Short answer: Very little. If your buyer or seller is doing a 1031 exchange, you usually sign a cooperation clause and a notice that the contract has been assigned to their qualified intermediary. You take on no cost or liability. The price, terms and closing stay the same; the main difference is that funds go to or come from the QI.
Reviewed by Jon Hilley. Last updated September 29, 2026.
Most buyers and sellers never notice the other side is doing a 1031 exchange, beyond a few extra documents at closing. The exchanging party's qualified intermediary steps into the contract through an assignment, and the closing agent sends or receives money from the QI instead of the investor.
Where the exchange can affect you is timing. An exchanger is working against the 45-day and 180-day deadlines, so they may push for specific closing dates or ask for flexibility. That can work in your favor as a counterparty.
Key rules
- Contract is assigned: the exchanger assigns its rights in the sale or purchase contract to the QI (Treas. Reg. §1.1031(k)-1(g)(4)).
- Written notice to all parties: everyone to the contract must receive written notice of the assignment on or before the closing date (Treas. Reg. §1.1031(k)-1(g)(4)(v)).
- No receipt of proceeds: the exchanger cannot actually or constructively receive the sale money, so it is wired to the QI (Treas. Reg. §1.1031(k)-1(g)(4)).
- Deadlines drive timing: the exchanger must identify within 45 days and close within 180 days (IRC §1031(a)(3)).
- Related parties need care: buying replacement property from a related party who cashes out does not qualify (Rev. Rul. 2002-83).
Does a 1031 exchange affect buyers?
If you are buying from a seller doing a 1031 exchange, you pay the same price on the same terms. You sign an acknowledgment that the seller assigned the contract to its QI, and your closing funds go through escrow as usual. Net proceeds are wired to the QI rather than to the seller. Your title and deed are unaffected; the seller still deeds the property directly to you. Your tax position does not change either: you take on none of the seller's deferred gain, and your basis is simply what you pay.
Withholding at closing
Two withholding rules can still apply on the buyer's side. If the seller is a foreign person, the buyer is generally responsible for FIRPTA withholding, usually 15% of the amount realized (IRC §1445), and the seller's exchange does not remove that obligation by itself; the seller needs an IRS withholding certificate (applied for on Form 8288-B) to reduce it. In California, escrow withholds 3⅓% of the sales price unless the seller certifies an exemption on Form 593, and a qualifying 1031 exchange is exempt. See the 1031 exchange rules by state.
If you are selling to a 1031 exchange buyer
A buyer using exchange funds wires money from the QI rather than a personal account. The buyer will want closing dates that fit their day 45 and day 180, and may ask for a quick close if they are near a deadline. 1031 exchange buyers are often motivated, but their deadlines are not your obligation unless the contract says so.
When both sides are exchanging
Sometimes the seller and the buyer are both doing a 1031 exchange. Each has its own QI and its own assignment, and the money moves from the buyer's QI to the seller's QI through escrow. Neither exchange depends on the other, but both sets of deadlines have to fit the closing date.
What a cooperation clause looks like
When a buyer is asked to cooperate with the seller's 1031 exchange, most contracts include language like this:
Seller intends to complete a tax-deferred exchange under IRC §1031. Buyer agrees to cooperate, including signing an assignment and notice, at no additional cost or liability to Buyer and without delaying closing.
We prepare the assignment and notice documents, so neither side's attorney has to draft them from scratch.
Example: a seller's closing statement
- Closing date: June 1, 2026
- Sale price paid by the buyer: $650,000
- Mortgage payoff: $250,000
- Commissions and closing costs: $39,000
- Net proceeds wired to the QI: $361,000
- Seller's identification deadline (day 45): July 16, 2026
- Seller's closing deadline (day 180): November 28, 2026
The buyer pays $650,000 just as in any sale, and the closing agent pays the lender and closing costs as usual. The only change is the last line: the $361,000 goes to the QI's exchange account instead of the seller's bank account. The seller's replacement purchase must then close by November 28, 2026, so the seller's buyer may be asked to accommodate that schedule if the two deals are linked.
Other questions investors ask
Can I sell my 1031 exchange property to a family member?
Generally yes, if you buy your replacement property from an unrelated seller. The related-party rules bite mainly when you buy replacement property from a relative who cashes out (Rev. Rul. 2002-83), or when you swap properties directly with a relative and either side sells within 2 years (IRC §1031(f)). See Who is a related party in a 1031 exchange?
How to sell a 1031 exchange property?
Put a cooperation clause in the contract, sign an exchange agreement with a qualified intermediary before closing, assign the contract to the QI, and have the net proceeds wired to the QI rather than to you. The steps are in How do you set up a 1031 exchange?
Common mistakes
- Leaving out the cooperation clause: we often see contracts signed with no exchange language, which makes a hesitant buyer or seller harder to bring along later.
- Calling the QI after closing: the most common problem we see is an exchanger who remembers the 1031 after the proceeds hit their account. At that point it is too late.
- Counterparty worry about liability: we regularly reassure agents and attorneys that signing the notice creates no tax exposure or extra cost for their client.
- Buying from family: an exchanger buying replacement property from a relative who cashes out usually fails the related-party rules.
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