In the exchange Last reverse exchange the intermediary (QI) borrows the replacement property purchase price from the banks non-recourse. The exchangor guarantees the loan. The QI acquires and holds the replacement property until the relinquished property sells. At the sale of the relinquished property, the QI and exchangor swap and the QI closes on the sale of the relinquished property. The sales proceeds are then paid to the bank with any excess going to the exchangor.

• QI borrows purchase price from bank
• Exchangor guarantees loan
• Note secured by replacement property

Step 2:

• QI purchases replacement property
• QI holds replacement property

• QI and exchangor swap relinquished property
• QI sells relinquished property
• QI applies proceeds to bank note
• Either excess proceeds go to the exchangor or exchangor assumes balance of unpaid note