expectations for your replacement property.
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