What is a qualified intermediary, and why can't I just hold the money myself?
A qualified intermediary (QI) is the independent third party that holds your sale proceeds and papers the exchange. If you touch the money — even for a day, even in escrow you control — the IRS treats the sale as taxable and the exchange is dead. The QI must be engaged before your sale closes.
The legal doctrine is constructive receipt: if funds are available to you, you have received them, whether or not you spend them. The QI structure solves this by having the intermediary technically sell your old property and buy your new one on your behalf, with the cash never passing through your hands. Your exchange agreement must be signed before the relinquished closing — you cannot appoint a QI retroactively.
Certain people are disqualified from serving: your attorney, CPA, real estate agent, or employee within the prior two years, and any related party. Use a professional exchange company.
The QI industry is lightly regulated, and intermediaries have failed with client funds before. Vet yours: ask whether funds sit in a segregated account requiring your co-signature, what fidelity bond and E&O coverage they carry, and how long they have operated. Your QI holding seven figures of your equity deserves at least as much diligence as your lender.
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