Beginning with residential real estate closings occurring on or after March 1, 2026, the Financial Crimes Enforcement Network (FinCEN) will implement a nationwide requirement for certain professionals involved in closings and settlements to report specific non-financed transfers of residential real estate to legal entities or trusts. FinCEN is implementing this requirement pursuant to its Residential Real Estate Rule (the “Rule”), which was originally adopted on Aug. 29, 2024. This initiative aims to enhance transparency and combat money laundering in the U.S. real estate market.
1. Scope of the Requirement
The Rule applies to transfers that meet all the following criteria:
- Residential Real Property: Properties located in the United States designed for occupancy by one to four families, including single-family homes, townhouses, condominiums, cooperatives, and certain vacant land intended for residential construction. This also includes residential properties with a commercial element.
- Non-Financed Transfers: Transactions that do not involve an extension of credit to all transferees that is (a) secured by a mortgage on the transferred property, and (b) made by a financial institution subject to anti-money laundering (AML) program and Suspicious Activity Report (SAR) requirements and obligations.
- Transferee Entity or Trust: At least one buyer must be a domestic or foreign legal entity (e.g., corporation, LLC, partnership) or a trust, rather than an individual. Banks, credit unions, public utility companies, insurance companies, statutory trusts, and securities reporting issuers, among others, are exempt from this definition.
- Exemptions: The requirement does not apply to certain specified transfers, such as those resulting from easements (grants, transfers, or revocations), death, divorce, bankruptcy, court supervision, no consideration, a transfer to a qualified intermediary for 1031 exchange, or certain like-kind exchanges.
2. Reporting Obligations
Professionals involved in real estate closings and settlements, such as settlement agents, title companies, attorneys, and others, are designated as “reporting persons.” One reporting person in each transaction is required to file a “Real Estate Report” with FinCEN for each reportable transfer, which must be submitted electronically through FinCEN's BSA E-Filing System by the final day of the month following the month in which the closing occurred or within 30 days after the closing date, whichever is later.
3. Information to Be Reported
Each Real Estate Report requires detailed information, including:
- Transferee Details: Legal name, address, and identifying information of the entity or trust acquiring the property.
- Beneficial Owners: Information on individuals who directly or indirectly own 25 percent or more of the equity interests of the transferee entity or trust.
- Signing Individuals: Identities of individuals authorized to sign documents on behalf of the transferee.
- Property and Transaction Details: Address of the property, total consideration paid, payment method (e.g., cash, wire transfer, cryptocurrency), and date of closing.
As an important note, all reported information in a Real Estate Report is maintained confidentially and not disclosed to the public under the Freedom of Information Act (FOIA).
4. Compliance Considerations
FinCEN has established a “reporting cascade” to identify the appropriate reporting person in each transaction. This hierarchy prioritizes professionals based on their role in the closing or settlement process. In some cases, parties may enter into a designation agreement to assign reporting responsibility. Note that failure to comply with the Rule and its reporting requirements can result in significant civil and criminal penalties.
Professionals subject to the Rule should take the following steps to ensure compliance:
- Policy Development: Establish internal policies and procedures for identifying reportable transactions and collecting required information.
- Training: Provide training to employees/staff on the requirements of the Rule and the process for filing reports.
- Recordkeeping: Implement secure recordkeeping systems to maintain documentation related to reportable transactions.
- Client Communication: Inform clients about the new reporting requirements and the information they may be required to provide.
5. Conclusion
The implementation of Real Estate Reports under the Rule marks a significant shift in the regulatory landscape for real estate transactions involving legal entities and trusts. Professionals involved in real estate closings and settlements must identify any covered transactions under the Residential Real Estate Rule, familiarize themselves with the Rule's requirements, and take proactive steps to ensure compliance by the effective date of March 1, 2026.
If you have any questions, please contact the authors, Zachary M. Rosenberg and Luca Provenzano. For additional information and resources, including FAQs and filing instructions, visit FinCEN's Residential Real Estate Rule webpage: https://www.fincen.gov/rre.