New FinCEN Reporting Requirements for Residential Real Estate Transactions

New FinCEN Reporting Requirements for Residential Real Estate Transactions

The U.S. Department of the Treasury, through the Financial Crimes Enforcement Network (“FinCEN”), has adopted new Residential Real Estate Transaction Reporting Requirements (the “Residential Real Estate Rule”). The rule becomes effective on March 1, 2026, and applies to certain non-commercial residential real estate transfers involving legal entities and trusts. These requirements impose new documentation, recordkeeping, and reporting obligations on parties involved in covered transactions.

Scope and Application of the Rule

The Residential Real Estate Rule applies to transfers of “residential real property” when all of the following conditions are met:

• The property consists of a single-family home, condominium, cooperative unit, apartment building, or land intended for residential development;
• No mortgage or deed of trust will be recorded against the property at closing. This includes cash purchases, seller-financed transactions, and transactions involving loans from unregulated or private lenders;
• The buyer is a legal entity, such as a limited liability company, partnership, corporation, or trust, rather than an individual natural person; and
• No exemption under the rule applies to the transaction.

Reporting Requirements and Filing Deadlines

For each reportable transfer, a designated “reporting person” must submit a Real Estate Report to FinCEN. The information required is more extensive than what is typically collected in a standard residential closing and includes:

• The property address, legal description, and nature of the transfer;
• Information regarding the transferee entity, including its legal name, principal address, and identifying information for individuals who own or control the entity;
• Identification of any individual authorized to sign or act on behalf of the transferee;
• The name of the transferor (seller);
• Payment details, including the purchase price, payment methods, sources of funds, and bank account information used to fund the transaction or make payments on behalf of the buyer; and
• Confirmation that the report is filed no later than 30 calendar days after closing, or by the last day of the month following the month in which closing occurs, whichever is later.

Who Is the “Reporting Person”

Each reportable transaction must have one party designated as the “reporting person.” Unless the parties agree in writing to designate a different reporting person, FinCEN assigns this responsibility based on the functions performed in the transaction, in the following order of priority:

1. The closing agent listed on the settlement statement;
2. The individual or entity that prepared the settlement statement;
3. The party that records the deed transferring ownership;
4. The title insurer that issues, or will issue, the owner’s title insurance policy;
5. The party that disburses the greatest amount of funds in connection with the transaction;
6. The party that examined title to the property; or
7. The party that prepared the deed.

In many transactions, the settlement agent or title company will serve as the reporting person. The reporting person is required to retain a copy of the filed report for a period of five years.

Penalties for Failure to Comply

Failure to comply with the Residential Real Estate Rule may result in civil and criminal penalties under the Bank Secrecy Act. Negligent violations, including failing to file a report or submitting incomplete or inaccurate information, may result in civil penalties assessed on a per-violation basis. Current penalty amounts include fines of up to $1,430 per violation, with higher aggregate penalties for patterns of negligent conduct.

Willful violations may result in substantially higher civil penalties, as well as potential criminal penalties, including fines and imprisonment. FinCEN has indicated that enforcement of these reporting requirements will be a focus once the rule becomes effective.

Practical Considerations for Upcoming Transactions

For residential real estate transactions closing on or after March 1, 2026, parties should evaluate early in the transaction whether the transfer will be subject to the reporting requirements. Coordination among buyers, sellers, settlement agents, title companies, and other professionals will be important to ensure that reporting responsibilities are clearly assigned and that required information is collected in a timely manner.

Although legal challenges to the Residential Real Estate Rule are pending, the reporting requirements are currently in effect. Parties involved in covered residential transactions should plan to comply with the rule unless and until further guidance or changes are issued by FinCEN.