(AN AFFILIATE OF Fidelity
National 1031 Exchange Services, Inc.)
Flowchart for §1031 Tax
Deferred Exchange ("Reverse"-Replacement Property Parked)
REPLACEMENT PROPERTY
Exchanger enters into a contract
(containing an exchange cooperation clause) to purchase the Replacement Property.
Exchanger (either directly or
through their closer, broker or attorney) requests Pacific American Property
Exchange Corporation (PAPEC) to act as Qualified Intermediary.
PAPEC obtains:
A. Preliminary Report/Commitment
B. Purchase Contract/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 for the amount of the "loan," which reflects
the Exchanger as the beneficiary.
Exchanger signs exchange documentation
and reviews and approves closing documents.
PAPEC closes on the purchase
of the Replacement Property and instructs closer to prepare and record the
deed from the Seller to PAPEC.
A. PAPEC is reflected as Buyer
and the Exchanger reviews and approves all closing documents.
B. Exchanger pays all extra
title and escrow costs related to the exchange.
C. PAPEC will be named as
co-insured on the hazard insurance policy
Exchanger enters into a Management
Agreement to manage Replacement Property while owned by PAPEC.
RELINQUISHED PROPERTY
Exchanger enters into a contract
(containing an exchange cooperation clause) to sell the Relinquished Property.
PAPEC obtains:
A. Preliminary Report/Commitment
B. Sale Contract Agreement/Closing
Instructions PAPEC prepares:
A. Assignment of Seller's
Position
PAPEC closes on the sale of
the Relinquished Property and instructs closer to prepare and record the deed
directly from the Exchanger to the third-party 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.
Simultaneously with the transfer
of the Relinquished Property to the third-party Buyer, PAPEC transfers the
Replacement Property to Exchanger and requests closer to record the deed from
PAPEC to the Exchanger.