When would I use direct deeding?

The 1031 exchange of like-kind properties is referred to as tax deferred and can be done with a qualified intermediary. If you are wondering about 'When would I use direct deeding' and allow the seller to directly deed the property to me or rather directly deeds your property to the buyer then here are a few facts.

In 1990 a ruling was passed that during the tax deferred exchange it was no longer necessary to give the deed from the seller to the intermediary, who in turn passed the deed to the buyer. This process is called as sequential deeding. Currently most of the deeding is done directly by skipping the role of the intermediary and when you are buying a property the seller is 'directing deeding' to you. Initially the practice of selling or buying through an intermediary was common.However; it involved the risk of having the deed in the name of the intermediary for a short while.

"When would I use direct deeding?" is a question for which the answer is that when you want to avoid the following risks.

• Risks of environment mishaps and hazards as it involves disclosures needed for these hazards.
• Liability risks involved.
• To avoid payment of taxes which are charged as transfer taxes when a deed is recorded.

Typically if you are wondering when and what documents would I use for direct deeding then you should know that your replacement property title or the title of the relinquished property need not be received by the intermediary for direct deeding. In the case of direct deeding your

• Intermediary will make an agreement with the buyer of the relinquished property.
• Intermediary will do an agreement with the seller of the acquired replacement property.

While choosing the tax deferred exchanges you must be wondering when would I use the direct type of deeding and if it is better than sequential deeding. Both the types have their own benefits and drawbacks. Be aware of all the tax regulations which are needed to qualify for the 1031 property exchange. There are certain regulations for the kind of property you should be buying as replacement for your relinquished property. There are certain specifications for the structuring of the deed for 1031 exchange and your attorney or tax advisor or the realtor might help you to do so.

The buyer, the seller and all others involved in the agreement will be notified through a written document. You can freely take the advice of a professional intermediary to know 'when and what procedure would be ideal if I use direct deeding' for any property. They may also give professional advice for handle the transaction costs and other investment regarding the replacement property.

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