Qualified Intermediary
A qualified intermediary (QI) is the independent third party that a 1031 exchange legally requires: it holds the proceeds from the sold property and executes the exchange documents, because if the seller takes possession of the funds — even briefly — the exchange fails and the gain becomes taxable.
Why the middleman is mandatory
The IRS treats money you can touch as money you received — "constructive receipt." The QI structure exists to break that chain: sale proceeds go from the closing table straight to the QI, and from the QI into the replacement purchase. That's also why the QI must be engaged before the first closing; there is no retroactive fix once funds have hit the seller's account.
Who can't be your QI
Anyone who has acted as your agent within the prior two years is disqualified — your own attorney, CPA, or real estate agent included. The role is filled by specialist exchange companies.
What to look for
QI funds are not federally insured, and the industry has seen failures — practitioners look for segregated or dual-signature accounts, fidelity bonding, and an established track record. A definition to know; the vetting belongs with the investor and their advisors.