The U.S. Department of the Treasury has taken steps to address concerns about the
misuse of residential real estate for illicit activity. New reporting requirements going into
effect aim to increase transparency in residential real estate transactions and
strengthen efforts to detect money laundering.
This regulation, originally set to go into effect on Dec. 1, 2025, requires mandatory
reporting for all-cash residential real estate purchases to the Financial Crimes
Enforcement Network (FinCEN) was postponed until March 1, 2026. This reporting
requirement applies to residential real estate transactions set to close after March 1,
2026.
What You Need to Know
- The rule is targeting non-financed (all-cash or privately financed) transfers of
residential property. - The real estate professionals involved in closings are required to identify the
reporting party, collect detailed beneficial ownership information and file. - The new rule does not apply to transfers made directly to individuals; it is
triggered only when the transferee is a legal entity or a trust.
Who Does The New Rule Impact?
The new rule impacts a variety of real estate professionals and businesses involved in
closings and settlements. This includes settlement agents, title insurance companies
and agents, escrow agents, attorneys involved in closings and other professionals
performing specific functions during the transfer process.
For further details, FinCEN has published additional information on the new rule and its
impact.
What Meets the Criteria for a Reportable Transfer?
A transfer is considered reportable under the new rule if it meets these four criteria:
1. Property Type: Residential real property in the U.S., including single-family
homes, townhouses, condominiums, and cooperative units. Notably, it also
covers entire apartment buildings designed for one to four families, as well as
vacant land where the transferee intends to build a residential structure. Mixed-
use properties with a residential component can be subject to the rule.
2. Financing: The transfer must be non-financed. This means the transaction does
not involve a loan from a financial institution. This is designed to target all-cash
sales and treats transactions financed by a private lender without such
obligations as non-financed, making them potentially reportable.
3. Transferee: The recipient of the property must be a transferee entity or a
transferee trust.
- A transferee entity is a corporation, partnership, LLC, or similar legal vehicle.
- A transferee trust includes most trusts and similar foreign legal arrangements.
- There are specific exemptions for highly regulated entities, such as banks,
insurance companies, public utilities, and entities registered with the Securities
and Exchange Commission under the Securities Exchange Act of 1934. - Some trusts are exempt.
4. No Applicable Exemption: The transaction cannot fall under one of the
specified exemptions.
- The rule outlines several non-reportable transfers, including those resulting
from death, divorce, bankruptcy, or court supervision. - A qualified intermediary for a like-kind exchange under Section 1031 of the
Internal Revenue Code is also exempt.
Who Is Responsible for Reporting?
For each covered residential real estate transaction, only one professional is
responsible for submitting the required Real Estate Report.
Professionals involved in the transaction may also agree, in writing, to designate a
specific party to handle reporting obligations.
Required Information to Disclose in the Real Estate Report
The designated reporting party must submit a Real Estate Report to FinCEN that
includes identifying details about themselves, the property being transferred, and the
parties to the transaction. This includes information about the seller, as well as detailed
disclosures concerning the buyer when the transferee is an entity or trust.
For entity or trust buyers, the report must include beneficial ownership information such
as names, dates of birth, residential addresses, citizenship, taxpayer identification
numbers, and details regarding the purchase price and payment structure. Beneficial
owners generally include individuals who exercise substantial control over an entity or
hold at least a 25 percent ownership interest. For trusts, reportable individuals may
include trustees, certain beneficiaries, grantors with revocation rights, or individuals who
control entities involved in the trust’s structure.
Transactions and Parties Excluded From Reporting
The rule carves out a number of exemptions aimed at excluding lower-risk or
administrative transfers from reporting requirements. These include transfers involving
easements, estate-related transfers following death, divorce-related property transfers,
bankruptcy proceedings, court-supervised transfers, and certain no-consideration
transfers to grantor trusts. Like-kind exchanges conducted through qualified intermediaries under Section 1031 are also excluded, as are transactions where no
reporting party can be identified.
In addition, reporting is not required when the transferee is a regulated or low-risk entity,
such as publicly traded companies, governmental bodies, banks and other financial
institutions, insurance companies, registered investment and securities entities, public
utilities, or subsidiaries of exempt organizations.
Conclusion
As the March 1, 2026, effective date approaches, real estate professionals involved in
residential closings should take proactive steps to understand how the new rule applies
to their role in a transaction. Identifying reporting responsibilities early, reviewing internal
procedures, and preparing to collect and safeguard required information will be key to
avoiding compliance gaps. While the rule represents a significant shift for all-cash and
non-bank-financed transactions, it also reflects a broader federal effort to promote
transparency and protect the integrity of the U.S. residential real estate market.