Can I sign a contract on the replacement property before my sale closes?

Sign today if you like; only the deed has to wait for your buyer

Go under contract whenever the deal appears. The deferred-exchange regulation describes the transaction by the sequence of transfers, not the sequence of signatures: you transfer the relinquished property and 'subsequently receive' the replacement property (Reg. §1.1031(k)-1(a)).

Asset Preservation states the working version: 'The taxpayer should make sure to close the sale of the relinquished property before it must close the acquisition of the replacement property to avoid the need for a reverse 1031 exchange arrangement.' It also notes that an early offer 'can be proactive and remove much of the uncertainty from the delayed exchange process.'

Nothing about an early contract shortens or lengthens your clocks. Section 1031(a)(3) counts 45 days and 180 days from the date you transfer the relinquished property, so an offer accepted in March on a sale that closes in July buys you no extra time and costs you none; when does the 45-day clock start pins down day zero.

An early contract does have one real advantage. If the seller can wait for your closing and then move fast, receiving the replacement inside the first 45 days satisfies the identification requirement by itself; if I close on the replacement within 45 days, do I still have to identify it explains that shortcut and its limits.

Reserve the right to assign, because the intermediary has to be written into your purchase before it funds

Sign in your own name and keep an assignment right. Reg. §1.1031(k)-1(g)(4)(v) treats the intermediary as a party to your agreement once your rights are assigned to it and all parties are notified in writing on or before the date of the relevant transfer of property.

On the purchase leg, that written notice is due by the replacement closing, not by the day you sign. There is room to paper it after your buyer surfaces, and none after the seller deeds the property to you.

The companion sentence, (g)(4)(iv)(C), is what lets the intermediary's wire count: it is treated as acquiring and transferring replacement property when it enters an agreement with that property's owner and the property is transferred to you under that agreement.

• An assignment sentence: buyer may assign this agreement to a qualified intermediary without further consent from the seller
• A purchase-side cooperation clause so the seller signs the notice of assignment at no cost and no liability; see Do I need an exchange cooperation clause?
• A closing date tied to your sale closing rather than to a fixed calendar date
• A written right to push the purchase closing 15 to 30 days if your buyer's lender slips

Until your sale funds, the deposit comes out of your own account

The intermediary holds nothing before your sale closes, so an early contract means an early deposit from your own money. It returns to you as a credit on the replacement closing statement, not as a payment from the intermediary.

Who holds the earnest money deposit covers that mechanism, including the assignment sequence a QI runs before it will wire a deposit of its own.

One day between the closings is plenty; the wrong day adds a five-figure structure

Hypothetical with round numbers: an $800,000 sale is set for October 8 and a $950,000 purchase for October 9. That is an ordinary forward exchange. The intermediary receives $800,000 on the 8th, wires it plus your $150,000 of new money on the 9th, and charges its usual fee.

Swap the dates and the same two deals need an accommodation titleholder, a lender willing to lend to an entity you do not control, and a far larger bill; how much does a 1031 exchange cost shows the spread between the two structures.

So make the purchase closing contingent on the sale closing and keep a written extension in reserve. If the buyer walks anyway, what happens if my sale falls through covers the restart.

When the seller will not wait, an accommodation titleholder buys it instead of you

A seller who refuses to move the date is the classic reverse trigger. Under Rev. Proc. 2000-37 an exchange accommodation titleholder takes 'qualified indicia of ownership' of the property and holds it for your benefit while the sale is arranged.

The revenue procedure expressly allows you to fund that structure: you may lend or advance money to the titleholder, guarantee its loan, lease the property back, and manage it. Reverse 1031 exchanges covers what that costs and which lenders will play.

• A written qualified exchange accommodation agreement no later than five business days after the titleholder takes ownership
• Your bona fide intent at that moment that the parked property be replacement property in a §1031 exchange
• Written identification of the relinquished property within 45 days of the titleholder's acquisition
• Transfer out of the parking structure within 180 days, with 180 days as the cap on the combined holding period

Four things to settle before you deliver the offer

None of this is advice on your particular deal, so have your CPA or attorney read both contracts before you sign them.

• Check that the vesting named as buyer matches the vesting on the property you are selling; same-taxpayer rules explains why a mismatch is fatal
• Ask your intermediary for its replacement-property document package now, so the notice of assignment is ready the week your sale closes
• Price the fallback before you need it: extension, deposit refund, or a reverse structure you have already quoted
• Name something you can close in days as a backup, such as a DST interest, so a slipped sale does not strand the purchase