Your qualified intermediary must be in place prior to your sale.  

Do you have a Qualified Intermediary?

The note could also be drafted in the Qualified Intermediary's name and then used toward the purchase of the replacement property or converted into cash through a sale of the note. 

His argument is that you don't take title of the property, so therefore you are acting as an intermediary by bringing the investor and seller together.

Others I have on mine are my plumber, electrician, painter, handyman, 1031 intermediary, general contractor and landscape contractor.

Some will have the checks or wires sent to them and deposited into their attorney trust account, and then they can wire out as needed, including the balance of the funds to the Qualified Intermediary.  

A 1031 exchange is a specific process that must involve a qualified intermediary prior to the sale of the old property.  

Is there much interaction between the lien purchaser and the actual homeowners in these situations or is everything done through a 3rd party intermediary? 

If he tried to influence the seller to accept an inferior offer for his own personal gain, that would be a big No No.And I'm not going to get into the issues of dual agency, which is illegal in a lot of states, or intermediary agency.

We raised all of ours as preferred equity for new development projects.Honestly the sites that are intermediaries are a dying breed IMO.