Definition
Reverse exchanges allow purchasing replacement property before selling relinquished property. They solve timing issues when ideal properties are available early.
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Reverse exchanges use a qualified intermediary or exchange accommodator to take title to the replacement property initially, then close on the relinquished property sale. This solves timing issues when good properties are available before the sale closes. Strict timelines and documentation are required. Reverse exchanges are more complex and costly.
Pro Tip
Reverse exchanges are complex. Work closely with qualified intermediary.
Example
Investor identifies ideal replacement property but hasn't sold current property; uses reverse exchange to purchase replacement while selling current