A qualified intermediary (QI) — sometimes called an exchange accommodator or exchange facilitator — is a required participant in nearly every 1031 exchange. Without one, the IRS treats you as having had “constructive receipt” of your sale proceeds, which disqualifies the exchange entirely. Doug Rhoads works alongside your qualified intermediary throughout the transaction, though the QI role itself is filled by an independent, licensed exchange company — not by Doug or his brokerage.
What a Qualified Intermediary Actually Does
The QI’s core job is to stand between you and your money during the exchange, so you never have direct or constructive control over the sale proceeds:
- Holds the proceeds from your relinquished property sale in a segregated escrow account
- Prepares the exchange agreement and required IRS documentation
- Receives your written 45-day identification of replacement property
- Transfers funds to close on the replacement property
- Provides the accounting and paperwork your CPA needs for the exchange
Why You Can’t Skip This Step
IRS regulations disqualify certain people from serving as your own qualified intermediary — you, your agent, your attorney, your accountant, and various related parties are all barred from filling this role for your own exchange. Attempting to handle the funds yourself, even briefly, is one of the fastest ways to unintentionally convert a tax-deferred exchange into a fully taxable sale.
What to Look for in a QI
Not all qualified intermediaries carry the same level of protection. Georgia does not currently regulate QIs as a licensed industry the way some states do, which makes due diligence on the front end important:
- Fidelity bonding and errors & omissions insurance covering the exchange company
- Segregated, qualified escrow accounts for each client’s funds — not commingled with the company’s operating funds
- Membership in the Federation of Exchange Accommodators (FEA), the industry’s professional association
- Financial strength of the parent company, since exchange funds sit with the QI for weeks or months at a time
How Doug Coordinates With Your QI
Doug does not act as your qualified intermediary — that role has to be filled by an independent third party under IRS rules. What he does is work in step with whichever QI you select:
- Structuring purchase and sale agreements with the exchange language your QI requires
- Timing closings so funds move on the schedule your QI needs
- Delivering your 45-day identification paperwork to your QI accurately and on time
- Coordinating between your QI, your closing attorney, and your CPA so nothing falls through a gap between parties
If you don’t already have a relationship with a qualified intermediary, Doug can introduce you to reputable, bonded exchange companies he has worked with on prior transactions.
Frequently Asked Questions
Can my real estate attorney serve as my qualified intermediary? No. IRS rules disqualify your attorney, CPA, real estate agent, and other parties who have acted as your agent within the two years before the exchange from serving as your QI.
When do I need to set up my qualified intermediary? Before your relinquished property closes. The exchange agreement and QI arrangement need to be in place at or before closing — you cannot add a QI after you’ve already received sale proceeds.
What happens to my funds if the QI company fails? This is the scenario that fidelity bonding, insurance, and segregated escrow accounts are designed to protect against. It’s a key reason to vet a QI’s financial strength and insurance coverage before selecting one, rather than choosing solely on fee.
Does Doug charge a fee for coordinating with my QI? No — QI coordination is part of Doug’s standard service on any transaction structured as a 1031 exchange. Your qualified intermediary charges its own separate fee for its services.
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This page is for general information only and is not tax or legal advice. Consult your CPA or tax attorney regarding your specific exchange.