The qualified intermediary is the party that holds relinquished-property proceeds so the investor never has actual or constructive receipt of the funds, and coordination work exists to keep that arrangement documented correctly across escrow, lender, and title teams throughout a Washington closing.
Why the Structure Requires an Independent Third Party
Federal exchange rules disqualify certain people from serving as the intermediary, including the investor's employee, attorney, accountant, real estate agent, or broker who has worked for the investor within the two years before the relinquished-property closing. The intermediary also cannot be a close relative. This exists because the exchange only works if the investor gives up direct control of the sale proceeds; if the investor can direct those funds without restriction, the exchange is treated as a sale followed by a purchase rather than a single continuous transaction.
Documents Assembled Before the Relinquished-Property Closing
Coordination work is mostly document sequencing, confirmed before escrow closes rather than after.
- Exchange agreement between the investor and the qualified intermediary, executed before the relinquished-property sale closes
- Assignment of the investor's rights under the sale contract to the intermediary, with notice delivered to the buyer
- Escrow instructions directing net proceeds to the intermediary's account rather than to the investor
- Written identification of replacement property, delivered to the intermediary within the 45-day window
- Assignment of the purchase contract on the replacement property, with notice delivered to the seller
- Closing instructions confirming the intermediary releases funds directly to the replacement-property closing rather than to the investor
Each of these needs to reach the right party before its related closing, not after, since a late assignment notice can call the exchange structure into question.
Coordinating Across Different Escrow Practices in the State
Escrow and title practices are not identical everywhere in Washington. King County closings often move through larger title companies familiar with exchange assignment language, while smaller counties east of the Cascades or in rural areas may see fewer exchange closings and need more explicit instruction on how the assignment and notice requirements work. Coordinating the intermediary's paperwork with whichever escrow office is handling a given closing, rather than assuming one statewide process, reduces the chance that a notice gets missed or a wire goes to the wrong account. Confirming which specific escrow officer will handle the assignment and notice paperwork, rather than routing everything through a general office line, also shortens how long it takes to correct a document if something needs to be reissued close to a deadline.
Keeping the Deadline Calendar and the Paper Trail in Sync
The 45-day identification period and the 180-day exchange period both run from the date the relinquished property closes, not from when a replacement property is found, so the intermediary coordination calendar should be built the day that closing is scheduled. A complete file, including every assignment, notice, and instruction described above, gives the investor's tax advisor what is needed to prepare the exchange reporting after the replacement property closes.
Building in a Response Plan if the Intermediary's Own Timeline Slips
Intermediaries process closings for many clients at once, and a busy stretch of the year can slow how quickly an assignment notice gets prepared or an identification is logged as received. Because the 45-day and 180-day deadlines are fixed by the relinquished-property closing date rather than by how quickly any single party moves, coordination work should include a standing check-in with the intermediary well before each deadline, not only when a document is expected. If a notice is running late, the investor and the intermediary need to agree on a corrected delivery plan immediately, since a missed assignment or a late identification cannot be repaired after the deadline has already passed. Building this kind of buffer into the coordination calendar, rather than assuming every step will move on schedule, is part of what keeps the exchange mechanics intact even when one part of the closing process runs slower than expected.
Common 1031 Exchange Questions
Can an investor's own real estate agent or attorney act as the qualified intermediary?
No. Anyone who has served as the investor's employee, attorney, accountant, or broker within the two years before the relinquished-property closing is disqualified, along with close relatives. The role has to sit with an independent third party.
What happens if the investor receives the sale proceeds directly instead of through the intermediary?
That is constructive receipt, and it disqualifies the exchange even if the investor never spends the money. Proceeds have to move from escrow to the intermediary's account, not to the investor, at any point in the transaction.
Does the exchange agreement need to be signed before the relinquished property closes?
Yes. The exchange agreement and assignment of the sale contract need to be in place before that closing so the transaction is structured as an exchange from the start rather than added after the fact.
Can one qualified intermediary handle proceeds from more than one relinquished property?
Yes, an investor selling multiple properties as part of one exchange strategy can generally use a single intermediary to hold combined proceeds, as long as each sale and assignment is documented separately for the closing file.
Who confirms the wiring instructions before the replacement property closes?
The intermediary coordinates final wiring instructions directly with the closing escrow office, and this should be confirmed in writing before funds move, since a misdirected wire at this stage is difficult to reverse.