The short answer
Yes. Your identification names a property, not a price, so a low appraisal, a price cut, a smaller loan or new closing terms on the same property leave it identified under Reg. section 1.1031(k)-1(c). What changes is the money: a cheaper replacement can leave cash with your intermediary or reduce the debt you take on, and either shortfall can become taxable boot. The identification breaks only if the deal changes into a different property, such as buying a different building or a part that differs in basic nature from what you named.
At a glance
| What you identified | The property, by legal description, street address or distinguishable name |
|---|---|
| Price on the notice | Not required; a lower price does not void the identification |
| Receipt test | What you close on must be substantially the same property as identified |
| Partial purchase | The regulation's example accepts 75% of the value of unchanged land |
| 200% rule | Values measured at the end of day 45, so a later low appraisal cannot hurt you |
| Tax effect of a cheaper deal | Less value or less debt replaced can mean taxable boot |
| Substitution after day 45 | Not allowed; a new property needs a new identification you can no longer make |
The identification attaches to the property, so renegotiating the price is safe
The regulation asks only that replacement property be "unambiguously described" in a signed writing sent before day 45, and it says real property is generally described by "a legal description, street address, or distinguishable name" (Reg. section 1.1031(k)-1(c)(3)). Nothing in that test turns on the contract price, the appraised value or the loan terms.
The receipt rule in paragraph (d)(1) is the one to watch. You must receive the property before the end of the exchange period, and it must be "substantially the same property as identified." A price reduction, a seller credit or a later closing date on the same building does not change what the property is.
The examples in paragraph (d)(2) even assume the price will differ: either party "will make up the difference by paying cash" when the replacement is worth more or less than what was sold. The identification holds through that adjustment.
A low appraisal cannot break the 200% rule after the fact
If you identified more than three properties, the 200% rule compares their aggregate fair market value "as of the end of the identification period" with the value of what you sold (Reg. section 1.1031(k)-1(c)(4)). A low appraisal can only lower that figure, which helps rather than hurts.
The 95% rule is different. If your list exceeded both the three-property and 200% limits, you must receive at least 95% of the aggregate value of everything identified, and the regulation measures each property's value at the earlier of receipt or the last day of the exchange period. A cheaper closing price does not reduce the value of the properties you failed to buy.
For how the limits work together, see how many replacement properties you can identify.
Worked example: a $50,000 price cut becomes $50,000 of boot unless you replace it
Hypothetical, round numbers, closing costs ignored; run your own numbers with your CPA. You sold a rental for $1,000,000 and paid off a $300,000 mortgage, leaving $700,000 with the intermediary. Your identified replacement was under contract at $1,000,000 with a $300,000 loan.
It appraises at $950,000. The seller agrees to that price and the lender, lending against the appraisal, cuts the loan to $285,000. You close using $665,000 of exchange funds, so $35,000 stays with the intermediary and you took on $15,000 less debt than you shed.
Under section 1031(b) the $35,000 is cash boot. The $15,000 debt shortfall is boot too, because Reg. section 1.1031(d)-2 treats relief from a liability as money received unless it is offset by debt you assume or cash you pay. Total recognized gain is about $50,000, capped at your realized gain.
- Adding $15,000 of your own cash at closing offsets the debt shortfall, because cash paid offsets liabilities relieved.
- The $35,000 left over cannot be offset by taking on more debt; liabilities assumed never offset cash received.
- Closing on a second property already on your list absorbs both shortfalls.
What breaks the identification is changing the property, not the deal
Example 3 of paragraph (d)(2) shows the line. A buyer identifies a barn on two acres, then buys only the barn and its land; because that part differs "in basic nature or character" from the property as a whole, it is not substantially the same property. Example 4 goes the other way: buying 1.5 of 2 identified acres of raw land, worth 75% of the whole, still counts.
So if the renegotiation drops a building, a pad site or a parcel with a different use, check it against those two examples before you sign. If the seller offers a different property entirely, it cannot replace the identified one after day 45; see changing your identification after day 45 and, if the deal is dying, what to do when the identified property falls through.
A trust interest already on your list can absorb the shortfall to the dollar
If your day-45 notice named a Delaware Statutory Trust interest as a backup, it can take the leftover cash and, through the trust's non-recourse loan, part of the missing debt. Whether a trust's loan counts as your replacement debt is covered in does a DST's loan count as replacement debt.
If no trust was named by day 45, it cannot be added now, and the remaining choices are to add your own cash, close another identified property, or accept the boot. Ask your intermediary to confirm the final numbers before the closing statement is signed.
Related questions
Do I need to send a new identification notice after renegotiating the price?
No. The notice describes the property, and the same property at a new price is still that property. Keep the contract amendment with your exchange file so the change is documented.
Can I walk away from the identified property after a low appraisal?
Yes, if your contract allows it, but you cannot replace it with a property you did not identify by day 45. Any funds left unused are paid out under the intermediary agreement's restrictions and taxed as boot.
Does the lender's lower loan amount matter if I pay the same price?
Yes. If you replace less debt than you paid off and do not add cash to make up the difference, the shortfall is taxable boot even though the price did not change.
Is a seller repair credit on the replacement a problem?
A credit that lowers the price is treated like any price cut: less value received and possibly cash left with the intermediary. A credit paid to you in cash outside the exchange is money received.
What if the appraisal came in higher than the price?
Nothing happens to the identification. The 200% rule uses fair market value, so a high value on a property you identified among more than three could matter; check the totals with your intermediary.
Sources
Checked against these publications on September 30, 2026. Rules and figures change; confirm the current version with your CPA or attorney before you act. This page is general information, not tax or legal advice.