What is a forward exchange?

Also called a delayed exchange: you sell the relinquished property first, a qualified intermediary holds the proceeds, and those funds are used to buy the replacement property. Capital gains tax is deferred until the replacement property is sold outside an exchange.

What are the deadlines in a forward exchange?

The replacement property must be identified within 45 days of closing on the relinquished property, and that period is not extended if the 45th day falls on a weekend or legal holiday. Closing on the replacement must occur by the earlier of 180 days after transfer of the first relinquished property or the due date of that year's federal return, including extensions.

How are exchange fees set?

Fees are quoted per transaction rather than published. They reflect the type and number of properties, their location, and the complexity of the exchange, with most wires and administrative services included. Reverse exchanges typically carry higher fees than a standard forward exchange because of the additional structural and legal requirements.

1031 exchange QIs

First American Exchange Company

First American Exchange Company, LLC is a qualified intermediary for Section 1031 tax-deferred exchanges and part of First American Financial Corporation (NYSE: FAF), a title insurance and settlement services company. It handles forward, reverse and improvement exchanges, and offers a self-serve exchange platform giving round-the-clock access to forms, deadlines and exchange details.

In a forward exchange the intermediary holds the proceeds from the relinquished property until they are used to buy the replacement. The replacement must be identified within 45 days of closing on the relinquished property, and the site notes the identification period is not extended when the 45th day falls on a Saturday, Sunday or legal holiday. Closing must happen by whichever comes first: 180 days after transfer of the first relinquished property, or the due date of the federal return for the year of that transfer, including extensions. Improvement exchanges are for using sale proceeds toward construction or renovation of the replacement property.

Exchange funds are held in segregated bank deposit accounts designated in the taxpayer's name and tax identification number. Deposits are made only with FDIC-insured institutions that maintain investment-grade ratings or are subsidiaries of investment-grade institutions, the parent's treasury team monitors those institutions, and the company states it does not invest exchange funds in securities. Its parent traces its heritage to 1889, reports revenues of $7.5 billion, and operates in all 50 states and abroad. Educational material includes articles, webinars, a capital gains calculator and a podcast.

Fees are not published. The company prices each exchange on the type and number of properties, their location and the complexity of the transaction, says most wires and administrative services are included, and notes that reverse exchanges typically carry higher fees than a standard forward exchange. It also states that as a qualified intermediary it is not a broker or adviser and cannot give financial, real estate, tax or legal advice.

Best for

Investment property sellers and their advisers who want a qualified intermediary backed by a large public parent, with segregated FDIC-insured fund custody, including on reverse and improvement exchanges. Not a source of tax or legal advice, which it says it cannot give.

What they do

Forward (delayed) 1031 exchanges
Reverse 1031 exchanges
Improvement and construction exchanges
Self-serve online exchange management
Exchange fund custody in segregated accounts
Capital gains deferral calculator
1031 exchange webinars and education

Details

Attribute	Value
Ownership	Subsidiary
Exchange types	Forward, Reverse, Improvement
Fund security	Segregated accounts

What stands out

Exchange funds are held in segregated accounts designated in the taxpayer's name and tax identification number.
Deposits are made only with FDIC-insured institutions holding investment-grade ratings or subsidiaries of such institutions.
States that it does not invest exchange funds in securities.
A subsidiary of First American Financial Corporation (NYSE: FAF), which reports revenues of $7.5 billion and traces its heritage to 1889.
Handles forward, reverse and improvement exchanges, with a self-serve platform for forms and deadlines.

Common questions

What is a forward exchange?: Also called a delayed exchange: you sell the relinquished property first, a qualified intermediary holds the proceeds, and those funds are used to buy the replacement property. Capital gains tax is deferred until the replacement property is sold outside an exchange.
What are the deadlines in a forward exchange?: The replacement property must be identified within 45 days of closing on the relinquished property, and that period is not extended if the 45th day falls on a weekend or legal holiday. Closing on the replacement must occur by the earlier of 180 days after transfer of the first relinquished property or the due date of that year's federal return, including extensions.
How are exchange fees set?: Fees are quoted per transaction rather than published. They reflect the type and number of properties, their location, and the complexity of the exchange, with most wires and administrative services included. Reverse exchanges typically carry higher fees than a standard forward exchange because of the additional structural and legal requirements.