The 45-Day Identification Period

How the 45-day identification period works in a Virginia 1031 exchange, including the three-property, 200-percent, and 95-percent rules.

The 45-day identification period is the first hard deadline in a 1031 exchange, and it is also the one investors most often misjudge. The clock starts on the calendar day the relinquished property closes, runs through weekends and federal holidays without pause, and ends at midnight on day 45 regardless of how complicated the search for a replacement turns out to be. To keep the deferral valid, the investor must identify one or more replacement properties in writing, delivered to the qualified intermediary before that deadline, under one of three IRS safe harbor rules: the three-property rule, the 200-percent rule, or the 95-percent rule.

The Three-Property Rule

Under the three-property rule, an investor can identify up to three replacement properties of any value, with no dollar ceiling attached. This is the rule most Virginia investors use, since it fits the common pattern of a single strong candidate plus one or two backups in case financing or title work falls apart on the first choice. A Loudoun County investor targeting one data-center-adjacent office building, with two backup listings identified in case the primary contract falls through, is a textbook three-property identification.

The 200-Percent Rule

The 200-percent rule allows more than three properties to be identified, but caps the combined fair market value of everything on the list at 200 percent of what the relinquished property sold for. An investor who sold a $3,000,000 Hampton Roads retail center could identify five, six, or more replacement candidates under this rule, as long as their combined value does not exceed $6,000,000. This rule fits investors spreading proceeds across several smaller assets, such as a group of Richmond-area multifamily buildings, where a three-property cap would be too narrow to cover realistic options.

The 95-Percent Exception

The 95-percent rule permits identifying an unlimited number of properties regardless of combined value, but it carries a strict condition: the investor must actually acquire at least 95 percent of the total value identified. Because failing that threshold by even a small margin disqualifies the entire exchange, this rule is rarely used by choice. It tends to show up only when a list drafted under the 200-percent rule accidentally runs over the cap and the investor has to fall back on the stricter standard to save the transaction.

What Counts as Valid Identification

Identification has to be unambiguous and in writing, signed by the investor, and received by the qualified intermediary before the deadline. A street address is generally sufficient for a standard commercial building; a legal description is safer for raw land, a partial interest, or a property still being subdivided, since an ambiguous description can later be challenged as failing to identify anything specific. A verbal mention to a broker, a voicemail to the QI, or an unsigned draft emailed after midnight on day 45 does not satisfy the requirement, no matter how clearly the investor intended it.

Interaction With the Three Safe Harbor Rules

An investor is not locked into one rule at the start of the 45 days. A list that begins under the three-property rule can be redrafted under the 200-percent rule if a fourth or fifth candidate emerges late, as long as the revised list is delivered to the QI before the deadline and the combined value test is satisfied. What cannot happen is mixing rules on a single list, such as identifying four properties worth more than 200 percent of the relinquished sale price while claiming the three-property rule's no-value-limit protection; the IRS applies whichever rule the facts actually satisfy, and a list that fails all three voids the identification entirely.

Frequently Asked Questions

Can a Virginia investor switch from the three-property rule to the 200-percent rule mid-search?

Yes, as long as the revised list is delivered to the qualified intermediary in writing before the 45-day deadline and the combined value of everything listed satisfies the 200-percent cap relative to the relinquished sale price.

Does identifying a property under the 95-percent rule commit the investor to buying it?

No single property is a binding commitment, but the rule as a whole requires acquiring at least 95 percent of the total identified value, so failing to close on enough of the list disqualifies the entire exchange rather than just the properties that fell through.

Is a purchase contract enough to satisfy identification, or is a separate letter required?

A signed purchase contract can serve as identification if it is delivered to the qualified intermediary before day 45 and describes the property specifically enough to remove any doubt, but the delivery itself has to be in writing and timely regardless of what document carries the description.

What happens if a Virginia investor identifies four properties without checking the value cap?

If the combined value of four or more identified properties exceeds 200 percent of the relinquished sale price and the three-property count is also exceeded, the identification can fail entirely unless the investor ends up acquiring at least 95 percent of that combined value under the fallback exception.

Can an identified property be removed from the list before day 45?

Yes. An investor can revoke and replace an identified property with a new written notice to the qualified intermediary at any point before the 45-day deadline, but once the deadline passes the list is locked regardless of new information.