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In a reverse exchange the "replacement property" is purchased before the Exchanger has sold the "relinquished property". Typically, a third party (several options) purchases the Replacement Property for the Exchanger. Then, when the relinquished property is sold to a buyer at a later date (within the 180-day IRS time limitation), the third party completes the exchange by deeding the Replacement Property to the Exchanger.

These 7 easy steps complete a reverse exchange:

Step 1
Exchanger engages us to prepare documentation for reverse exchange transaction.

Step 2
The replacement property must be purchased by the third party before the Exchanger has sold relinquished property to buyer; Exchanger cannot purchase it directly.

Step 3
Exchanger arranges financing for the third party to purchase Replacement Property; these loans can be made by Exchanger, its affiliates or third party lenders.

Step 4
The third party and Exchanger execute reverse exchange documents and the third party purchases Replacement Property (this is the "parking" arrangement).

Step 5
The third party net-leases Replacement Property to Exchanger, who then operates and manages property as lessee.

Step 6
Exchanger sells the relinquished property through a qualified intermediary ("QI"). The QI then uses the proceeds of the sale to purchase the Replacement Property from the third party.

Step 7
Exchanger acquires the replacement property through the QI from the third party to complete 1031 tax-deferred exchange.