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The Section 1031 exchange procedure is one that is best begun with a certain amount of pre-planning and foresight; the process presents the unwary real estate investor with ample opportunity to make a misstep. Taking this into consideration, you may be hesitant to begin a 1031 exchange without being sure that you will be able to follow the process to completion. In all actuality, though, the risks involved in an exchange aren't as unmanageable as they may, at first, seem. Starting an exchange is not in any way a permanent commitment – in all actuality, many smart investors, when selling an investment property will start the process of a 1031 exchange just to leave their options open. This is because, if one begins on the path of a exchange, there exist several opportunities to change one's mind and sell outright, while starting out along the path of selling outright completely surrendering the option of conducting an exchange. There's actually no reason to worry about the possibility of changing your mind during the course of an exchange. The only thing you really have to do in order to keep your options open is stay aware of the time frames involved in the process of an exchange, as they'll be the major determining factor of when you will get the chance to receive the money that would've been transferred to your replacement property had you chosen to go through with the exchange. After you close the sale of your relinquished property, the proceeds are sent straight to your qualified intermediary. Once this has occurred, the earliest point at which you can retrieve your proceeds from your qualified intermediary is at the end of the ensuing 45 days, which represents the deadline for having identified a replacement property. If 45 days have come and gone and you haven't made an identification, the exchange will automatically end and you will be able to receive the proceeds of the initial sale. If you have made an identification before deciding that you would like to terminate the exchange, you can just revoke the identification before the 45 days have passed, and the exchange will end. If you've already completed this step in the process, the next chance you will get to retrieve your proceeds will be after another one-hundred-eighty days, which is the deadline for closing on a replacement property. An exception to this rule is that if your tax return occurs before this deadline, you can shorten this time frame. As long as you don't ask for an extension on your return, you are able at this point to tell your qualified intermediary the exchange has been terminated and receive your {proceeds. In the end, it's always a good idea to be prepared for whatever contingencies may arise; beginning the 1031 process when you aren't sure what the future may hold can, in fact, be to your advantage, in that it keeps both options open. As long as you take note of the time frames involved in the 1031 process, you are at liberty to back out of your exchange in the event that your circumstances change.
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