1031 Exchanges: Where Smart Due Diligence Meets Speed (and How Clark Hill Inspections Helps)

If you’re trading into your next commercial property using a 1031 exchange, speed and certainty matter. The rules are clear: exchanges apply to real property held for business or investment, you generally defer gain if you swap for like-kind real estate, you must identify your replacement within 45 days and close within 180 days, and you’ll report the transaction on IRS Form 8824—often with a Qualified Intermediary (QI) facilitating the flow of funds.

That tight timeline is exactly why a well-scoped, lender-ready commercial inspection can be the difference between a smooth exchange and an expensive surprise.

Why inspections are mission-critical in a 1031

A 1031 lets you roll equity forward without immediate tax on the gain, but it doesn’t change the building you’re buying. Unplanned roof, MEP, envelope, or life-safety costs can crush projected returns and lender assumptions. A standards-based Property Condition Assessment (PCA) gives you a clear view of near-term repairs and longer-term capital plans—evidence you can use to negotiate, plan reserves, and keep your 180-day clock intact. The industry baseline for PCAs is ASTM E2018, which outlines scope, walk-throughs, document reviews/interviews, and a Property Condition Report (PCR) with opinions of probable costs. 

Environmental diligence that fits the exchange clock

Where environmental risk is a concern, pair your PCA with a Phase I Environmental Site Assessment performed to ASTM E1527-21 (the current EPA-recognized “All Appropriate Inquiry” standard). This helps identify recognized environmental conditions (RECs) and preserves liability protections—without sampling or invasive work—so you can move quickly without skipping risk management. 

A Massachusetts note (read if buying or selling here)

Massachusetts follows the federal approach to deferring gain on real-property like-kind exchanges. However, when you eventually dispose of the replacement property, the portion of gain that reflects Massachusetts-source appreciation becomes Massachusetts-source income (a “clawback-type” rule to be aware of in cross-state scenarios). Talk with your tax advisor early so your transaction structure and filings match your plan.

How Clark Hill Inspections supports 1031 investors, lenders, and brokers

Our commercial PCA aligns with ASTM E2018, giving you a clear, decision-ready picture—fast:

• Scope built for lenders & investors: Building envelope, structure, roofing, site, interiors, accessibility considerations, and MEP systems—rolled into a concise PCR with near-term repairs and capital reserve opinions. 

• Add-ons when warranted: Phase I ESA (ASTM E1527-21), sewer line scoping, thermography, specialty roof evaluations, and moisture diagnostics—so you don’t lose time stitching multiple vendors together. 

• Exchange-ready coordination: We work seamlessly with your QI, broker, lender, attorney, and CPA to align reports and close-critical dates. (Best practice is to assemble that team up front.) 

  
  

A timeline that respects the 45/180-day reality

• Pre-offer: Quick consult to right-size your scope for the asset and lender.

• Day 0–3 (LOI/PSA): Schedule fieldwork; confirm document request list.

• Day 5–10: Onsite PCA; immediate heads-up on any red flags.

• Day 10–15: Draft PCR with opinions of probable costs; optional add-ons (e.g., Phase I ESA) delivered in parallel.

• Day 15+: Final PCR; we join your team huddle (broker/QI/lender) to map repairs, credits, or reserves before you run out the clock.

  
  

  (Regulatory deadlines remain 45 days to identify and 180 days to complete—plan backward from those dates.)

  
  

What “like-kind” really means (and what it doesn’t)

“Like-kind” is broader than many buyers think: most U.S. real property held for business or investment can be exchanged for other U.S. real property of a different type (e.g., retail for industrial), but U.S. property isn’t like-kind with foreign property. Personal property isn’t eligible after 2017. 

Pro tip: Use 1031 activity to your advantage

We’re seeing investors use exchanges to resize portfolios (e.g., out of high-capex assets and into lower-touch industrial) and to scale while deferring taxes—moves that make rigor in inspections and capex planning even more valuable.

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Ready to exchange with confidence?

Clark Hill Inspections delivers ASTM-aligned commercial PCAs (and environmental add-ons when needed) on a timeline that fits the 45/180-day window—so you can negotiate with facts, protect your returns, and hit your deadlines. Email or call us to schedule your 1031-focused PCA today.

Disclaimer: This article is for general information only and isn’t tax, legal, or accounting advice. Always consult your professional advisor about your specific situation.