Seeking help - started 1031 exchange now want to hire consultant / QI

[Derek Gardner]

OK, so I recently sold a local rental property and just went into escrow to buy a replacement. My friend convinced me to use him as a QI as he's done it before over the years and it would save me money. I'm second guessing that decision now and would feel a lot better if I paid someone to review things to make sure it is being done correctly since my friend does not do this as his day to day.

An agreement was signed prior to my sale, and assignment of the sale contract and escrow sent the proceeds to my friend. Now I am at the stage of negotiating a repair credit on the upleg and then removing contingencies.

I know this is an unusual request but is there anyone who is experienced with 1031 that I could hire to make sure I do this right any my friend doesn't misguide me and mess this up? Your name would not go on anything, just need someone to review and advise on best course(s) of action.

Also, not sure if there are nuances with California but experience with that state would be a plus as a noticed this: 

https://www.ftb.ca.gov/file/personal/reporting-like-kind-exc...

Thx!

[Dave Foster]

@Derek Gardner. It sounds like two out of the three components of the 1031 exchange were in place at the closing.  As long as your friend has no business or family relationship with you, you have possibly started a correct 1031 exchange.  Whether or not it would pass with the IRS depends on language used in the agreement and the wordings in the settlement statement.  And whether notices of the assignment were posted properly.  

The problem with a friend is that your money is now their money.  If anything happens to them there is no protection for you.  A lawsuit, divorce, bankruptcy, death, - all could really jam up things and cause you to not only lose your 1031 exchange but the money they are holding as well!!

At this point in time you are stuck with them as your QI if you want to finish.  No QI would accept an official substitution of QI from a personal friend.   But consulting with you to make sure you're as proper as possible might be a possibility.  

I'll reach out via pm to give you more information and see if there's something we can do for you.