A qualified intermediary is the third party required in a 1031 exchange who holds sale proceeds between the relinquished property sale and replacement property purchase. Sellers cannot touch the proceeds themselves.
The QI structure is a federal 1031 requirement. Sale proceeds flow directly to the QI (not to the seller), who holds them in segregated accounts until the replacement property closes. Any seller access to proceeds voids the exchange. QIs are not federally regulated. Selection matters — several large QIs have gone insolvent over the last two decades, taking client funds. Due diligence on the QI's balance sheet, segregated trust accounts, and insurance is essential.
For LA multifamily 1031 exchanges, common QIs include IPX1031, Exeter 1031, and First American Exchange Company. Verify capitalization and insurance. The $1,000-$2,500 QI fee is not the place to save money — this is where your full tax deferral lives.
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