Once an investor closes the sale of relinquished property, a clock starts that cannot be paused, extended by agreement, or reset for a slow market. The exchanger has exactly 45 calendar days to give the qualified intermediary a written list of candidate replacement properties, and the rules governing what that list can contain are narrow enough that a casual approach routinely produces an invalid identification. Understanding the three counting rules ahead of time, rather than during week six, is what keeps a Detroit-area exchange on track.
When the Clock Starts and What Stops It
Day one is the closing date of the relinquished property, not the date a purchase agreement was signed or the date the investor started shopping for a replacement. The count runs in calendar days, including weekends and federal holidays, and there is no administrative mechanism to pause it for a pending inspection, a slow lender, or a title issue on the property being sold. The only recognized extensions apply to federally declared disaster areas, and those are granted by IRS notice rather than requested case by case. An exchanger who assumes a delay will be forgiven is planning around an exception that, in most years, will not apply to them.
The Three-Property Rule
The most commonly used identification rule allows an exchanger to name up to three replacement properties of any value, with no limit on the combined price. Most single-property exchanges use this rule because it is the simplest to satisfy: an investor selling one Detroit warehouse can identify a primary target plus two backups without doing any value math at all. The tradeoff is the hard cap of three; a fourth property cannot be added under this rule no matter how attractive it looks on day 40.
The 200 Percent Rule
An exchanger who wants to identify more than three properties can do so under the 200 percent rule, which allows an unlimited number of candidates as long as their combined fair market value does not exceed twice the value of the relinquished property. This rule suits an investor spreading proceeds across several smaller assets, such as trading one larger building for a handful of net-leased retail units in different submarkets. The value ceiling has to be calculated and documented at the time of identification, not estimated loosely, since exceeding it invalidates the identification for every property on the list, not just the excess.
The 95 Percent Rule and Why It Rarely Gets Used
A third option lets an exchanger identify any number of properties at any combined value, with no cap, but only if the exchanger ultimately acquires at least 95 percent of the total value identified. In practice this rule is unforgiving: naming ten properties as a hedge and closing on only three, when those three fall well short of 95 percent of the combined list value, can disqualify the entire exchange. It shows up mainly when an exchanger has a narrow, specific reason to over-identify and a realistic plan to close on nearly all of it, not as a general-purpose safety net. Most Detroit exchangers who consider the 95 percent rule are better served falling back to the 200 percent rule instead, since the value cap under that rule is easier to plan against than a near-total acquisition requirement.
What Makes a Written Identification Valid
The notice has to be signed, dated, and delivered to the qualified intermediary, and each property named needs an unambiguous description, generally a full street address or a legal description sufficient to identify the parcel. A verbal mention during a phone call or an informal text naming a building does not satisfy the requirement on its own. An exchanger can revoke or replace any identified property at any point before day 45 without penalty, which means the list can stay a working document until it is actually delivered, but once day 45 passes, the properties named are locked for purposes of the exchange. If the identification relies on the 200 percent or 95 percent rule, the notice should also state a good-faith value for each property, since the intermediary and, later, a reviewer may need to confirm the combined figures against the rule being used.
Common 1031 Exchange Questions
Does the 45-day period include weekends and holidays?
Yes, it runs on calendar days from the closing date of the relinquished property, with no adjustment for weekends, holidays, or business closures.
Can I identify more than three properties?
Only under the 200 percent rule, where the combined value of every property named cannot exceed twice the value of the relinquished property, or the 95 percent rule, where nearly all identified value has to actually be acquired.
What happens if my written identification is missing a property address?
An identification without an unambiguous description, generally a full address or legal description, does not satisfy the requirement, and the property may be treated as never identified even if it was discussed with the intermediary informally.
Can I change my identified properties after I submit the list?
Yes, up until day 45. Any revocation or substitution has to reach the qualified intermediary in writing before the deadline; changes submitted after day 45 are not valid.
What if I miss the 45-day deadline entirely?
The exchange generally fails, and the deferred gain from the relinquished sale becomes taxable in the year of the sale. Relief outside a federally declared disaster area is rare, which is why the deadline is treated as fixed.
