When Should You Start a 1031 Exchange? Why Timing Matters

The short answer: call your Qualified Intermediary once you're under contract to sell, and always before the sale closes. If you can start the conversation when you list, even better.

Here's why the timing works the way it does.

The one deadline you can't miss

Your exchange has to be set up before your relinquished property closes. That means the exchange agreement is signed and the sale contract is assigned to your QI before escrow closes.

If the sale closes first and the proceeds go to you, or to an account you control, the sale can't be turned into a 1031 exchange afterward. There's no fix for this one, and this situation unfortunately plays out more often than it should.

When the clock starts

The 45-day and 180-day periods both start the day your relinquished property closes. They run at the same time, and they include weekends and holidays.

• Day 45: your replacement property identification is due to your QI, in writing.

• Day 180: the last possible day to close. You have up to and including that date to complete your replacement purchase or purchases. If your tax return is due before day 180, that due date comes first unless you file an extension.

Being under contract doesn't start either clock. It's simply the point where things get real and it's time to call us.

What starting early gets you

Starting early doesn't change the rules, but it gives you a head start on finding a suitable replacement property.

We always recommend starting your replacement property search before your sale closes. That way, you can use your 45 days to narrow down properties you’ve already considered. This is especially helpful if you’re purchasing in a market you don’t know well.

Get your lender involved early, too. Financing delays can put your exchange at risk, and the exchange deadline doesn’t move because your loan isn’t ready. Starting that conversation before your sale closes gives you more time to work through financing and avoid a last-minute scramble.

Your CPA should also be part of the conversation before you sell. They can help you determine how much you need to purchase and reinvest to fully defer your gain, along with the tax impact if you want to keep some cash.

On our end, the earlier you bring us in, the sooner we can coordinate with your closing agent and prepare your exchange documents. The exchange needs to be in place before your sale closes, with the exchange proceeds sent directly to us.

Getting your exchange set up

Our goal is to keep this simple. Start by connecting us with your closing agent—whether that’s an escrow officer, title company, or closing attorney—and we’ll coordinate the exchange paperwork with them.

We’ll collect a few items from you, including a W-9 to help set up your exchange account. Once we have the required information, we can typically have your exchange set up the same day. Getting started early gives everyone time to prepare and helps keep your closing on track.

The bottom line

You don't need a replacement property picked out before you sell. You do need your exchange in place before you close. Call us when you're under contract, or sooner if you'd like to talk through your options.

APX 1031 is a Qualified Intermediary. We don't provide tax or legal advice; talk with your CPA or attorney about your situation.