The 45-day identification period is the first hard deadline in a 1031 exchange, and it starts running the moment the relinquished property closes, not when the exchange paperwork is signed or when a buyer is found for the replacement. For a Scottsdale investor selling an Airpark flex building or an Old Town retail parcel, that clock does not pause for a slow escrow or a broker on vacation. Missing it does not just delay the exchange, it ends it, converting deferred gain into taxable gain in the year of sale. Understanding exactly how the window is measured, and which rule governs how many properties can go on the list, is the difference between a routine identification and one that unravels weeks later over a technicality.
When the Clock Starts and What Counts as a Day
The 45 days are calendar days, not business days, counted from the date title to the relinquished property transfers. There is no extension for weekends, federal holidays, or the investor being out of town. A sale that closes on a Friday still starts the count that same day, and day 45 lands where it lands regardless of whether it falls on a Sunday. Investors who assume the deadline shifts to the next business day are working from residential closing habits rather than the actual 1031 rule, and that assumption has ended more than one exchange.
Because the window is short and fixed, most Scottsdale investors start scouting replacement candidates before the relinquished sale even closes, so the 45 days are used for confirming and narrowing rather than starting from zero.
The Three-Property Rule
Under the three-property rule, an investor can identify up to three replacement properties of any value, with no cap on combined purchase price. This is the rule most exchanges use because it is simple: name three candidates in writing, with the correct legal description, delivered to the qualified intermediary before midnight on day 45, and the identification is valid regardless of what those three properties are worth combined.
The 200% Rule and the 95% Rule
An investor who wants to identify more than three properties can use the 200% rule, which allows any number of candidates as long as their combined fair market value does not exceed 200% of what the relinquished property sold for. This comes up often in Scottsdale exchanges moving out of a single larger asset, like a North Scottsdale office building, into several smaller replacement properties spread across submarkets.
There is a third option, the 95% rule, which removes the value cap entirely but requires the investor to actually acquire 95% of the total value of everything identified. Because that bar is hard to clear in practice, it is rarely the primary plan and more often a fallback discussed with a qualified intermediary when a list has already grown past the 200% ceiling.
What the Written Notice Has to Include
An identification is not verbal and it is not a text message to a broker. It has to be in writing, signed by the investor, and delivered to the qualified intermediary or another party involved in the exchange before the deadline, with an unambiguous legal description or street address for each candidate. A property described only as a general area or an active listing without a specific parcel does not satisfy the requirement, and an intermediary who receives a vague notice on day 44 may not have time to flag the problem before the window closes.
Common Ways the Deadline Gets Missed
Most missed 45-day windows are not caused by investors who forget the rule exists, they are caused by investors who underestimate how much time underwriting actually takes. A Scottsdale investor touring a shortlist of Airpark industrial candidates in week three, only to discover a title issue on the front-runner in week five, has effectively lost the cushion that should have caught that problem earlier. Others misjudge the calendar itself, assuming a deadline landing on a weekend automatically shifts, or losing track of the exact closing date because the relinquished sale closed remotely with paperwork trickling in over several days. A written tracking calendar, shared between the investor, the broker, and the qualified intermediary from day one, closes most of these gaps before they become deadline problems.
Common 1031 Exchange Questions
Does the 45-day identification period apply to every 1031 exchange in Scottsdale?
Yes, any deferred exchange involving a qualified intermediary runs on the same 45-day clock, regardless of asset type or where the relinquished or replacement property is located.
Can the 45-day deadline be extended for any reason?
Only in narrow, federally declared disaster situations with specific IRS relief announcements. Personal circumstances, a slow closing, or a difficult property search do not qualify for an extension.
Can an investor change the identified properties after submitting the notice?
A new or revised notice can be delivered any time before day 45 expires, but nothing can be added, removed, or changed once the deadline passes.
Is verbally telling a real estate agent about a candidate enough to identify it?
No. The notice has to be a signed written document delivered to the qualified intermediary or another qualifying party, with a specific legal description for each property.
What happens if none of the identified properties end up closing?
The exchange fails for that portion, and the deferred gain typically becomes taxable in the year the relinquished property sold. This is why most investors identify backup candidates rather than a single property.
