Where Do You Start?
We will need the following in order to prepare the legal documents for your like-kind exchange closing:
• New Exchange Data Form
• Form W-9 (for the investment of sales proceeds)
• Title Company Contact Information
• Relinquished Property Purchase and Sale Agreement or Contract
The Process:
1) Upon receiving the Contract and Title Company information, we start preparing the deferred exchange documents that are required by the IRS. Our documents usually contain the following:
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Exchange Agreement: This is the contract between you and UTB 1031 as your Qualified Intermediary or “QI”. This document required by the IRS defines the exchange terms and time frames.
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Relinquished Property Assignment: Transfers to UTB 1031 as QI the right to act on your behalf in the exchange.
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Notice to Buyer of Assignment: Notifies the buyer of your relinquished property that you are doing a like-kind exchange.
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Qualified Escrow Agreement: Exchange proceeds received by the QI will be held and invested distributed by the United Texas Bank in accordance with the terms and conditions of this Agreement.
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Closing Instructions to the Title Company: This letter gives the closing agent detailed instructions about preparing their documents for the closing, and how to handle each of our documents. It also includes our wire instructions so that the funds can be wired to your United Texas Bank Exchange account.
2) Settlement Statement for the Sale (sometimes on a HUD-1 form):
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Unless you are receiving proceeds from the closing and will pay tax on them, the settlement statement will reflect that no money is being sent to you. Instead, the sale proceeds will be shown as “Exchange Proceeds” on the settlement statement and sent to UTB 1031 as QI by the closing agent.
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NOTE: Day of closing starts the 45-day identification period and 180-day exchange period.
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Our exchange fees will be shown on your relinquished property Seller Settlement Statement and will be collected at the time of your replacement property purchase.
3) Secure Funds: Sales proceeds (exchange proceeds) are wired to an interest-bearing escrow account at United Texas Bank using Exchanger’s tax ID number and these funds are never co-mingled with any other assets.
We usually are not present at the closing, but can be available by request and are always available by phone.
When it’s time for your closing for replacement property purchase, we wire your exchange proceeds to the closing agent.
4) Once your relinquished property sale closes, that starts your 45-day Identification Period and 180-day Exchange Period.
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Provide to UTB 1031 a completed Identification of Replacement Property form within 45 days of the relinquished property closing.
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Once you’ve identified and signed a contract for the purchase of a replacement property, call us and send (by email/fax) to us the real estate contract and general closing information.
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We will prepare the documents for the replacement property portion of the exchange:
• Replacement Property Assignment: Transfers to UTB 1031 the right to purchase the replacement property on your behalf to complete the exchange.
• Notice to Seller of Assignment: Notifies the seller of the replacement property that you are doing a like-kind exchange.
• Closing Instructions to the Title Company: This letter gives the closing agent detailed instructions about preparing their documents for the closing, and how to handle each of our documents. It also includes a request for wire instructions so that your exchange funds are wired to the closing agent.
5) Settlement Statement for the Replacement Property Purchase (sometimes on a HUD-1 form):
The settlement statement will list UTB 1031 as the Buyer and you as the Exchanger.
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The funds from your exchange account will be transferred from UTB 1031 to the closing agent (by wire) and will show in the body of the settlement statement as Exchange Proceeds. The balance of funds necessary to purchase the property will show at the bottom of the Purchaser Statement as “Balance due from Buyer”. You need to arrange with the settlement agent to have this amount wired to the closing.
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We will sign the settlement statement as the Buyer, and you will sign as the Exchanger.