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Real Estate Exchange Instruction

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REAL ESTATE EXCHANGE INSTRUCTION

This Real Estate Exchange Instruction (the "Instruction") is made between the undersigned Exchanger and the undersigned Qualified Intermediary/Intermediary (together, the "Parties") to effectuate a like-kind exchange under applicable law concerning the Relinquished Property described below and any Replacement Property identified in accordance with these instructions.

1. Date and Parties

Date of Instruction:

2. Relinquished Property

3. Replacement Property (Identification)

Exchanger elects to identify replacement property as follows (check applicable method and provide particulars). Identification(s) must comply with the time limits set forth in Section 6 below.

4. Transaction and Financial Terms

Escrow Holder for sale of Relinquished Property:

5. Allocation and Handling of Funds

The Exchanger directs that proceeds from the sale of the Relinquished Property be delivered to the Intermediary by escrow or other closing agent and held by the Intermediary in a segregated account pending acquisition of Replacement Property. The Intermediary shall not release funds other than in accordance with this Instruction and written authorization from the Exchanger except as required by operation of law.

6. Timelines and Identification Periods

Exchanger acknowledges and instructs that identification of Replacement Property must occur within the statutory identification period applicable to like-kind exchanges and that exchange completion must occur within the statutory exchange period. Exchanger authorizes the Intermediary to rely upon the identification method selected in Section 3. All time periods run from the closing date of the Relinquished Property unless otherwise stated.

7. Representations, Warranties and Covenants

Exchanger represents and warrants that Exchanger is the lawful owner of, or has authority to direct the disposition of, the Relinquished Property; that all statements and instructions are accurate; and that Exchanger will deliver any documents or authorizations reasonably required by the Intermediary to effectuate the exchange. Intermediary represents that it will act only as a facilitator and will not provide tax advice.

8. Disclosures

The Exchanger confirms the following disclosures as true to the best of Exchanger's knowledge:

9. Default, Indemnity and Limitation of Liability

In the event of Exchanger default or failure to timely identify or acquire Replacement Property, Exchanger shall be solely responsible for any tax consequences and for indemnifying and holding harmless the Intermediary from claims arising from Exchanger's acts or omissions. Intermediary's liability shall be limited to direct damages proven and shall not include consequential, special, or punitive damages. Exchanger acknowledges that Intermediary does not guarantee tax treatment.

10. Notices

All notices required or permitted under this Instruction shall be in writing and delivered to the contact addresses provided above by personal delivery, overnight courier, or certified mail, return receipt requested, and shall be effective upon receipt.

11. Governing Law; Entire Agreement

This Instruction shall be governed by and construed in accordance with the laws of the state in which the Relinquished Property is located, without regard to conflict of law principles. This Instruction, together with any exhibits and escrow instructions expressly incorporated herein, constitutes the entire agreement between the Parties with respect to the subject matter and supersedes all prior agreements and understandings.

12. Additional Instructions and Special Terms

By signing below, the Parties acknowledge receipt of this Instruction, confirm authority to execute, and agree to perform according to its terms.

Exchanger Printed Name:

By:

Date:

Intermediary Printed Name:

By:

Date:

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What the Real Estate Exchange Instruction Is

A Real Estate Exchange Instruction is a written directive used to instruct an exchange accommodator, escrow agent, title company, or closing attorney on how to process proceeds, transfer interests, and handle documents for a property exchange. The instruction records parties, property identifiers, timing constraints, and routing for funds and signed documents. It organizes who signs, where instruments are recorded, and which supporting documents to attach. Accurate instructions reduce processing delays, clarify tax reporting responsibilities, and create a clear audit trail for title, escrow, and tax compliance.

Why Clear Exchange Instructions Matter

Clear instructions protect parties by reducing misrouting, preventing title defects, and supporting tax compliance. They create a traceable record for signers, notaries, exchange accommodators, and regulators, and they clarify who has authority to direct funds or accept replacement property.

Why Clear Exchange Instructions Matter

Who Typically Prepares and Receives These Instructions

Real estate brokers, closing attorneys, exchange accommodators, escrow officers, and buyers or sellers commonly prepare or receive exchange instructions.

  • Exchange accommodators and qualified intermediaries coordinate funds and replacement property identification and follow IRS guidance for deferred exchanges.
  • Title and escrow agents receive instructions to reconcile closing statements, record deeds, and deliver instruments to the county recorder.
  • Buyers, sellers, and their counsel use instructions to confirm signatory authority, delivery timing, and document retention responsibilities.

Ensure all recipients have authority and contact information to avoid processing delays and unexpected tax reporting issues.

Core Components of a Professional Exchange Instruction

A complete instruction groups identity, property details, signature blocks, escrow routing, timeline, and supporting exhibits. Use plain language for required actions and reference attachments by filename and exhibit letter to reduce ambiguity during closing and recording.

Parties

Full legal names and contact details for grantors, grantees, and agents.

Property Details

Legal description, parcel number, and street address for each property involved.

Routing Instructions

Escrow account details, wire instructions, and disbursement priorities.

Timing

Execution, recording, and funds transfer deadlines and any conditional holdbacks.

Signatures

Designated signers, signature order, and authentication requirements.

Attachments

Exhibits such as deeds, closing statements, tax forms, and identification documents.

Essential Information to Include

Full Legal Names: Exact names as on government ID.
Property Identifier: Parcel ID or legal description.
Escrow Agent: Name and contact info of escrow holder.
Exchange Accommodator: Qualified intermediary name and license if applicable.
Effective Date: MM/DD/YYYY date of the instruction.
Signature Order: Who signs and in what sequence.

Step-by-Step: Preparing and Delivering the Instruction

Follow a consistent sequence: gather details, draft instruction, attach exhibits, confirm signers, execute, and deliver to the accommodator and escrow agent.

  • 01
    Gather Documents: Collect deeds, title reports, and closing statements before drafting.
  • 02
    Draft Instruction: Specify routing, signers, dates, and exhibits in clear language.
  • 03
    Obtain Signatures: Signers authenticate identity and complete required notarizations.
  • 04
    Deliver and Confirm: Send to accommodator and escrow; confirm receipt and acceptance.

Configuring an Online Exchange Instruction Workflow

Set up an e-signing workflow that enforces signer order, authentication, and attachment requirements to reduce rework.

Field Configuration
Signer Authentication Email + SMS or KBA for high-assurance signers
Signer Order Enforce sequential signing where required
Required Attachments Make exhibits mandatory before signing
Audit Trail Capture IP, timestamp, and action history

Delivery and eSubmission Options

Choose delivery channels that balance signer convenience with required authentication and recordkeeping.

  • Email Delivery: Fast, suitable for low-risk signatures
  • Secure Portal: Preferred for large files and repeated access
  • API Integration: Automates routing to systems like Salesforce

Where to Send the Completed Instruction

Route the signed instruction to all stakeholders and the official filer so funds and recording occur without delay.

  • Exchange Accommodator: Primary recipient for fund routing and replacement identification
  • Escrow Officer: Receives closing statements and disbursement directives
  • Title Company: Verifies legal descriptions and prepares recording documents
  • County Recorder: Files deeds and instruments for public record

Timing, Filing Windows, and Processing Expectations

Expect both internal processing time and statutory reporting deadlines; build extra days into the schedule for notarization, title review, and wire transfers.

Internal Processing:

Allow 2–5 business days for review and routing by accommodator or escrow

Notary / RON Retention:

RON audio-video often retained 5–10 years by state rules

Tax Reporting:

Report proceeds on the applicable tax return by federal deadlines (e.g., Form 1040 due April 15)

Wire Transfers:

Confirm wire timelines with the escrow bank; same-day vs next-day varies

Recording:

County recorder processing varies by jurisdiction and may add days

Key Milestones During an Exchange

Track these sequential milestones to keep the exchange on schedule and document each action in the transaction record.

01

Prepare Instruction

Assemble parties, legal descriptions, exhibits, and signature blocks

02

Sign and Notarize

Execute signature blocks and complete any notarizations or RON sessions

03

Deliver to Accommodator

Send signed instruction and exhibits to the exchange accommodator

04

Record and Disburse

Record deeds and authorize disbursements per instruction terms

Common Mistakes to Avoid

  • Using informal or abbreviated legal descriptions that do not match title documents, causing recording delays or rejections.
  • Failing to specify signer authority or title, which can lead to contested signatures or rejected recording by the county.
  • Omitting mandatory exhibits such as the deed or closing statement, requiring re-execution and delaying fund disbursement.
  • Sending wiring instructions without independent verification, increasing the risk of wire fraud and payment errors.

Penalties and Risks of Incorrect Instructions

Tax Penalty: Incorrect reporting may trigger IRS penalties
Failed Exchange: Improper steps can disqualify tax deferral
Title Defect: Recording errors may create clouded title
Signature Rejection: Improper authentication may void signatures
Late Recording: Delays can affect priority and lien status
Data Exposure: Poor security can breach confidential information

Practical Examples of Exchange Instructions in Use

Two illustrative scenarios show how instructions streamline exchange processing and reduce ambiguity.

Optica Ventures Example

Optica prepared a detailed instruction prior to closing to name the exchange accommodator and specify wiring steps

  • The accommodation clarified payment order
  • The result was a single review cycle and timely fund transfer, reducing settlement confusion and preserving title continuity.

Martin Properties Example

Martin Properties used a standardized instruction template with exhibit references for replacement properties

  • Their team required notarization and electronic audit trail
  • This approach allowed mobile execution, consistent compliance, and quicker escrow clearance across multiple transactions.

Supporting Documents Commonly Attached

Attach these documents to avoid follow-up requests and to create a complete record for title and tax compliance.

Deed

Recordable deed in final form matching the legal description and prepared for the county recorder.

Closing Statement

Settlement statement showing payoffs, prorations, fees, and disbursement instructions for escrow reconciliation.

Title Report

Current title commitment or preliminary report identifying exceptions, liens, and required endorsements.

Identification

Government-issued ID for signers and any corporate resolutions authorizing signatory authority.

eSignature Vendor Pricing and Feature Snapshot

Basic vendor pricing and common features for managing exchange instructions and e-signed closing documents. signNow is listed first per platform comparisons.

signNow DocuSign Adobe Sign PandaDoc HelloSign
Starting Price $8/user/mo $15/user/mo $14/user/mo $19/user/mo $15/user/mo
Free Trial 7-day free trial Varies by plan Varies by plan Varies by plan Varies by plan
Bulk Send Yes (Premium tier) Varies by plan Varies by plan Varies by plan Varies by plan
Audit Trail Yes Yes Yes Yes Yes
HIPAA Compliant Yes Yes Yes No No

Frequently Asked Questions

Answers to common questions about using, signing, and maintaining a Real Estate Exchange Instruction.


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