Transactional Service Charges – 1031 Exchange Fees, Costs and Charges

Written by admin on May 14th, 2011

Transactional Service Charges – 1031 Exchange Fees, Costs and Charges

Evaluation of the 1031 exchange transaction fees and costs charges by Accommodators is a complex and intriguing subject. This article will help us to understand some of the intricacies of the 1031 exchange fees, costs and other charges. The article

– presents facts from the industry standards

– Points out the adequate and practical fee limits

– analyzes various fee schedules for better comparisons across the industry

A point to ponder is that fee structures consist of various other factors like how much risk is taken on by Qualified Intermediary for fair compensation apart from the work performed by them.

Following factors should be considered while analyzing and comparing the charges of various Qualified Intermediaries (Accommodators).

Administrative Charges

Property charges

Income from Interest paid by QI

Income from Interest not shared by QI and

Various other service and transaction commissions

Administrative fees and property Fees

Institutional Qualified Intermediaries (Accommodators) typically charge a 30- 40% more administrative fee (which includes setup fees as well) than Non-institutional Qualified Intermediaries. The former charges somewhere between 0-0 in comparison to the latter’s 0-0. This fee can be structured in two parts one for to be sold property (“surrender property”) and one for buying property (“stand-in property”). In addition to this a sum of around 0 – 0 property fee for each additional property processed in the tax-deferred exchange.

It is advised that all other charges and fees must be considered before making a choice on accommodators.

Income Earned from Interest on 1031 Exchange Funds

The major chunk, about two thirds of Qualified Intermediary’s exchange revenue which is tax-deferred, comes from income generated from the interests. Interest income is the revenue gained from interest of the funds deposited with Qualified Intermediaries. Qualified Intermediaries can hold the interest gained on your tax-deferred funds while these funds are deposited to them. Some of QIs may choose to share some or full portion of the income generated from the interest as well.

This fee structure is a very clear and correct way to pay your Qualified Intermediary for their rendered services. This should be evaluated, understood and negotiated very well with your Qualified Intermediary. The size of exchange transaction has a direct relation with the risk Accommodators are exposed to and equally to the gains in interest income retained by them

What are the Transactional Service Charges?

Many Qualified Intermediaries put some other charges for complicated transactional structures like allowing the seller to go for carry-back financing. There are some other transactions fees like wire transfer commission mail and courier delivery charges, which some small qualified intermediary include in their fees structures. Knowing the details of these is always advisable for making a final decision on your Qualified Intermediary.

Qualified Intermediaries can market their fee structures to look less expensive than the competition’s, but when you consider all above fee structure facts, especially the interest income retained by them, and then make a comparison, you will able to choose the best as per your need.

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