How Much Does a 1031 Exchange Service Cost?

1031 Pros
Jun 11
4 min read

A typical 1031 exchange service costs between $500 and $1,500. That fee includes things like setting up the exchange, creating an account, processing paperwork, and holding your money.

A 1031 exchange service is an important part of a successful transaction. While it’s important to know what they charge, price shouldn’t be your only consideration when you choose a professional to help.

Here’s what you need to know.

What Is a 1031 Exchange?

A 1031 exchange involves the exchange of properties. In the simplest form, an investor sells one property and purchases another. For example, some investors use reverse 1031 exchanges. They buy a property first and then sell a property in exchange.

Investors use these tools for the potential tax benefits. As the Internal Revenue Service (IRS) explains, a 1031 exchange allows investors to roll their potential capital gains taxes from the sale into new properties they purchase. The tax bill doesn’t come due until the investor sells the replacement properties.

For a 1031 exchange to work, the investor can’t take possession of the proceeds from the sale. If they touch the money, the transaction becomes taxable. To avoid this problem, people hire a 1031 exchange qualified intermediary—sometimes known as an exchange service.

What Does a 1031 Exchange Cost?

We’ve explained that you need an exchange service to avoid tax problems. Expect to pay between $500 and $1,500 for this help. Let’s explain what might be part of this total cost.

Set-Up Fees

Set-up fees range between $600 and $1,200. That cost could include things like the following:

Creating your account
Opening a secure bank account for your money
Creating a contract
Handling your account
Creating appropriate paperwork

Per-Property Fees

Some 1031 exchanges involve just two properties, but that’s not mandatory. You could sell one property and purchase three as replacements, for example. Some facilitators charge extra for those additional properties. Common fees range between $300 and $500 per property.

Interest Income Earned

Your 1031 qualified intermediary creates an account to hold the money generated by the sale of your property. Legally, your intermediary is in charge of the funds. The IRS requires investors to complete the transaction within 120 days. During that time, your money could generate interest.

Qualified intermediaries generally keep some or all of this interest that’s generated. The larger the sale, the more money they might make on the deal.

Service Fees

Some qualified intermediaries include all traditional office fees within their set-up fees. Others charge extra for things like couriers, transfers, and faxes.

What Other Fees Could You Incur?

A qualified intermediary plays a key role in your 1031 exchange, and the fees involved can seem significant. As you create your budget, know that these aren’t your only potential costs. You could also pay the following fees:

Realtor’s Commissions

In the past, realtors could charge commissions ranging from 5% to 6% of the home’s sale price. In 2024, the realtor’s model changed, and those traditional fees were abolished. However, many realtors still charge fees for their work. You should understand those costs and include them in your budget.

Property Inspection

It’s smart to hire someone to walk through your property before the sale, so you understand what repairs might be in your future. An inspection could also allow you to ask the seller to fix things before the closing. An average home inspection costs about $350, but an inspection of a large commercial property could cost much more. It’s well worth the investment, however, to have a clear idea of what you’re purchasing.

Property Appraisal

If you’re using a loan to pay for your new properties, the bank might require an appraisal to prove the equity can pay back the loan in a crisis. A typical home appraisal costs $200 to $600, but an appraisal of a large commercial property could cost much more. You can get a quote from a prospective appraiser before hiring them.

Closing Costs

A buyer’s closing costs are between 2% and 5% of the purchase price, while a seller’s closing costs are between 2% and 4% of the price. If you participate in a 1031 exchange, you’ll be both a buyer and seller at one point. These closing costs should be included in your total budget.

Transfer Taxes

Some counties and cities charge taxes when a property is legally transferred from one entity to another. Since a 1031 exchange involves a transfer, these taxes might be part of your total cost. The fees can range widely from under $100 to more than $3,000. Your qualified intermediary should explain your potential fees to you.

Insurance

You may need several different types of policies to protect your investment. For example, you might need mortgage protection insurance, lender’s title insurance, or liability insurance.

Loan-Related Fees

Some banks charge for opening a loan, checking your credit, and starting the financial transfer. These fees are typically low, but they should be included in your budget.

How to Choose the Right Team

A qualified intermediary is an important part of your 1031 exchange process, and you’re smart to consider your options carefully and clearly. In addition to asking about price, talk with your potential partner about the following:

Experience in performing 1031 exchanges
Licensing and bonding
Financial protection steps
Connections to title companies or realtors
Customer service expertise

Consider 1031 Pros

At 1031 Pros, we have the experience and expertise you need. We’ve helped hundreds of investors—both large and small—handle complex 1031 transactions. These are the only types of real estate deals we handle.

Our streamlined process ensures that you avoid capital gains taxes, so you can save money. Our security measures keep your assets safe, so you don’t lose money. We’d love to help you move smoothly through the 1031 exchange process. Contact us to get started today.