1031 Exchange Fees, Costs and Charges
The 1031 Exchange industry has long since been chided by professionals and investors for not explaining the fees, costs and charges associated with the work done by a Qualified Intermediary/Accommodator. Here we will delve into what is considered standard in the industry and what practices deviate from the norm into the realm of unacceptability in terms of 1031 Exchange fees and other associated charges to the Investor, both on the part of the Qualified Intermediary and the amount of risk exposure.
Interest Income Earned on 1031 Exchange Funds
About two-thirds of the 1031 Exchange revenue of a Qualified Intermediary is comprised of interest income earned and retained on the 1031 Exchange funds; the other one-third is typically made up of set-up and administrative fees. In addition, they will retain or share all or part of the interest generated on the Investor’s tax-deferred exchange funds while on deposit. This is typical and generally considered fair in terms of compensation of the Qualified Intermediary; conversely, the greater the risk associated with larger tax-deferred exchange transaction results in more income retained.
Set-up and/or administrative fees
While the initial fee offered by a Qualified Intermediary may seem reasonable, the Investor must figure in all associated charges and fees for various services that stand to drive said fees up; such services include per property charges, interest income paid to the Investor, interest income retained by the Qualified Intermediary, and transactional or service fees. Once all the cards have been laid on the table in terms of services, charges, and fees, the Investor then has a clear picture of how to proceed.
Transactional and/or Service Fees
Most Qualified Intermediaries acquire the majority of their income from a set-up fee and establishing a set percentage of the income gained from interest; other charges may apply if the details of the transaction are more complex of it their duties include acts such as wire transfers or overnight delivery.
Set-up, Administrative Fees and Per Property Costs
For each 1031 Exchange transaction, the average Qualified Intermediary charges an administrative fee ranging from $750.00 to $1,000.00; additional 1031 Exchange transaction typically carry additional fees ranging from $200.00 to $400.00 each. Lower set-up or administrative fees can be found with the services of a non-institutional Qualified Intermediary, ranging from $400.00 and $600.00.
Disclaimer: 1031 exchange made simple does not guarantee the performance of the QI's in our referral network and we can not be held liable for any misrepresentations or mistakes in regards to a 1031 exchange by one of the QI's that we refer to you. 1031 Exchange made simple does not provide tax advice nor can we make representations regarding the tax consequences of an exchange transaction. 1031 Exchange made simple is a 1031 QI Referral Network. 1031 made simple is not responsible (in any way) for the performance, creditability, and financial condition of any QI in our network. In this new economic environment it is imperative that all potential 1031 exchange customers do their own due diligence and research on any QI that they may use, on a 1031 exchange. Please verify and check the validity of the Bonding and Insurance of your QI. It may be wise to have your 1031 exchange accounts set up as separate, individual customer accounts. Our web site is to be used as a information based web site only. All parties doing a 1031 exchange must consult their tax advisors or attorney for this information.
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