14. Why do I need an intermediary?

An Intermediary is required in all transactions other than those outlined below: A two-party simultaneous exchange. (*Please see note below.)

Benefit: Simple and Cost-Effective

NOTE: The only safe harbor recommended by the Treasury Department for simultaneous exchanges is the use of a Qualified Intermediary.

The ACB Exchange also called the Alderson or Reverse Missouri Waltz Exchange. (Buyer buys replacement property form the seller, and then exchanges it with the exchanger for the relinquished property. These steps all occur simultaneously.)

Problem: (i) potential for, as hazardous waste liability to attach to buyer of replacement property buyer passes through the chain of title and deeds to the exchanger, and the potential for liens, clouds and judgments which might be filed against the buyer of the relinquished property to attach the replacement property, as the buyer enters the chain of title.

The ABC Exchange also called the Baird or Missouri Waltz Exchange. (The exchanger and the seller of the replacement property exchange properties, and the seller, who now owns the relinquished property, sells to the buyer. These steps occur simultaneously)

Benefit: Minimizes transfer tax consequences by having the double title transfer on the relinquished property, which has a lower value.

Problem: (i) potential for hazardous waste liability to attach to seller of the replacement property, as seller passes through the chain of title on the relinquished property and deeds to the ultimate buyer, and (ii) the potential for liens, clouds and judgments which might be filed against the seller of the relinquished property to attach the to the replacement property, as the seller enters the chain of title.

The Pot Exchange, (Any number of people put their "haves" and "wants" into one pot, and a single escrow officer or closing agent sorts everything out and delivers the appropriate "goods" to each party, whether that be property, cash or paper, etc. This is accomplished by a direct deed system, and must occur simultaneously.)
Benefit: Avoids or minimizes transfer taxes or potential hazardous waste liability.

Problem: Requires one very accurate and dedicated closing agent or escrow officer.

A Qualified Intermediary is always required for the two remaining types of exchanges:

  1. The Simultaneous Exchange With an Intermediary
  2. The Delayed Exchange With an Intermediary

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