Generally, the transaction you described is considered to be a deferred or delayed exchange, whereby you sell the property you own and subsequently replace it within the time periods required. In the case of a transfer of relinquished property in a deferred exchange, gain or loss must be recognized if the taxpayer actually or constructively receives money or other property before actually receiving like-kind replacement property. Furthermore, if the full amount of the consideration for the relinquished property is actually or constructively received before the like-kind replacement property is received, the transaction is considered a sale rather than a deferred exchange, even though like-kind replacement property is ultimately received by the taxpayer. Thus, the IRS issued Regulation 1.1031(k)-1 to shed light on how deferred exchanges would be treated and to provide safe harbors so individuals could be assured of how their transactions would be treated. There are essentially three IRS prescribed safe harbor methods you may use to prevent actual or constructive receipt of cash of "other property", the most popular of which is the qualified intermediary.
Per Reg. Sec. 1.1031(k)-1(f)(1) A transfer of relinquished property in a deferred exchange is not within the provisions of section 1031(a) if, as part of the consideration, the taxpayer receives money or other property.
Per Reg. Sec. 1.1031(k)-1(f)(2) The taxpayer is in actual receipt of money or property at the time the taxpayer actually receives the money or property or receives the economic benefit of the money or property. The taxpayer is in constructive receipt of money or property at the time the money or property is credited to the taxpayer's account, set apart for the taxpayer, or otherwise made available so that the taxpayer may draw upon it at any time or so that the taxpayer can draw upon it if notice of intention to draw is given.
Per Reg. Sec. 1.1031(k)-1(g)(2) through (4) sets forth essentially three safe harbors to avoid actual or constructive receipt of funds from the exchange transactions. These three include security or guarantee arrangements, qualified escrow accounts or trusts and qualified intermediaries. Failure to use one of these methods will subject your transaction to substantial risk.
The IRS has been clear in its regulations in that if you sell an investment property and receive the cash or other non-qualifying property (or constructively receive) before you receive the like-kind replacement property, then you must recognize gain to the extent your received (or constructively received) such cash or other property.
So a qualified intermediary is one of three safe harbor methods used to accomplish a 1031 exchange. Its also the most successfully used method I have ever seen in my practice which is why I approach it the way I do in answering questions such as yours. I strongly recommend you see a qualified attorney or intermediary to see if they can still be used if you want to be sure about how your transaction will be treated for tax purposes.