According to the IRS, to meet all the rules of a 1031 Exchange, it is advisable to find someone to act as a Qualified Intermediary, also known as a Accommodator or Facilitator.
Basically this is a third party that is neutral and takes possession of the proceeds from the sale of your investment property and then uses the funds to purchase your new investment property, and then transfers title of the property to you.
As we have mentioned, 1031 Exchanges are great, but they need to be set up correctly and must meet all rules of the IRS. A real estate attorney can be helpful.
The contract to sell or buy real estate must contain wording that clearly demonstrates an intent to perform a 1031 Exchange.
"A qualified intermediary is a person who enters into a written exchange agreement with you to acquire and transfer the property you give up and to acquire the replacement property and transfer it to you. This agreement must expressly limit your rights to receive, pledge, borrow, or otherwise obtain the benefits of money or other property held by the qualified intermediary." IRS
The closing date for the new property must happen within 180 days of close of the property you are selling.
Currently, under Section 121 of the IRS code, you can exclude up to $250,000 (Single) or $500,000 (Married) of the gain on the sale of a personal resident if certain requirements are met, such as a residence used in a trade or business.