Skip to main content

1031 Exchange Qualified Intermediary Fee

June 13, 2024

The services of a Qualified Intermediary are pivotal to the overall success of a 1031 exchange. From ensuring legal compliance and securing exchange funds in escrow to documentation and reporting, the QI plays a variety of roles in facilitating a 1031 exchange. However, you also need to be aware of the qualified intermediary fees and other 1031 exchange costs associated with their services so you can choose a suitable QI for your exchange needs and align your budget.

As the best qualified intermediary in Los Angeles, California, with over 32 years of experience, Universal Pacific 1031 Exchange has assisted many investors in handling the complexities of property transactions worth over $100M. With a proven track record of success, our team of experts are always available to offer their experience in facilitating seamless exchanges. Take the first step by booking a free consultation with us today.

In this article, we explore the role of a qualified intermediary, the fees they charge for a successful 1031 exchange, and other things you need to know.

What Is a 1031 Exchange?

What Is a 1031 Exchange?

The 1031 exchange is also called a like-kind exchange. It involves swapping a relinquished property for a suitable, like-kind replacement property while deferring capital gains taxes and depreciation recapture. The replacement property must be equal or greater in value than the relinquished property. Additionally, both the relinquished property and the replacement must be investment properties.

Outside the 1031 exchange, funds from selling property are liable to capital gains tax. But with the tax-deferred exchange, you can reinvest the entire sale proceeds to acquire a replacement property without worrying about capital gains tax.

Aside from tax deferral, the 1031 exchange also provides investors with the opportunity to strategically grow their investments. The deferral of capital gains tax increases available capital for investment, and swapping properties provides excellent opportunities to acquire more valuable properties and diversify into other kinds of real estate.

Understanding the 1031 Exchange Qualified Intermediary Fee

Understanding the QI Fee

It’s important to consider and assess the qualified intermediary fees and other 1031 exchange costs before you initiate a 1031 exchange. Understanding these costs will help you budget effectively for the exchange to avoid delays and out-of-budget expenses.

Generally, the QI fees for each exchange range from $500 to $8,500 on average. However, the exact service fees depend on the QI and the type of 1031 exchange involved.

Based on the nature of the exchange, delayed exchange QI fees fall between $500 to $2,500. On the other hand, QI service charges for a reverse exchange vary from $4,500 to $7,500 since they are more complex and risky compared to the traditional 1031 exchange.

In a case where a tax-deferred exchange involves trading one investment property for multiple properties, the QI fees may fall between $400 and $800 for each additional property.

Additional Costs in a 1031 Exchange

Aside from the QI fees, there are other 1031 exchange costs worth considering before you initiate a 1031 exchange. A proper understanding and assessment of these fees help you avoid costly errors and unexpected expenses. Such costs include:

Legal and Accounting Fees

Ensuring compliance with IRS specifications means you may have to consult an attorney or tax advisor. Their service fee amount varies depending on their expertise and the case’s complexity. Some local jurisdictions also charge recording fees to record the sale and purchase of real estate.

Financing Costs

You might incur loan acquisition fees and other associated costs if you require financing to cover the exchange expenses. If you involve a real estate agent or broker to sell the relinquished property or purchase a property, you might need to pay broker commissions.

Inspection Fees

It’s recommended to inspect and appraise an investment property before acquiring it. For instance, an environmental assessment might be necessary for certain commercial properties to ascertain factors such as security and market proximity. These services come with extra fees.

Closing Costs

The 1031 exchange closing costs include several expenses related to finalizing the transaction. You can incur closing costs on both the sale of the relinquished property and the purchase of the replacement property. Examples of closing costs include title search and insurance fees, escrow fees, recording fees, and transfer taxes. If you involved real estate agents or brokers, their commissions are also part of the closing costs, typically paid by the seller.

Property Transfer Taxes

Some states or local jurisdictions impose transfer taxes on the sale or purchase of real estate. For instance, the State of New York charges $2 per $500 of value. In Nevada, real estate investors pay $1.95 for each $500 of value and the County Recorder records the deed only when the transfer taxes and the recording fees have been paid.

Potential Boot

In a case where you don’t reinvest all of your property sales proceeds in the replacement property, the portion that is not reinvested is known as boot. You cannot defer capital gains taxes on a boot in a 1031 exchange, so you’ll have to pay the tax and any associated fees.

Factors That Influence the QI Fees

Factors that influence the QI Fees

How much you pay for QI fees for a 1031 exchange depends on various factors such as how complex the transaction is, the services offered by the QI, the location of the QI, their reputation, and their experience.

1. The complexity of the transaction

The more complex a transaction is, the higher the QI fees. The complexity of a 1031 exchange depends on factors such as the number of properties involved, the level of perceived risk, the size of capital, and any unique requirements of the 1031 exchange.

2. Geographical location of the QI

The governing regulations of a state (like license requirements) can affect a QI’s operational costs, and consequently, their fees. Additionally, QIs in developed or busy cities may charge more due to higher demands, while you may pay less for QIs in less developed areas.

3. Services offered by the QI

A qualified intermediary may charge higher fees if they offer other comprehensive services such as search assistance for the replacement property, investment consultation, etc.

4. Experience and reputation of the QI

Highly experienced QIs who are in high demand and have a good track record in the 1031 exchange industry can command high fees due to their expertise.

Comparing QI Fees

Comparing QI Fees

The qualified intermediary fees may vary significantly from one company to another. So, you need to compare the QI fees and assess their services to be sure you’re getting the right value for your money while staying within budget. Especially for investors who engage qualified intermediaries frequently, shopping around for more affordable and efficient QIs can save you hundreds of dollars in the long run.

Also, comparing different qualified intermediaries and their service fees helps you gain insights into the exchange expenses and what makes for a reasonable fee structure. This can give you an edge in negotiations to maximize value for money and help you avoid unexpected transaction costs such as hidden charges.

However, although it’s essential to consider the QI fees in a 1031 exchange, cost should not be your only focus when comparing qualified intermediaries. Pay close attention to other critical factors such as reliability, reputation, range of services, expertise, transparency, etc.

Common Misconceptions About 1031 Exchange Qualified Intermediary Fees

Over time, people have developed certain misconceptions around the QI fees and these misconceptions can lead to wrong decisions when choosing qualified intermediaries. The two major misconceptions you should be wary of include:

Lower fees always mean a better deal

Sometimes, lower fees may indicate that a QI is offering limited services. Also, QIs with low reputation or experience tend to charge less as a marketing strategy to attract more clients. Hence, a lower fee does not always mean a better deal.

All QIs offer the same fees for their services

Different QIs offer different services and the respective fees for each service may vary. It’s important to understand the fee structure of your QI and what the fees cover.

The Role of a Qualified Intermediary (QI)

The Role of a Qualified Intermediary (QI)

According to Section 1031(k) of the Internal Revenue Code, a property exchange cannot defer capital gains taxes through a 1031 exchange if the investor is in actual or constructive receipt of the sales proceeds of the relinquished property. So, the QI secures the money in escrow to ensure compliance with this prerequisite.

When the seller identifies the replacement property, the QI then facilitates the deal and releases the exchange funds for the purchase. The QI also helps the investor prepare the required legal documents, reports, and other formalities to finalize the 1031 exchange.

Before choosing a qualified intermediary, you need to be sure that they possess the expertise and experience to facilitate a successful 1031 exchange. Also, consider other important factors such as customer support and QI fees. You can book a free consultation with us at Universal Pacific 1031 Exchange for expert guidance throughout your 1031 exchange process.

How To Choose the Right QI for Your Needs

How to Choose the Right QI for Your Needs

Research thoroughly and check QI credentials

This helps you verify the expertise, experience, and competence of a QI. The QI must be well versed in IRS regulations for 1031 exchanges to ensure a successful tax-deferred exchange as noncompliance can disqualify your exchange transaction for tax deferral.

Ask for referrals and testimonials

You can get referrals from an escrow officer, family, or friends to recommend a suitable QI. Also, analyze testimonials and client reviews on third-party sites.

Ensure the QI understands your unique situation

Understanding the peculiarity of your exchange transaction helps your QI to tailor their services to your specific needs. You also need to ascertain that the QI offers the services particular to your case.

Potential Pitfalls to Avoid

Potential Pitfalls to Avoid

Choosing the right QI is not only about knowing what to do; you need to also know the mistakes to avoid. Such pitfalls include:

Not Vetting the QI Properly

It is risky to finalize an agreement with a QI without knowing their credentials, experience, reputation, and client reviews. Doing this can expose you to financial losses, complications during the exchange, and compliance issues. To avoid this, make sure to conduct in-depth research.

Overlooking Hidden Fees

A lack of understanding of the QI fee structure can expose you to hidden fees and unexpected costs. To avoid this, request a detailed fee breakdown from your QI.

Failure to Factor in All Costs

Unplanned expenses can take you off budget and delay the exchange process. Ensure that you create a detailed budget to cover the QI fees and other possible costs.


The success of your 1031 exchange depends largely on your choice of a qualified intermediary. When choosing a QI, endeavor to assess the QI fees so you can plan better and ensure it’s within your budget. Our experts at Universal Pacific 1031 Exchange in Los Angeles are here to help you make the right choice. Follow our step-by-step guide to 1031 exchange or contact us to book a free consultation.

About The Author

Michael Bergman, CPA
Michael Bergman is a California licensed CPA and Real Estate Broker with over 32 years of experience in commercial real estate. Specializing in 1031 tax-deferred exchanges and financial oversight, his expertise is invaluable for complex real estate transactions. Michael’s unique blend of financial acumen and real estate knowledge positions him as a trusted advisor in the industry, offering sound advice and strategic insights for successful property management and investment.

Don’t let taxes hinder your property investment decisions. Connect with us today for a free, no-obligation 1031 exchange consultation. Let us help you navigate the process with ease.