Investors buy real estate to earn a profit. Decisions are carefully made to determine the effects of location, potential rents and expenses, financing and a multitude of other important factors in an attempt to realize much of a profit as possible. Once the profit is made, the typical investor sells his property, pays his taxes and reinvests in other real estate. The vast majority of real estate investor seldom make use of one of the most valuable techniques for increasing and preserving profit we have available: The tax deferred exchange

Present exchange laws are based upon tax provisions dating back to 1921. Subsequent code changes, tax court rulings, and Revenue Rulings have created a set of clear, concise guidelines for performing defensible tax deferred exchanges. Judicial decisions made in 1979 and the 1984 Tax Reform Act added the concept of the delayed exchange. It is possible to sell your property today and complete your tax-deferred exchange in six months. By using the technique of the "reverse exchange" your may acquire a property today and sell the property you no longer wish to own in the future while still deferring taxes on the sale.

Troubleshooting an exchange is the best way to ensure a successful exchange. Time is your biggest enemy; we encourage our Exchangors to search for Replacement properties as soon as possible. The search for replacement property could prove fruitful, escrow can be opened at any time, DO NOT allow the replacement property to close without an exchange being structured. If it becomes necessary to close the replacement property before the relinquished property has closed, a Reverse Exchange can be structured.


Contact Atlanta Commercial Real Estate Services, Inc. and discuss the proposed exchange before posting the relinquished property for sale.

1. Market the relinquished property for sale.

2. When writing purchase/sale agreement, include a 1031 cooperation clause. The cooperation clause establishes your intention to exchange and puts the parties of the exchange on notice.

3. Open escrow as usual and inform the closer of your intent to exchange.

4. Contact ___________________________________________ with the escrow information.

5. Copies of the Sale Agreement and Preliminary Title Report will be obtained from your Escrow officer.

6. All exchange documentation and escrow instructions are forwarded to escrow with copies to Exchangor and the Exchangor’s agent if applicable.

7. Prior to the close of escrow, an account is set up for the proceeds from the sale of the Relinquished Property. At this time, the Exchangor may request to become one of the signatories on the account along with _______________________. If this is the case, the signature card will be signed ____________________________ and then sent to the Exchangor for signing and returned to the bank

8. At closing the Exchangor will sign the settlement statements read and approved as the Exchangor. ___________________________ will be the seller on all documents and will sign as such. When the Exchangor signs the documents at the close of escrow, the following documents ___________________________________ will be signed along with ordinary closing documents:

-Exchange Agreement
-Novation Agreement (assigning seller’s position to __________)
-Qualified Escrow Instructions for bank
-Fee Schedule

*Escrow instructions, settlement statements and deed will be prepared by escrow and will also be signed by Exchangor. Escrow prepares deed directly from Exchangor to buyer.

9. When escrow closes, proceeds from the sale are wired into the exchange account and ___________________________________ provides the Exchangor with the Identification Packet giving the 45 day Identification deadline and the 180 day completion deadline along with an Identification form to be returned to __________________________________________ within the 45 day identification period.

10. When the Exchangor opens escrow for the acquisition of the Replacement Property, ________________________ will once again obtain a copy of the Purchase Agreement and Preliminary Title Report from escrow in order to prepare documents and instructions. (Exchangor will once again be provided with copies.) If it is necessary for an Earnest Money deposit to be made to escrow, this can be done with Exchangor’s funds, which would then be refunded to Exchangor upon close of escrow, or it can be made from the exchange funds that are being held by ADVANTAGE. (If Exchangor is listed as signor on account, they must be available by fax at any time that funds be requested out of account.)

-At the close of escrow, the Exchangor will sign the following from _______________________________:
-Wire instructions to bank for transfer to Replacement Property Escrow.
-Novation agreement
-Declaration of Completion

*Escrow instructions and settlement statements will be prepared by escrow and will also be signed by the Exchangor. Escrow prepared the deed directly from seller to Exchangor.

The Replacement Property is now the Exchangor’s and the exchange has been completed.

11. __________________________________ prepares the Termination Packet that summarizes the exchange, what was given and received, and finally gives an accounting of the funds.

Congratulations, you have completed your exchange.

**We must complete the entire exchange within the 180-day completion deadline.**