Many 1031 exchange start three exchanges without knowing which pitfalls can trip them up if they’re not careful.
So what are the biggest pitfalls which experienced exchangers avoid in which you can make yourself aware?
Here are the two big ones, pitfall number one, make sure your exchange funds are safe.
This may seem obvious, but it isn’t. The 1031 exchange industry is largely unaffected. This means that just being in the 1031 on a changed business is not necessarily indicative that a given firm is competent to handle your exchange. And more importantly, your exchange funds, this is your hard-earned money.
And that is why you owe it to yourself to engage your firm as your facilitator. Like IPX who beats the ethical standards that only a Fortune 500 company provides. IPX is the 1031 exchange leader in both technical expertise and managing the highest level of security for your funds. Also, when it comes to the safety of your funds, bigger is better.
IPX has developed a reputation as the national leader in internal revenue code, section 1031, qualified intermediary services and provides industry-leading security for exchange funds through its secure measures and procedural controls. That is not necessarily the case with every other qualified intermediary or lawyer with the trust account.
Also, please make sure your facilitator has done hundreds of thousands of exchanges. There’s just no reason any facilitator needs to learn the 1031 process with your transaction.
And here’s pitfall number two, start looking for replacement property as early as possible. Probably the hardest thing to do in any exchange is to identify your candidate or target replacement properties within your 45-day identification period.
Especially if you’re looking at a hot market where there are more buyers than sellers. That’s why you should be looking well before your exchange property is even closed. This gives you the extra time in case you need it to find and secure the perfect replacement property. Also, make sure the broker helping you locate a new property has access to everything available on the market.
So those are the two big 1031 pitfalls be aware of them and good luck.