Understanding 1031 Exchange Fees: What Does a Qualified Intermediary Charge?

When planning a 1031 exchange, one of the first questions investors often ask is, “How much will this cost?” While the fees may seem like just another expense, they’re actually a small price to pay compared to the potential tax savings. Let’s break down what you can expect to pay in 1031 exchange fees.

Basic Fee Structure for 1031 Exchanges

Most Qualified Intermediaries (QIs) structure their fees in one of two ways: either as a flat fee or as a percentage of the transaction value. Some may use a combination of both, with a base fee plus additional charges for specific services.

What’s Typically Included

Standard 1031 exchange fees usually cover:

• Document preparation and review
• Safe handling of exchange funds
• Coordination with title companies and other parties
• Basic consultation throughout the exchange process
• Required reporting documentation

Additional Costs to Consider

Depending on your specific situation, you might encounter these additional fees:

• Wire transfer fees
• Multiple property charges (if exchanging into several properties)
• Rush fees for expedited services
• Complex transaction fees
• Extension fees if needed

Value vs. Cost

While focusing on fees is important, remember that a 1031 exchange can potentially save you thousands or even millions in capital gains taxes. When choosing a QI, consider:

• Their experience and expertise
• Security measures for handling funds
• Availability and responsiveness
• Track record of successful exchanges

Red Flags to Watch For

Be wary of QIs who:

• Won’t provide a clear fee structure upfront
• Charge significantly less than market rates
• Push unnecessary additional services
• Don’t maintain separate escrow accounts for exchange funds
• Aren’t bonded and insured

Remember, the lowest fee isn’t always the best deal. Your QI plays a crucial role in ensuring your exchange complies with IRS regulations and completes successfully. The cost of a failed exchange far outweighs any savings on QI fees.

Ready to learn more about 1031 exchange fees and how they apply to your specific situation? Contact WealthBuilder 1031 at 888-508-1901 for a transparent discussion of our fee structure and services. We believe in clear communication and no surprises when it comes to costs.