In a 1031 exchange, your qualified intermediary needs to hold your 1031 exchange proceeds in a separate account and make sure that you don’t have any actual or constructive receipt of the funds. But the intermediary can advance that money for either the purchase of the replacement property or a deposit (such as an earnest money deposit) for the purchase of the replacement property. So you can use your 1031 funds to advance an earnest money deposit. This is very convenient because it’s probably you preference to use the money in the exchange account to pay your deposits, rather than money out of your own pocket.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
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