Qualified Intermediary in Miami
The WHO-holds-the-money guide for exchanging into Miami. What a Qualified Intermediary actually does under the IRS safe harbor, how to vet one in a state with no QI licensing -- bonding, segregated accounts, fees, and who keeps the interest -- the disqualified-person rule that bars your own CPA, and what happens to your exchange if the QI fails.
Florida licenses the broker who shows you the condo, the title agent who closes it, and the attorney who reviews the contract. It does not license, register, bond, or otherwise regulate the company that will hold the entire proceeds of your relinquished property sale — often seven figures — for up to six months. That company is the Qualified Intermediary, the exchange cannot happen without one, and in Florida the only screen between your money and a bad one is the evaluation you run before you sign the exchange agreement.
Thomas Druck PA has been a Miami broker since 2006 and works primarily with absentee owners — on the buy side, that includes exchange buyers running a 1031 into Miami from California, New York, and other high-tax states. The QI is the buyer’s selection, made with the CPA — Tom does not pick it. But the Miami closing has to land in sequence with the QI’s wire, so this guide is the selection homework: what the QI actually does under the IRS safe harbor, where your money sits while the exchange runs, what the fees do and do not cover, who is legally barred from the role, and what the 2008 industry failure taught about telling strong QIs from weak ones. The deadline math and identification rules are the overview guide’s territory (linked above); this is the WHO-holds-the-money layer.
Why the QI is the exchange's single point of failure
Every other participant in a Miami exchange is replaceable mid-stream — the lender, the title company, even the realtor. The QI is not: it holds 100 percent of the exchange funds, the safe harbor only works while the money stays out of your control, and once the relinquished closing wires the proceeds, you are committed to that company’s solvency and account structure until your Miami replacement closes. A bad building costs you a deal; a bad QI can cost the funds AND the exchange.
The selection gets less attention than it deserves because the fee spread looks trivial — a few hundred dollars between providers on a seven-figure transfer. The real differences are structural: where the money sits (segregated qualified trust or escrow accounts versus commingled pooled accounts), what backs it (bonding and errors-and-omissions coverage), who is legally allowed to serve (the disqualified-person rule), and what the QI earns on the float. Florida adds a twist most exchangers from regulated states do not expect: no Florida agency licenses or audits QIs at all, so none of this is verified for you. This guide is the checklist.
What to ask a Qualified Intermediary before you commit
Florida verifies nothing about a QI, so the buyer’s questions are the regulation. Seven questions, each with what a good answer looks like — ask them before the exchange agreement is signed, because afterward is too late to renegotiate where the money sits.
- “Are my funds held in a segregated account in my name — and can I see the account structure in the exchange agreement?” Good answer: a separately identified qualified trust or qualified escrow account per client, dual-signature controls on disbursement, named bank. Bad answer: anything that sounds like a pooled or operating account. This is the single most important question on the list — commingled funds were the difference between recovery and loss when the industry’s largest failure hit in 2008 (see the failure section below).
- “What fidelity bond do you carry, per occurrence, and with whom?” Industry standard is $1 million per occurrence; the large national QIs carry substantially more. Ask for the carrier and confirm the bond covers theft and fraud by the QI’s own people — that is what a fidelity bond is for.
- “What errors-and-omissions coverage do you carry?” The bond covers dishonesty; E&O covers mistakes — a blown identification transmission or a documentation error that disqualifies the exchange. Both, not either.
- “Are you a disqualified person for me?” Run the screen in reverse: has this company or anyone in it acted as your employee, attorney, accountant, investment banker or broker, or real estate agent or broker in the 2 years before your relinquished closing? Family members and entities related to you (or to your agents) at the 10 percent ownership level are also out. The full rule is in the mechanics section below.
- “Who keeps the interest my funds earn?” The honest industry answer: usually the QI — the float is where much of the business’s revenue actually lives, and on a large exchange held for months it can exceed the fee many times over. Some QIs share or credit interest; some price low fees against keeping all of it. There is a correct amount of float for the QI to keep — whatever you knowingly agreed to. The wrong amount is the one you never asked about.
- “How many Florida exchanges did you administer last year, and who is my single point of contact?” A QI that runs Miami closings monthly knows Florida title practice, HOA estoppel timing, and the assignment language local closers expect. National scale is fine — the work is wires and e-signatures — but Florida volume is the competence proxy a no-licensing state leaves you.
- “Do you hold the Certified Exchange Specialist (CES) designation, and are you a Federation of Exchange Accommodators member?” Neither is a license, and Florida requires neither. But CES (exam, experience, ethics, and continuing-education requirements) and FEA membership are the closest thing to professional standards the industry has — in a state that checks nothing, voluntary accountability is signal.
How Thomas Druck PA works with exchange buyers
- Discovery call — QI status is question two. (Question one is the exchange structure.) Engaged, shortlisted, or not started — because the QI must be under agreement BEFORE the relinquished closing, and buyers who sequence it late compress everything downstream. Tom does not select or recommend the QI; he flags the calendar dependency early.
- The Miami search runs on the overview guide’s workflow. Shortlist and Net + Risk Review during the relinquished listing period, per the 1031 Exchange Miami Condo Guide — identification day is a selection, not a search. The QI’s only job in this phase is receiving the identification letter by day 45; Tom makes sure property descriptions match the QI’s required format.
- Offer and contract carry the exchange language. Offers go in with the QI assignment language the safe harbor requires (the QI acquires and transfers the contract rights — Florida deals run on assignment, not the QI taking title), and the contract dates are negotiated against the real deadline with buffer.
- Closing coordination with the QI’s transfer schedule. The wire from the QI, lender funding (if any), HOA approval, and title all land in sequence — the QI’s disbursement mechanics (dual signatures, verification callbacks) add a day that absentee buyers planning remotely need in the calendar. This is the step where QI quality shows: a responsive QI is a non-event, a slow one is a closing-date risk.
- Absentee setup. Remote execution end to end — e-signed exchange documents, wires, RON at closing per the standard absentee workflow since 2006. Most exchange buyers never fly in.
The QI mechanics (the actually-hard parts)
What the QI actually does -- the safe harbor, done precisely
A delayed exchange has a legal problem at its center: if you receive the sale proceeds -- actually or constructively -- between the two closings, there is no exchange, just a sale followed by a purchase, fully taxable. IRC section 1031(a)(3) sets the 45/180 deadlines but says nothing about who may hold the money; the answer lives in the regulations. Treasury Regulation 1.1031(k)-1(g)(4) creates the qualified intermediary safe harbor: a QI under a proper exchange agreement is NOT treated as your agent, so funds it holds are not in your constructive receipt. Mechanically, the QI enters the exchange agreement before the relinquished closing, takes assignment of your sale contract, receives the proceeds directly at closing (the money never touches your account, even for a day), receives your written identification by day 45, takes assignment of the Miami purchase contract, and wires the funds to the replacement closing. One restriction with teeth -- the (g)(6) limitation: the exchange agreement must deny you any right to receive, pledge, borrow, or otherwise benefit from the funds before the exchange completes or fails by its terms. Mid-exchange "can I just take part of it out" is not a paperwork question; it is the safe harbor collapsing. The deadline math itself -- the earlier-of rule, Form 4868, disaster relief -- is covered in the 1031 Exchange Miami Condo Guide.
Where your money sits -- segregation, bonding, and what backs the promise
The exchange agreement determines whether your funds sit in a segregated qualified trust or qualified escrow account in your name, or in the QI's pooled accounts. Segregation is the protection that matters: a properly documented qualified trust or escrow account is insulated from the QI's creditors if the QI fails; pooled funds historically were not (see the failure section below). Behind the account structure sit the fidelity bond (theft and fraud -- $1 million per occurrence is the industry floor, the large nationals carry far more) and errors-and-omissions coverage (mistakes). Florida verifies none of this -- no licensing, no audits, no minimum bond, unlike the eight states that regulate QIs (California, Idaho, Nevada, Washington, Colorado, Virginia, Maine, and New Hampshire). The practical consequence: the exchange agreement and the account documentation ARE the regulation. Read them, or have the tax attorney read them, before the relinquished closing -- afterward is too late to renegotiate where the money sits.
What a QI costs -- and where the real money is
The posted fee is modest: roughly $750 to $1,500 for a standard delayed exchange at most established QIs (an institutional-grade national on a multi-property exchange lands at the top of that band or somewhat above), plus per-property add-ons and wire fees. Reverse and improvement exchanges are a different product -- $5,000 to $15,000 and up -- because the QI-affiliated entity must hold title to a property mid-structure. But the fee is not the business model: much of a typical QI's revenue is the float -- interest earned on your exchange funds between closings. On a $2 million exchange parked for five months, even conservative short-term rates produce interest that dwarfs the fee -- and most exchange agreements quietly assign most or all of it to the QI. This is why the cheapest QI is not the selection criterion: a $250 fee saving is invisible next to the float, and fee-shopping selects for exactly the under-capitalized, yield-chasing behavior that produced the industry's failures. Compare on account structure, bonding, and interest policy; treat the fee as a tiebreaker.
When a QI fails -- the 2008 lesson, and why fund safety is only half the question
The industry's defining failure: LandAmerica 1031 Exchange Services, a subsidiary of the then third-largest US title insurer, filed Chapter 11 on November 26, 2008, after parking exchange funds in auction-rate securities that froze. About $300 million sat in a commingled pooled account covering roughly 400 exchangers -- they became unsecured creditors and waited years for partial recovery. About $100 million sat in segregated sub-accounts for roughly 50 clients, who fared materially better. Same QI, same week -- the account structure was the whole difference. The second half of the lesson is the one QI marketing skips: the 45/180 deadlines generally do not pause because your QI failed. Exchangers with frozen funds watched their 180th day pass with no replacement closing -- the exchange dead AND the money stuck. The IRS eventually responded with Revenue Procedure 2010-14 (QI defaults on or after January 1, 2009): a safe harbor under which a taxpayer whose exchange fails solely because the QI defaulted and entered bankruptcy or receivership is not treated as in constructive receipt, and reports gain only as funds are actually recovered -- rescuing the immediate tax outcome, not the exchange. Fund protection and exchange survival are separate questions; the checklist above is how you avoid having to learn the difference.
Common mistakes exchange buyers make with the QI
- Engaging the QI after the relinquished property goes under contract — or worse, at closing. The exchange agreement and contract assignment must be in place BEFORE the relinquished closing funds. QIs can paper a deal in days, but a rushed engagement means nobody read the account structure or the interest policy — the two things worth reading.
- Asking your own CPA or attorney to “just hold the money.” The trusted-advisor instinct is exactly backwards here: the more work your CPA, attorney, or realtor has done for you in the past 2 years, the more clearly the regulation disqualifies them. Using a disqualified person does not create a weaker exchange; it creates no exchange.
- Fee-shopping the QI. The $250 you save between providers is noise against the float the QI earns on your funds — and against what account structure decides if the QI fails. Compare segregation, bonding, and interest policy first; let the fee break ties.
- Never asking who keeps the interest. On a large exchange the float can exceed the fee many times over. Some QIs credit interest to the exchange; most keep it. Either can be fine — but it should be a term you read, not a surprise you reconstruct afterward.
- Treating fund safety as the only QI risk. LandAmerica’s segregated-account clients got their money back — and many still lost their exchanges, because the deadlines ran while the bankruptcy unwound. Revenue Procedure 2010-14 softened the tax outcome for QI-default failures; it did not resurrect anyone’s exchange. Solvency, account structure, and disbursement responsiveness are exchange-survival questions, not just custody questions.
What this article does not cover
This guide covers the Qualified Intermediary layer of a Miami exchange -- what the QI does, how to vet one, what it costs, who cannot serve, and what failure looks like. It does not cover: the exchange framework itself -- the 45/180 deadline math, the like-kind rule, the identification strategies (1031 Exchange Miami Condo Guide, this cluster's overview); which Miami buildings survive an exchange buyer's screen (Investment Condo Buildings In Miami); origin-state treatment of the deferred gain, including the California clawback (1031 From CA or NY Into Miami; reverse and improvement exchange structuring -- the QI-affiliated titleholder mechanics are a specialist conversation between your QI and tax counsel; Delaware Statutory Trusts and other passive replacement structures (financial advisor plus CPA territory); and -- explicitly -- QI selection itself and the exchange tax math. Tom coordinates the Miami real estate side and aligns the closing with the QI's transfer schedule; the QI engagement is your and your CPA's decision, and gain, basis, and boot are CPA and tax attorney work.
Quick answers for 1031 buyers
What does a Qualified Intermediary do in a 1031 exchange?
The QI holds the proceeds from your relinquished property sale and uses them to acquire your replacement property — keeping the money out of your actual or constructive receipt, which would disqualify the exchange. The QI prepares the exchange agreement, takes assignment of both contracts, and runs the wires so the transaction stays at arm’s length. This works because of the IRS qualified intermediary safe harbor (Treasury Regulation 1.1031(k)-1(g)(4)), under which a properly engaged QI is not treated as your agent. A delayed exchange without a safe harbor arrangement is, in practice, just a taxable sale followed by a purchase.
Do I need a Florida-licensed Qualified Intermediary?
There is no such thing — Florida has no QI licensing or regulation at all. Eight states regulate QIs at the state level (California, Idaho, Nevada, Washington, Colorado, Virginia, Maine, and New Hampshire); Florida is not among them, and there is no meaningful federal registration either. So the evaluation is substance, not a license: a fidelity bond of at least $1 million per occurrence, segregated qualified trust or escrow accounts in your name (never commingled with the QI’s operating funds), errors-and-omissions coverage, independence under the disqualified-person rule, and real Florida exchange volume. Most major national QIs serve Miami exchanges remotely — wires and electronic signatures — which works fine for absentee buyers.
How much does a Qualified Intermediary cost?
Standard delayed-exchange fees run roughly $750 to $1,500 at established QIs, plus wire fees and per-property add-ons for multi-unit identifications. Reverse and improvement exchanges run $5,000 to $15,000 and up because the QI-affiliated entity must hold title mid-structure. But the posted fee is not the QI’s real revenue — much of the business is the float, the interest earned on your funds between closings, which on a large exchange can exceed the fee many times over. Compare QIs on account structure, bonding, and who keeps the interest; the fee spread is a tiebreaker, not the decision.
What happens if my Qualified Intermediary goes bankrupt during the exchange?
Two separate questions hide in this one. Your funds: if they sit in a properly documented segregated qualified trust or escrow account in your name, they are insulated from the QI’s creditors; if they were commingled in the QI’s pooled accounts, you are an unsecured creditor — that distinction was the whole story in the industry’s defining failure, the 2008 LandAmerica bankruptcy, where pooled-account exchangers waited years for partial recovery while segregated-account clients fared far better. Your exchange: the 45- and 180-day deadlines generally do not pause for a QI failure, so even protected funds can come back after the exchange window has died. The IRS softened the tax outcome with Revenue Procedure 2010-14 — if the exchange fails solely because the QI defaulted into bankruptcy or receivership, you are not treated as having received the funds, and gain is reported as money is actually recovered — but that rescues the tax treatment, not the exchange. Account structure and QI solvency are exchange-survival questions; vet them before the relinquished closing.
Can my CPA or attorney serve as my Qualified Intermediary?
No. Under Treasury Regulation 1.1031(k)-1(k), anyone who has acted as your employee, attorney, accountant, investment banker or broker, or real estate agent or broker within the 2 years before your relinquished closing is a “disqualified person” and cannot serve as your QI. Family members and entities related to you or your agents at the 10 percent ownership level are caught too. The narrow exception: prior services pertaining only to 1031 exchanges (and routine title or escrow work) do not disqualify — which is why dedicated QI firms exist. The trusted-advisor instinct runs backwards here: the more your CPA has done for you, the more clearly the rule bars them. Use an independent QI firm.
Does Thomas Druck recommend specific Qualified Intermediaries?
No. Tom does not recommend, endorse, or receive anything from any QI — same scope discipline as the lender side. What he does provide: the evaluation checklist (bonding, segregated accounts, fees and interest policy, the disqualified-person screen, Florida volume) and coordination between your chosen QI’s transfer schedule and the Miami closing. QI selection is your and your CPA’s call.
Related resources
- 1031 Exchange Miami Condo Guide -- live, this cluster's overview. The 45/180-day deadline math, the like-kind rule, identification strategy, and the workflow this QI layer plugs into.
- 1031 From CA or NY Into Miami -- the origin-state guide: California clawback, New York treatment, sequencing against a residency exit.
- Investment Condo Buildings In Miami -- live, the sibling deep-dive: WHAT to identify -- rental-policy categories, warrantability, the HOA screen.
- Relocating to Miami From California -- live. The highest-volume 1031 origin corridor; covers the residency-exit mechanics that often run alongside an exchange.
- Capital gains for out-of-state Miami sellers -- live FAQ. The seller-side tax mechanics for when the Miami condo is eventually sold.
- Non-Resident Buyers hub -- the full overview of the 16-article series.