Vetting a QI: nine questions before you wire anything.

Why this deserves an hour of your life

For up to 180 days, every dollar from your sale sits under your qualified intermediary's control — and here's the industry's open secret: QIs face no federal licensing, no federal capital requirements, and in most states, no regulation at all. Anyone can print business cards tomorrow. Most QIs are honest and competent. The 2008 LandAmerica 1031 collapse — which froze hundreds of exchangers' funds in bankruptcy and turned sale proceeds into unsecured claims — is the permanent reminder that "most" is not a security procedure.

Nine questions. Ask them all. Any hedging on the first four is disqualifying.

The fund-security four

1. "How exactly are my funds held?"

The only good answer: a segregated account in your name/for your benefit (ideally a qualified escrow or qualified trust arrangement) at a major bank — never commingled in the QI's general operating pool. Commingling is how one firm's problem becomes every client's problem.

2. "Who can move the money, and how?"

You want dual authorization — disbursements requiring your written sign-off plus theirs, with bank-verified wire procedures and callback verification. While you're at it, ask about their wire-fraud protocols; exchange wires are a favorite target of business-email-compromise scams, and a QI without hardened procedures is a soft target holding your money.

3. "What bonding and insurance do you carry — and can I see certificates?"

Fidelity bond (protects against employee theft) and errors-and-omissions coverage, in amounts that bear some relationship to funds held. A real firm sends certificates the same day. A firm that "will get back to you" just answered a different question.

4. "Who owns you, and how long have you operated?"

Bank-owned and large independent QIs bring balance-sheet accountability; boutique QIs can be excellent too — with longer track records doing the work. What you're screening out is the newly formed LLC with a nice website and no history. Ask for the year founded, exchanges handled annually, and two professional references (attorneys or CPAs, not clients they picked).

The competence five

5. "Who works on my file, and what happens on day 44 at 6 p.m.?"

You're hiring the person who answers the phone, not the logo. Ask who processes identifications after hours near the deadline — the answer tells you everything about how the firm thinks.

6. "Walk me through your identification procedures."

A good QI has forms, delivery confirmation practices, and proactive deadline reminders. A great one calls you on day 38, unprompted. See the 45/180 guide for why that call is worth the whole fee.

7. "Have you handled my structure before?"

Reverse exchanges, improvement exchanges, partnership situations, related-party wrinkles — if your exchange has any twist, you want a QI who's done that twist dozens of times, with an in-house attorney or one on speed dial.

8. "What do you charge — all-in?"

Standard delayed exchanges commonly run $750–$1,500; reverses several times that. Also ask who keeps the interest earned on your funds while parked — many QIs' real revenue lives there, which is fine, but it should be disclosed, not discovered.

9. "What don't you do?"

The right answer includes: give tax advice, give investment advice, or recommend specific replacement properties. A QI selling you investments is wearing two hats over one wallet.

Timing: when to do all this

Before you accept an offer on your property — because the QI must be in place before closing (case file 02 shows what happens otherwise), and because vetting under deadline pressure is how corners get cut. One hour of calls, weeks before closing, while nothing is urgent. It will be the highest-paid hour of your exchange.