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Exchanging
At
The
Last
Minute
Although it is not the
preferred way to do an exchange, it is
possible to set up an exchange at the very last
minute. We have prepared exchange documents with less
than two hours notice.
If you have actually closed,
even though you have not taken possession of exchange funds, it is too late to
set up an exchange. If you have the right to
receive funds from the closing, you have
constructive receipt of the funds, even if you
have chosen not to pick up the funds.
If you establish an
exchange at the last minute, all you have to
lose is the cost of
the intermediary’s services, usually a
few hundred dollars. A small price to pay
to keep exchange options open.
If you set up an exchange, divert funds to the
intermediary, and decide at any time
thereafter not to complete the exchange,
you simply notify your intermediary to terminate the exchange. Funds will be
released to you. You will have to pay the tax on the
exchange funds and the cost of the
intermediary’s services. There is no tax
penalty.
Failure to establish an exchange before you
close the sale of relinquished property, will eliminate
the option to do an exchange. You cannot later decide to
set up the exchange. So, when in doubt, it is usually
better to start the exchange and cancel if you elect not
to exchange.
If you decide to do an exchange at the last
minute, you will still need to do the things any
other exchanging party should do. You will just
have to do those things in a compressed time
period. If you will be using an accountant or a
realtor, get them involved as soon as you can
after establishing your exchange.
Finding suitable replacement property is usually
the hardest part of an exchange. You will want
to move forward in finding property as soon as
possible. You will have to make your final
designation of potential replacement property
within 45 days of the date of closing on your
relinquished property. There are no exceptions
or extensions of time.
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