(AN AFFILIATE OF Fidelity
National 1031 Exchange Services, Inc.)
Flowchart for §1031 Tax
Deferred Exchange ("Reverse"-Relinquished Property Parked)
REPLACEMENT PROPERTY
Exchanger enters into contract
(containing an exchange cooperation clause) to purchase the Replacement Property.
Exchanger requests Pacific American
Property Exchange Corporation (PAPEC) to act as Qualified Intermediary.
PAPEC obtains:
A. Preliminary Report/Commitment
B. Purchase Contract Agreement/Closing
Instructions PAPEC prepares:
A. Assignment of Buyer's
position
B. Exchange Agreement
C. Property Management Agreement
PAPEC borrows
funds for the down payment and closing costs from the Exchanger (preferably
in an amount representing at least the net equity in the Relinquished Property).
PAPEC signs a promissory note prepared by closer for the amount of the "loan"
which reflects the Exchanger as the beneficiary.
Exchanger signs exchange documentation
and reviews and approves all closing documents.
PAPEC closes on the purchase
of the Replacement Property as Buyer. PAPEC authorizes closer to prepare the
deed to record directly from Seller to Exchanger, CONCURRENTLY with the transfer
of the Relinquished Property from Exchanger to PAPEC.
RELINQUISHED PROPERTY
Exchanger authorizes PAPEC to
open escrow and title for the transfer of Relinquished Property from Exchanger
to PAPEC for a value comparable to the expected sale price.
PAPEC and Exchanger instruct
closer to prepare documents with the following terms:
A. PAPEC to acquire title
"subject to" any existing encumbrances.
B. There will be no proration
of taxes, HOA dues, etc.
C. Closer to add PAPEC to
Exchanger's existing hazard insurance policy.
D. Closer prepares the deed
from Exchanger to PAPEC and is authorized to record this deed CONCURRENTLY
with the close of the Replacement Property acquisition by Exchanger.
PAPEC enters into a Property
Management Agreement with the Exchanger to manage the Relinquished Property,
pending the completion of the exchange.
Exchanger begins negotiations
on the sale of the Reliquished Property to the third-party Buyer. After agreeing
on terms, PAPEC enters into a contract to sell the Relinquished Property.
PAPEC will sign the contract upon receipt of a "Read and Approved" copy signed
by the Exchanger.
PAPEC prepares:
A. Assignment of Seller's
Position
Exchanger reviews and approves
all closing documents.
PAPEC closes on the sale of
the Relinquished Property as Seller and instructs closer to prepare a deed
from PAPEC to the Buyer.
The exchange proceeds are used
by PAPEC to pay off the "loan" from the Exchanger (created in step No.
3 above) and cancel the promissory note.