Do I have to sell before I can buy replacement property?

May 9, 2005

Subject:  1031 Tax Deferred Exchange timing question
From:  Vanessa
Date:  Mon, 11 Apr 2005

Hi,

For a 1031 exchange, do I have to close escrow on the sale of my property before I identify the replacement property? Can I sign a purchase agreement on the replacement property before the first sale is executed? And does the purchase of the replacement property have to be contingent on the sale of the first property?

Thanks,
Vanessa

Answer

Date:  Mon, 02 May 2005

Hello Vanessa,

I suggest that you retain a qualified intermediary to help you with your exchange, and get a tax advisor to work with. Acquiring the replacement property before the sale of property is a "reverse exchange" requiring specialized help, but it can be done. The purchase of the replacement property does not have to be contingent on the sale of the first property. It might have to be "parked" with the intermediary until it can be determined if the first property is sold.

Good luck!
Mike Gray

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