Timing a 1031 Exchange With a Hermosa Sale

Selling in Hermosa Beach and planning a 1031 exchange can feel like a race against the clock. Inventory is tight, escrows have their own pace, and the IRS deadlines do not bend. You want to keep your tax deferral and land the right replacement without rushing a big decision. This guide shows you how to time the sale and the exchange windows in Hermosa so you can move with confidence. Let’s dive in.

Understand the 45 and 180 day rules

You have two hard deadlines once you close on the property you are selling. You have exactly 45 days to identify replacement property, and 180 days to acquire it. These periods start the day after you close and they run at the same time. The IRS does not extend them for weekends, holidays, or low inventory. See the federal timing rules in IRS Publication 544.

The 180 day deadline can be shortened by your tax return due date for the year of the sale. The exchange period ends on the earlier of day 180 or your return due date, including extensions. Plan your sale date with that in mind. See the guidance in the Instructions for Form 8824.

To qualify, both the property you sell and the one you buy must be real property held for investment or for use in a trade or business, not for personal use. After the 2017 tax law changes, personal property no longer qualifies, which is also covered in IRS Publication 544.

How to identify your replacements

Within 45 days, you must identify replacements in writing using one of these methods:

• Three property rule. Identify up to three properties, any value.
• 200% rule. Identify any number of properties as long as their total market value is not more than 200% of what you sold.
• 95% rule. Identify any number of properties and acquire at least 95% of their total value.

Pick one method and follow it carefully. Missed or invalid identifications can disqualify the exchange. Review the rules here: three property, 200% and 95% rules.

What Hermosa Beach means for timing

Hermosa Beach is a small, high value coastal market with low transaction volume and often limited inventory. Recent snapshots have shown a median sale price in the low two million dollar range and a median days on market around 40 to 60 days, though it varies by month and property type. Tight supply can make the 45 day identification window harder. You can watch trends on the Hermosa Beach market snapshot.

Local escrow timelines also matter. In Los Angeles County, financed residential escrows often take about 30 to 45 days, while more complex or 1031 related deals can run longer. Build your plan around typical escrow pacing and keep room for appraisals, underwriting, and contingencies. See an overview of escrow timing here: close of escrow timeline.

City paperwork can add time. In small cities, certain building reports or permits may require extra lead time. Order needed reports early to avoid delays during escrow. For practical local tips, see this South Bay process overview.

Choose your exchange structure

Deferred exchange: sell then buy

This is the most common approach. You close your Hermosa sale, a Qualified Intermediary holds the proceeds, and your 45 and 180 day clocks start. Pros include simpler setup and broader lender familiarity. The tradeoff is speed. In a tight market, locking down acceptable replacements inside 45 days can be stressful. Learn the basics in this 1031 overview.

Reverse exchange: buy then sell

If the perfect replacement appears before you can sell, a reverse exchange can hold the property for you. An Exchange Accommodation Titleholder parks title under a Qualified Exchange Accommodation Agreement while you list and close your sale. You still have 45 days to identify the property you will sell and 180 days to finish the exchange. Reverse exchanges are more complex and more expensive, and they require more liquidity and lender cooperation. See the reverse exchange and QEAA basics.

Build a working timeline

Here is a simple way to map your calendar to the IRS windows and local escrow pace.

If you sell first (deferred exchange)

• Before listing. Interview and engage a Qualified Intermediary, speak with your tax advisor, and pre‑screen replacements. Prepare your property and order any city reports.
• In escrow on your sale. Coordinate closing timing with your buyer and your QI. Confirm financing options for your replacement.
• Day 0. Close your sale. The QI receives the proceeds. Your 45 and 180 day clocks start.
• By day 45. Deliver written identification of your replacement property or properties using the three property or 200% rule. See the identification rules.
• By day 180, or earlier if your return due date comes first. Close on the replacement and complete the exchange. You will report the exchange on Form 8824 when you file, guided by the Form 8824 instructions.

If you must buy first (reverse exchange)

• Before you purchase. Engage an accommodator to set up the EAT structure and confirm your financing.
• On acquisition. Acquire the replacement into the EAT. You have 45 days to identify the property you will sell and 180 days to close that sale.
• Finish the exchange. Close your Hermosa sale within 180 days to complete the swap under your QEAA.

Line up your team early

Several partners affect your schedule. Bringing them in early helps you keep options open during the 45 day sprint.

• Qualified Intermediary. Essential for deferred exchanges. Have the QI in place before you open escrow so funds never touch your account. See this 1031 overview.
• Escrow and title. Ask about typical turnaround times, payoff demands, and any municipal reports.
• Lender. Start pre‑approval or pre‑underwriting for the replacement property so financing does not compress your 180 day window.
• Tax advisor. Coordinate federal rules and California reporting.
• Local agent. Use up‑to‑the‑minute pricing and on‑market intel to shape your identification list.

Mind California reporting

California generally follows the federal rules for real property exchanges, but it adds reporting when you exchange California property for out of state replacements. If you sell in Hermosa and buy out of state, you must file Form FTB 3840 for the year of the exchange and then file it each year until you recognize the deferred gain. See the state’s guidance on reporting like‑kind exchanges.

Transfer taxes to budget

Los Angeles County collects a documentary transfer tax when you record a deed. Hermosa Beach does not appear to add a separate city transfer tax. If you buy your replacement in a city with its own transfer tax or surtax, such as Los Angeles, Santa Monica, or Redondo Beach, factor that into your numbers. For county details, review the documentary transfer tax information.

Common pitfalls and how to avoid them

• Closing your sale before your QI is engaged. Engage the QI before escrow opens so funds never pass to you.
• Weak identification strategy. Use the three property or 200% rule to keep backups and protect options.
• Ignoring the tax‑return deadline. If your return due date hits before day 180, your exchange period ends early.
• Underestimating escrow timing. Typical LA County escrows are 30 to 45 days for financed deals. Pad your schedule for appraisals and underwriting.
• Touching funds. If you receive sale proceeds, the exchange fails. Have the QI hold the funds.
• Missing FTB 3840. If you buy out of state, add California’s annual reporting to your checklist.
• Forgetting financing logistics. Reverse exchanges may require more cash and lender coordination.

A well timed Hermosa sale with a 1031 exchange is very doable with the right strategy and team. If you want a clear plan that fits local inventory, escrow timing, and the federal deadlines, let’s talk. Connect with Adela Randazzo for a private, step‑by‑step game plan for your sale and exchange.

FAQs

What is the 1031 exchange timeline after a Hermosa Beach sale?

• You have 45 days from the day after closing to identify replacements and 180 days to acquire them. The periods run at the same time, and the IRS does not extend them for weekends or holidays.

How does a reverse exchange work if I find a replacement before selling in Hermosa?

• An accommodator parks title to the replacement under a QEAA, you identify the property you will sell within 45 days, and you complete the exchange within 180 days.

Can I delay my Hermosa closing to buy first or to line up replacements?

• Yes, you can negotiate the closing date. Delaying the close delays the start of your 45 and 180 day windows, which can help you lock in replacements or set up a reverse exchange.

Do I owe extra city transfer taxes when selling in Hermosa Beach?

• Hermosa Beach does not appear to add a city transfer tax beyond the county tax, but many nearby cities charge their own transfer taxes on purchases, so budget for that if your replacement is in one of those cities.

What California forms apply if I buy my replacement out of state?

• If you exchange California property for out of state property, file Form FTB 3840 for the year of the exchange and continue filing it each year until you recognize the deferred gain.