3 Ways a 1031 Exchange Goes Wrong (And It’s Usually Not the IRS)

Let’s be honest.

A 1031 exchange isn’t complicated because of tax law.

It’s complicated because people wait too long, assume too much, or don’t coordinate.

Here are the three ways I most often see them go sideways:

1️⃣ The Seller Touches the Money

This is the fastest way to kill a 1031.

If the sale proceeds hit the seller’s account — even for a day — the exchange is over. No undo button.

That’s why a Qualified Intermediary (QI) must be hired before closing and the funds must go directly to them.

Not the seller.Not the agent.Not “we’ll fix it after.”

There is no “after.”

2️⃣ They Start Planning After They Go Under Contract

I can’t tell you how often someone says:

“Oh by the way, we’re doing a 1031.”

…three days before closing.

A 1031 requires:• Proper contract language• A Qualified Intermediary engaged in advance• Closing coordination• Replacement strategy planning

If you wait until the last minute, your stress level will be Olympic-level high.

Planning early = smooth.Planning late = chaos.

3️⃣ They Underestimate the 45-Day Clock

Once the property closes, the IRS clock starts ticking.

You have:• 45 days to identify replacement properties• 180 days to close

Those are calendar days. No extensions. No exceptions.

If you haven’t already started thinking about what you want to buy before you close, you’re already behind.

The Truth?

Most 1031 exchanges don’t fail because the strategy doesn’t work.

They fail because someone didn’t coordinate properly.

My role on the sale side is simple: Make sure the contract protects the exchange, Coordinate with the Qualified Intermediary, Work with the closing attorney, Make sure the proceeds never touch the seller.

I don’t give tax advice — but I absolutely protect the transaction.

If you’re considering selling an investment property in NC and think a 1031 might be part of the plan, let’s talk before you list.

Because in real estate (and taxes), timing isn’t everything.

It’s the only thing.

Naomi Bjerke