Most 1031 real estate investors  are not aware that the 1031 Qualified Intermediary (QI) industry is not regulated by the federal government and most states. Practically any individual can establish a business acting as a 1031 Qualified Intermediary without testing or approval from any governmental entity. This means that in most states, there are no regulations or laws concerning how your 1031 Exchange funds are deposited, invested, or secured by your QI.

Based on this lack of regulation choosing the safest QI is obviously an integral part of your 1031 exchange. The nation’s largest  Qualified Intermediary is IPX1031 (www.ipx1031.com/).

They are a wholly owned subsidiary of Fidelity National Financial which is a Fortune 500 company, publicly traded on the NYSE (FNF) and along with its subsidiaries is the largest title insurance company in the country. In addition to being the parent company of IPX1031, FNF is also the parent company of Fidelity National Title, Chicago Title, Commonwealth Title, Alamo Title, Ticor Title and Lawyers Title.

Security Controls of the QI

When using a QI, it’s important to look at the types of  security controls they have in place to protect your 1031 funds. Below are some of the highlights of the Qualified Intermediary IPX 1031 and the security controls they have in place to protect customer funds:

  • $100 Million Fidelity Bond
  • $50 Million Written Performance Guaranty
  • $30 Million in Errors & Omissions Insurance
  • IPX1031 is a wholly owned subsidiary of Fidelity National Financial

–  Fidelity National Financial is traded on the New York Stock Exchange (FNF)

–  Largest provider of title insurance services in the country

– The highest ranking Fortune 500 title provider

  • As part of a publicly traded corporation, they are subject to audits, controls, and a level

of financial transparency that’s not normally required of privately held companies.

  • Exchange funds are held in segregated accounts for the benefit of the named Exchanger

using the Exchanger’s taxpayer identification number.

  • Standard investment vehicle is a separate interest bearing bank account for each exchange.
  • Daily reconciliation of exchange account balances.
  • Disbursement of exchange funds requires written authorization of the Exchanger.
  • All disbursements require dual authorization and are controlled by their Banking Division.
  • Sales and administrative staff have no authority or ability to transfer funds.

Please see the below information “1031 DST Options for when your 1031 DST investment is sold.” It’s important to know that you have a choice to change your QI when your 1031 DST is sold. We recommend going to your QI’s website or calling their office and checking if they have all these type of security controls protecting your 1031 money. If not we suggest finding another QI, IPX is obviously a good choice but there are other large companies as well to choose from.

I hope this type of information helps you when making your decision to use a QI. If you would like to discuss this further or have any questions please call us at: 972-661-1283 ext: 3.