New FinCEN Real Estate Reporting Rules Take Effect March 1

New federal reporting requirements affecting residential real estate transactions take effect March 1. FinCEN’s new Residential Real Estate Rule reaches far beyond traditional home purchases and will impact a broad range of residential and residential‑adjacent real estate transfers involving legal entities and trusts. The rule will immediately reshape closing procedures, as well as documentation and information‑collection obligations for buyers, sellers, title agents, and the professionals who represent them.

When Does the Rule Apply?

The rule applies to a wide range of transactions involving “residential real property.” Reporting is generally required when all of the following apply:

• The property is residential real estate, including single‑family homes, one‑to‑four‑family homes, condominiums, co‑ops, some apartment buildings, dual‑use properties, shares in cooperative housing, and certain vacant land intended for residential development.
• The transfer is “non‑financed,” meaning there is no traditional mortgage from a bank or other lender subject to federal anti‑money laundering (AML) and Suspicious Activity Report (SAR) requirements. This includes all‑cash purchases, seller financing, hard‑money loans, private lending, and other financing from unregulated lenders.
• The transferee is a legal entity or trust, rather than an individual.
• No exemption applies (for example, certain transfers resulting from death, divorce, bankruptcy, transfers to a bankruptcy estate, or transfers to a 1031-qualified intermediary).

A transfer is reportable if, at the time of closing, at least one transferee is a legal entity or trust and the transfer otherwise meets the rule’s criteria. Notably, transactions that do not involve the issuance of title insurance or the exchange of funds may still be reportable.

What Information Must Be Reported?

FinCEN’s Real Estate Report is extensive, requiring the collection and submission of more than 100 data points for a reportable transaction. As a result, FinCEN compliance is significantly more complex than a typical residential closing. For each reportable transaction, the designated “reporting person” must file a Real Estate Report that includes the following, among other things:

• Detailed information about the property and transaction, such as the property address, legal description, and the nature of the transfer
• Identification of the transferee entity or trust, including its legal name, address, formation details, and beneficial ownership information for individuals who own or control the entity or trust
• Identification of individuals signing on behalf of or representing the transferee, including authorized signers, trustees, or other controlling persons
• Identification of the transferor (seller), including basic identifying information required as part of the report
• Information regarding consideration and payments, including the purchase price or value exchanged, payment methods, sources of funds, and bank account information used to fund the transaction or make payments on behalf of the buyer

While individual sellers are generally not subject to beneficial ownership reporting, identifying information regarding the transferor is required as part of the report. The report must be submitted by the later of 30 calendar days after closing or the last day of the month following the month closing occurred.

Who Is Responsible for Filing the Report?

Under the rule, one party is designated as the “reporting person” responsible for filing the Real Estate Report for each reportable transaction. FinCEN determines the reporting person through a mandatory reporting cascade based on the functions performed in the transaction, unless the parties enter into a written designation agreement. The cascade prioritizes, in order:

1. The closing or settlement agent listed on the closing or settlement statement
2. The person who prepares the closing or settlement statement
3. The person who files the deed or other instrument transferring ownership
4. The title insurance company underwriting the owner’s policy
5. The person who disburses the greatest amount of funds in connection with the transaction
6. The person who evaluates the status of title
7. The person who prepares the deed or other transfer instrument

In most cases, the first party in this sequence that performs a listed function is responsible for filing the report. This means the settlement agent or title company will often serve as the reporting person. The reporting person must retain a copy of the report for five years.

Penalties for Non‑Compliance

Failure to comply with the rule may result in civil and criminal penalties under the Bank Secrecy Act. Negligent violations, including failure to file or filing an incomplete or inaccurate report, may result in civil penalties assessed on a per‑violation basis (currently up to $1,430 per violation), with penalties of up to $111,308 for a pattern of negligent activity. Willful violations of the rule may result in civil penalties of up to $286,184. In addition, willful violations of the rule could result in criminal fines of up to $250,000 or imprisonment for up to five years, or both. FinCEN has emphasized that enforcement will be a priority.

What Should Industry Professionals Do?

Industry professionals should ensure that their current practices align with the new rule for transactions closing on or after March 1. This includes identifying potentially reportable transactions early, confirming how FinCEN’s definitions apply to specific deal structures, and coordinating with other transaction participants regarding reporting responsibility. In addition, professionals should be prepared to collect and review expanded information, confirm who will serve as the reporting person under FinCEN’s reporting cascade, and ensure that filing procedures are in place and operational. Although legal challenges to the rule remain pending, the reporting requirements are effective as scheduled, and transactions should proceed with compliance in mind while developments continue to be monitored.

Contact Meghan Collier, Joe Reimer or any member of the Phelps business and real estate teams with questions or for compliance advice.