A STRAIGHTFORWARD APPROACH
TO REVERSE EXCHANGES.

The Reverse Exchange is a powerful tool for investors in certain situations. For example, in some real estate markets, low inventory levels make it much easier to sell a property than to buy a desirable replacement. A Reverse Exchange is ideal in this case because it allows you to buy a new property before you sell the old one and still have a valid 1031 exchange. In addition to real property, Reverse Exchanges can be applied to a wide variety of investment assets including aircraft, boats and art.

The two types of basic Reverse Exchanges
There are two types of basic Reverse Exchanges — Exchange First and Exchange Last. In either case, the Qualified Intermediary is required to hold title to one of the assets involved in the exchange (either the Replacement Property or the Relinquished Property) during the exchange period for the exchange to fall within the IRS safe harbor guidelines. The “like-kind” property requirements and the 180-day deadline of Forward Exchanges also apply to Reverse Exchanges.

Exchange First
In an Exchange First, the Exchanger transfers title to the Relinquished Property to the Qualified Intermediary and then receives title to the Replacement Property. These events often take place in a short time frame and simulate a standard or simultaneous Forward Exchange. When the Relinquished Property is sold, the Qualified Intermediary transfers the title to the ultimate buyer.

Exchange Last
In an Exchange Last, the Exchanger buys the Replacement Property and transfers title to the Qualified Intermediary. When the Relinquished Property is sold, title to it is transferred to the Buyer and the Qualified Intermediary transfers title to the Replacement Property to the Exchanger.

Some financial considerations
The type of Reverse Exchange that an Exchanger uses typically depends on the way in which the Replacement Property is being purchased. If the Exchanger is using cash or private financing, either type of Reverse Exchange can be used. If the Exchanger is using conventional financing, an Exchange First is the preferred option because lenders seldom agree to have a third party, in this case the Qualified Intermediary, “on title” to the property securing the loan. As a general rule, a Reverse Exchange requires additional planning. We encourage our clients to advise their tax and legal professionals of their intent to do a Reverse Exchange in order to fully understand the impact it may have.

THE NES DIFFERENCE

Total customer support
An Exchange Officer who is fluent in legal, tax and exchange planning matters will be assigned specifically to your transaction, and will be accessible via phone, email or fax.

Your NES Exchange Officer will:

• Quickly set up your account.
• Gather all the right data and generate the necessary
  exchange documents.
• Closely monitor and manage the timing of events and flow
  of documents to ensure a valid exchange.
• Advise you on all the actions and costs necessary.
• Assist you with timely notifications on key issues and
  deadlines.

Going the extra mile
As part of our goal to simplify and streamline the entire process, we also provide you with a set of solutions designed to address critical needs that can arise during a Reverse Exchange. For example, in an Exchange Last, since the Q.I. will be on title to the Replacement Property, obtaining financing or property insurance may be difficult. In either case, we can refer you to one of our financial or insurance partners who offer products specifically tailored for these situations.

Similarly, in an Exchange First, if supplying the deed to your Relinquished Property within the necessary time frame becomes a problem, NES has a partner who can help to generate a new deed for you — often in less than 24 hours.

Solid security for safe harbor
Nothing is more important to us than the security of our clients’ property, and helping to assure a successful transaction. That’s why we strictly adhere to the “safe harbor” guidelines for a Reverse Exchange as specified in Revenue Procedure 2000-37 under the Internal Revenue Code, Section 1031. We also provide a protection program featuring a comprehensive Fidelity Bond and Errors and Omissions insurance policy for each account.

Moreover, a nationally recognized public CPA firm has audited our processes, which have been proven through hundreds of successful Reverse Exchanges, for compliance and controls. In fact, we have received an unqualified SAS 70 Type II opinion concerning the effectiveness of the controls we’ve put in place. We also strictly adhere to the privacy requirements of a number of critically important federal statutes as they relate to the protection and retention of financial and personal information.

Adding to all this assurance is the fact that Nationwide Exchange Services is a respected member of the Federation of Exchange Accommodators (FEA), the only national trade association organized to represent professionals who conduct like-kind exchanges.

Accelerated processing
Our automated systems use advanced and proven document management and business process technology. This means we can respond very quickly. For example, for a basic Reverse Exchange, we can prepare the necessary exchange agreements in as quickly as two hours. So, you can call us at the last minute, if you have to, and still be assured of the same high levels of accuracy and service.*

Proven performance
Since 1990, Nationwide Exchange Services has successfully conducted thousands of Reverse Exchanges. Today, our industry-setting standards have helped make us the preferred provider for Reverse Exchanges by more leading banks, independent title companies and major law firms than any other Qualified Intermediary.

*Keep in mind that some steps in the process require the involvement of other third-party-related services (e.g., local transfer of deeds, insurance, loans), which can affect the timely completion of critical steps in the exchange.

Learn more about Reverse Exchanges.
Click here to download a brochure in pdf format.