Understanding 1031 Exchange Costs: Fees, Hidden Charges, and How to Save

When planning a 1031 exchange, one of the first questions real estate investors ask is, “How much will a 1031 exchange cost?” The answer can vary widely. Costs depend on the type of exchange, the policies of your Qualified Intermediary (QI), and even hidden ways intermediaries make money. In this overview, we’ll break down the typical fees charged for 1031 exchanges – by exchange type and by firm – and explain the less-obvious hidden fees (like wire or rush fees) that can crop up. Finally, we’ll look at how QIs earn interest on your held funds and highlight a new approach that can save investors money.

Typical 1031 Exchange Fees (By Type of Exchange)

Standard (Delayed) Exchange Fees: For a straightforward delayed 1031 exchange (the most common type), the average QI fee is $800 to $1,000 and up (source). This is usually a flat setup or administrative fee that covers one sale (the relinquished property) and one purchase (the replacement property). Some providers charge a bit less – non-institutional or smaller QIs might charge around $800 – while large national firms like IPX1031 or Old Republic Exchange often charge closer to $1,000 or more.

Reverse and Improvement Exchange Fees: If your exchange is more complex – such as a reverse exchange (buying the replacement property before selling the old one) or a construction/improvement exchange – expect significantly higher costs. These complex exchanges require additional legal structures and risk for the QI, and fees often run in the thousands of dollars. Many QIs charge a hefty surcharge or separate fee for reverse exchanges. Most providers similarly list reverse or improvement exchanges starting at about $5,000 (source). In short, a reverse or build-to-suit exchange can easily cost several thousand dollars, whereas a simple delayed exchange might be under $1k.

Multiple Properties: If you are selling or buying multiple properties as part of one exchange, many QIs will add on a per-property fee for each additional property beyond the first. This charge is often in the range of $250–$400 for each extra property involved. It compensates the intermediary for the extra paperwork and coordination with multiple closings. Always ask your QI how they handle multi-property exchanges – some might bundle a couple properties in the base fee, while others charge à la carte per address.

Regional Variations: Some large nationwide QIs don’t publish a fixed price list; their fees may vary by region or transaction size. These industry-leading firms often quote fees case-by-case, but generally fall in the same range (roughly $800–$1,200 for standard deals, plus surcharges for complex deals). Smaller or regional QIs might advertise set prices online to be competitive, whereas bigger players rely on their reputation and will discuss pricing after understanding your exchange details. Either way, the factors influencing cost are similar everywhere – type of exchange, number of properties, and any special services required.

“Junk” Fees and Hidden Charges to Watch For

Beyond the headline exchange fee, it’s important to read the fine print. Many Qualified Intermediaries tack on miscellaneous smaller charges – sometimes referred to as “junk fees” – that can increase your overall cost. Here are a few common ones:

• Wire Transfer Fees: It’s typical for QIs to charge a fee for sending or receiving your funds via wire. This might be a flat fee (often around $50 per wire). If your exchange involves multiple wires (to escrow, to sellers, etc.), these fees add up. A reputable QI should be upfront about whether wire fees are included in the base price or charged separately.
  
  
• Rush Fees: If you need to start an exchange on very short notice, some intermediaries impose a rush fee for expediting document preparation. For example, many companies charge a “rush fee” of $250 if the exchange must be set up with less than 48 hours’ notice. Not all QIs charge this, but it’s wise to ask – especially if your closing is coming up quickly.
  
  
• Document or Courier Fees: A few QIs (often smaller ones) might charge extra for overnight mail, courier services, or document handling. While many modern firms have moved to electronic documents, you could still see charges for overnighting paperwork. These tend to be relatively minor costs ($25, $50, $100), but they are worth noting.
  
  
• Separate Account or Interest Setup Fees: Some intermediaries offer to place your exchange proceeds in a separate interest-bearing account for your benefit, but charge a fee for that service. For instance, a certain provider charges $300 to set up a separate interest-bearing escrow account so that the client keeps the interest. In absence of this, the QI might commingle funds or hold them in their own account and keep the interest (more on this below). Not every QI offers an option for you to earn interest, and those that do might impose setup or maintenance fees.
  
  
• Extra Property Fees: As mentioned, if you exchange multiple properties, there’s often an extra fee per additional property. It might be called an “Additional Relinquished Property Fee” or “Additional Replacement Property Fee,” typically a few hundred dollars each.
  
  

All these smaller charges are why you should always request a full fee schedule or quote. What looks like a bargain-low exchange fee could balloon to thousands of unexpected costs after adding $50 here and $250 there. In fact, some industry players explicitly call out these add-ons as unnecessary “junk fees.” The bottom line: transparency is key. A trustworthy QI will clearly explain all potential charges upfront.

How QIs Make Money on Your Funds (Interest Earnings)

Aside from explicit fees, there’s a subtler cost factor in 1031 exchanges: interest on your money. When you sell your property, the proceeds sit with the Qualified Intermediary in between your sale and your replacement purchase. During that holding period (which could be up to 180 days), those funds are typically parked in a bank account or money market – earning interest. Who keeps that interest? In many cases, the QI does.

In fact, industry analysis shows that the majority of a QI’s revenue often comes from interest earned on clients’ exchange funds, with only one-third coming from the upfront fees. Most traditional intermediaries retain all or most of the interest your money accrues while in their custody. From the QI’s perspective, this helps justify lower upfront fees on small deals – bigger exchanges naturally generate more interest revenue to the QI, which they feel compensates them for the greater risk and work of handling large sums. However, from your perspective as an investor, any interest kept by the QI is money that you could have earned. It’s essentially a hidden cost of using that provider.

Some QIs will share a portion of the interest with you or put your funds in a separate account under your name, but this isn’t standard unless you negotiate for it. Always ask your intermediary: Will my funds earn interest, and if so, do I get to keep any of it? The answers will help you compare the true cost between providers. For example, if Company A charges a $1,000 fee but lets you keep all interest, and Company B charges $750 but keeps all interest on, say, $500,000 of proceeds for 6 months – Company A might actually end up cheaper after interest is accounted for.

A New Approach to Lower 1031 Costs: The Deferred.com Model

Facing the traditional fee structures and hidden interest spreads, some modern 1031 exchange services are trying a different approach. Deferred is one such Qualified Intermediary that has reimagined the pricing model. Deferred charges no exchange fee at all for a standard 1031 exchange – in other words, a $0 exchange fee for forward exchanges. This No Fee pricing model is made possible by their efficient, software-driven process and by leveraging the interest earnings (instead of charging you upfront). Unlike many QIs that quietly pocket all the interest, Deferred actually shares a portion of the interest earned on your funds with you. Your money is held in a segregated, FDIC-insured account and that you’ll benefit from the interest accrual rather than losing it entirely to the intermediary.

What does this mean for an investor? Essentially, Deferred’s goal is to help you “earn more, not pay more.” You don’t pay the typical $750-$1,000 fee, you avoid the assorted junk fees (no wire fees, no extra property fees, no rush fees – they explicitly do not charge those), and you get interest income back on large exchanges.

Deferred’s approach is part of a broader vision to modernize 1031 exchanges. They're building a fintech-enabled platform with a user-friendly digital interface and quick, transparent service. Security isn’t sacrificed either: client funds are held with robust protections (segregated accounts with up to $175 million in FDIC coverage, backed by high-limit fidelity bonds). And notably, Deferred has emphasized customer service, with 9a-12p EST support 7 days per week and a team with over 40 years of experience in the space.

Understand 1031 Costs to Maximize Your Return

If you’re evaluating the cost of a 1031 exchange, make sure to look at the full picture. Compare the base fees between firms, but also ask about the “junk” fees and whether you’ll earn interest on your funds. A typical 1031 exchange can cost under $1,000 in fees with a traditional provider – but hidden charges and lost interest earnings can change the math. The good news is that the industry is evolving. With innovative options like Deferred offering no fee exchanges and interest sharing, investors have more choices to minimize costs. By doing your homework on fees and choosing a transparent, investor-friendly intermediary, you can keep more of your money working for you even as you defer taxes on your real estate gains.