Choosing the Right Qualified Intermediary

Your Qualified Intermediary is the cornerstone of a successful 1031 exchange. Learn what to look for, what questions to ask, and how to protect your investment when selecting a QI to handle your tax-deferred exchange.

Why QI Selection Matters

$2B+
Lost to QI Fraud Since 2000
180
Days Your Funds Are Held
100%
Protection with Right QI

What is a Qualified Intermediary?

A Qualified Intermediary (QI), also called an Exchange Accommodator or Exchange Facilitator, is an independent third party that facilitates 1031 exchanges by holding the proceeds from your property sale and using them to purchase your replacement property.

Why You Need a QI

IRS regulations require that you never have actual or constructive receipt of the exchange funds. If you touch the money—even for a moment—your entire exchange is disqualified and becomes immediately taxable. A QI ensures this critical requirement is met.

Key QI Responsibilities

Legal & Documentation

  • • Prepare exchange agreements
  • • Document property identification
  • • Ensure IRS compliance
  • • Provide tax reporting forms
  • • Maintain exchange records

Financial Management

  • • Receive sale proceeds
  • • Hold funds securely
  • • Track interest earnings
  • • Disburse for purchases
  • • Handle multiple properties

Critical Security Features to Require

Warning: QI Industry is Unregulated

Unlike banks or brokerages, Qualified Intermediaries are not federally regulated. Anyone can claim to be a QI. This makes your due diligence critical to protecting your funds.

Segregated Client Accounts

Your funds should NEVER be commingled with the QI's operating funds or other clients' money. Each client should have a separate, segregated account.

Ask for proof: Request documentation showing how client funds are segregated and protected from any claims against the QI company.

Fidelity Bond & Insurance

A fidelity bond protects against employee theft and fraud. Errors & Omissions insurance covers mistakes. Both are essential for protecting your exchange.

Minimum coverage: Look for at least $1 million in fidelity bond coverage and $1 million in E&O insurance. Larger QIs often carry much more.

FDIC-Insured Banking

Exchange funds should be held in FDIC-insured bank accounts at reputable institutions. Multiple banking relationships provide additional security.

Verify: Ask which banks they use and how funds are protected. Legitimate QIs will readily share this information.

Essential Questions to Ask Any QI

Security & Protection

  1. 1.

    How are client funds protected?

    Look for: Segregated accounts, separate from operating funds

  2. 2.

    What insurance coverage do you carry?

    Look for: Fidelity bond of $1M+, E&O insurance, cyber liability

  3. 3.

    Which banks hold client funds?

    Look for: Major FDIC-insured banks, multiple relationships

  4. 4.

    Can I audit my account during the exchange?

    Look for: Online access, regular statements, transparency

Experience & Track Record

  1. 5.

    How long have you been in business?

    Look for: 10+ years, stable ownership, growth history

  2. 6.

    How many exchanges have you completed?

    Look for: Thousands of successful exchanges, all types

  3. 7.

    What types of exchanges do you handle?

    Look for: All types including reverse and improvement

  4. 8.

    Can you provide references?

    Look for: CPAs, attorneys, recent clients willing to speak

Service & Support

  1. 9.

    Who will handle my exchange?

    Look for: Dedicated coordinator, not just call center

  2. 10.

    What are your hours and response times?

    Look for: Extended hours, 24-48 hour response guarantee

  3. 11.

    How do you handle complex situations?

    Look for: In-house expertise, attorney access, problem-solving

  4. 12.

    What technology do you offer?

    Look for: Online portal, document upload, tracking tools

Red Flags to Avoid

These warning signs should make you think twice about using a QI:

Commingled Funds

Client money mixed with operating accounts

No Insurance

Lack of fidelity bond or E&O coverage

Unusually Low Fees

May indicate corner-cutting on security

Pressure Tactics

Rushing you to sign without questions

Limited Experience

New company or few completed exchanges

No Physical Address

Only PO Box or virtual office

Won't Provide References

Unwilling to share client testimonials

Complex Fee Structure

Hidden fees or confusing pricing

Understanding QI Fees

Qualified Intermediary fees vary based on exchange complexity, property values, and service levels. Understanding typical fee structures helps you evaluate proposals and avoid surprises.

Standard Exchange Fees

Basic Delayed Exchange $750 - $1,500
Each Additional Property $200 - $500
Reverse Exchange Setup $3,500 - $7,500
Improvement Exchange $2,500 - $5,000+

Additional Services

Document Preparation Often Included
Wire Transfer Fees $35 - $75
Interest on Funds Varies by QI
Consulting Services $150 - $300/hr

Fee Considerations

  • • Lowest price isn't always best—consider security and service
  • • Ask about all fees upfront to avoid surprises
  • • Some QIs share interest earned on your funds
  • • Complex exchanges justify higher fees for expertise

QI Comparison Checklist

Use this checklist when evaluating Qualified Intermediaries:

Security & Protection

Experience & Expertise

Service & Support

Why Investors Choose National 1031 Center

Maximum Security

  • ✓ $100M fidelity bond protection
  • ✓ Segregated FDIC-insured accounts
  • ✓ Daily reconciliation
  • ✓ Multiple banking relationships

Expert Team

  • ✓ Certified Exchange Specialists
  • ✓ 30+ years combined experience
  • ✓ In-house attorneys and CPAs
  • ✓ Dedicated coordinators

Superior Service

  • ✓ 48-hour response guarantee
  • ✓ 24/7 emergency support
  • ✓ Online account access
  • ✓ White-glove treatment

Proven Track Record

  • ✓ 10,000+ successful exchanges
  • ✓ 98% client satisfaction
  • ✓ All 50 states served
  • ✓ A+ BBB rating

Experience the National 1031 Center Difference

Join thousands of investors who trust us with their most important transactions. Our combination of security, expertise, and service is unmatched in the industry.

Schedule Your Free Consultation

Choose Your QI with Confidence

The right Qualified Intermediary makes all the difference. Let our experts guide you through a secure, compliant exchange that protects your investment and maximizes your tax savings.

Have questions about QI selection? Call us: (877) 483-0427