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About Exeter 1031 Exchange
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1031 Exchange Fees, Costs and Charges
This article will help you determine what is considered to be the industry standard and what is not; to identify what is acceptable and reasonable and what is not. It will help you analyze fee schedules to make sure that you are comparing apples to apples. You also need to keep in mind that fees are not based just on the amount of work performed by the Qualified Intermediary but are also based on the amount of risk taken on by the Qualified Intermediary in order to fairly compensate the Qualified Intermediary for the risk taken. When comparing 1031 exchange fees and costs charged by the various Qualified Intermediaries (Accommodators), you should fully analyze and consider factors such as:
It is easy for a Qualified Intermediary to structure its fees and costs to appear to be less expensive than its institutional competitors, but when you factor all of the above fees, costs and charges into the equation, especially the amount of interest retained by the Qualified Intermediary, you will able to compare each fee schedule side-by-side to determine which is the best value. Set-up, Administrative Fees and Per Property Costs Institutional Qualified Intermediaries typically charge a set-up or administrative fee in the range of $700.00 to $800.00 for each 1031 exchange transaction. This fee usually includes one sale property ("relinquished property") and one purchase property ("replacement property"). You would pay an additional property fee of about $200.00 to $300.00 for each additional property processed in the tax-deferred exchange. Non-institutional Qualified Intermediaries typically charge lower set-up or administrative fees between $400.00 and $600.00, which appears to be less expensive than the institutional Qualified Intermediaries. You need to consider all of the other costs and charges in order to truly compare 1031 exchange service providers. Interest Income Earned on 1031 Exchange Funds Set-up and administrative fees typically only make up about one-third of a Qualified Intermediary's tax-deferred exchange revenue. The majority of their 1031 exchange revenue, or about two-thirds, is comprised of interest income. Qualified Intermediaries will retain or share all or a portion of the interest income earned on your tax-deferred exchange funds while they are on deposit or held by the Qualified Intermediary. This fee structure is actually a very fair and efficient way to compensate your Qualified Intermediary for the tax-deferred exchange services performed on your behalf. The larger the tax-deferred exchange transaction is the more risk your Qualified Intermediary is exposed to, and conversely the amount of interest income retained by your Qualified Intermediary increases in direct relationship to the size of the transaction. You do need to evaluate the amount that will be retained by the Qualified Intermediary and the amount that will be paid to you in order to clearly understand the total amount of fees you are paying to your Qualified Intermediary, otherwise you will not be comparing apples to apples. Transactional and/or Service Fees The majority of the Qualified Intermediary's fee structures only include a set-up fee and a percent of the interest income. There are special charges for more complicated transactional structures, including seller carry-back financing. A few smaller Qualified Intermediaries may charge various transactional fees such as wire transfer fees, overnight delivery or courier charges, facsimile costs, etc. It is important to know and understand the total fee structure before making a final selection of your Qualified Intermediary. |
