Effective March 1, 2026, a new FinCEN residential real estate reporting rule will require the disclosure of confidential information, from both the buyer and the seller, for large swaths of real estate transactions.
For those who do not know, FinCEN is the Financial Crimes Enforcement Network. FinCEN is the agency that sought the enforcement of the much-maligned Corporate Transparency Act. The purpose of the Corporate Transparency Act is to require business owners to disclose similarly confidential information in an effort to combat money laundering and fraudulent business practices.
The FinCEN residential real estate reporting rule seeks to accomplish a similar goal, namely require disclosure of confidential information upon the sale of residential real property, in order to combat the same evils. Below, we will examine the FinCEN residential real estate reporting rule, and help to illuminate how it may impact you.
What is the FinCEN Residential Real Estate Reporting Rule?
As stated above, the FinCEN residential real estate reporting rule is a new rule that requires the disclosure of buyer and seller information for certain residential real estate transactions. While it does not require all buyers and sellers of residential real estate to report the transfer, it can apply in many situations.
The reporting requirements are slated to begin on March 1, 2026. Accordingly, now is the time to better acquaint oneself with the new rule to ensure compliance going forward. In total, there are over 100 data fields that must be answered when reporting. For professionals who work in residential real estate transactions or the preparing of deeds, it is important to know what pieces of data are sought so that you get such information from your clients and ensure a smooth reporting process.
When does the FinCEN Residential Real Estate Reporting Rule Apply?
Per FinCEN, a transfer of residential real estate is reportable when the four following conditions are met:
- The real property is residential;
- The transfer is not commercially financed;
- The property is transferred to a certain type of entity or trust; and
- An exception does not apply.
FinCEN defines “residential real property” as any of the following:
- Real property located in the United States containing a structure designed principally for occupancy by one to four families;
- Land located in the United States on which the transferee intends to build a structure designed principally for occupancy by one to four families;
- A unit designed principally for occupancy by one to four families within a structure on land located in the United States; or
- Shares in a cooperative housing corporation for which the underlying property is located in the United States.
Further, residential real property can include single-family homes, condos, co-ops, townhouses, and any other dwelling that satisfies any of the four criteria above. Also note that even if a residential portion is attached to a commercial portion of real property, the sale of the residential portion would still be reportable, even though commercial real estate is exempt from this rule.
A “non-financed” transfer is a transfer that does not involve a commercial lender giving a loan or credit to the purchaser. The reason why commercially financed transfers are exempt from reporting is because there is a presumption of legitimacy when a large financial institution is involved. This law targets transfers that would otherwise go undetected, therefore lending themselves to foul play.
Who Must Report?
There is, as FinCEN says, a “cascading” legal duty to report. There are seven types of people implicated in this cascading list, all of whom need to be aware of this new FinCEN residential real estate reporting rule to ensure they are not held liable for any oversights or failures to report.
The priority list is as follows:
- The individual listed as the closing agent;
- The individual who prepares the closing statement;
- The individual who files the deed with the relevant recording office;
- The title insurance underwriter;
- The individual who disburses the greatest amount of funds;
- The individual who provides the title evaluation; and
- The individual who prepared the deed.
This list can implicate many of the people that may routinely be involved with residential real estate transactions, from real estate brokers, to attorneys and their support staff, to title insurance agents, and so forth. Ultimately, the burden falls on the “reporting person” (more on that below).
What Information is Sought?
In total, there are 111 data fields in the FinCEN Residential Real Estate Reporting Form. There is a slew of information sought for both the buyer and the seller, as well as the entity or trust that the property may be transferred to.
While most of the information sought is basic (i.e. names and addresses), the report also inquires about identification numbers (i.e. driver’s license number), relevant bank account numbers, and details about any relevant loans, to name a few data fields. Of course, this may not be information that a professional would have from the client ahead of time, so it is important to understand what information must be gathered in order to effectively and efficiently complete the report.
What are the Exceptions?
While it may be hard to interpret the exact parameters of each, FinCEN does offer some exceptions to the FinCEN residential real estate reporting rule. According to FinCEN, a transfer does not need to be reported if any of the following are true:
- It is a transfer that is a grant, transfer, or revocation of an easement;
- The transfer occurs from the death of an individual, whether by law, contractual provision, or testamentary disposition;
- The transfer is incidental to divorce or the termination of a marriage/civil union;
- The transfer is made to a bankruptcy estate;
- The transfer is supervised by a court in the United States;
- The transfer is for no consideration made by an individual, either alone or with their spouse, to a trust of which that individual, that individual’s spouse, or both, are the settlors or the grantors;
- The transfer is made to a qualified intermediary for the purposes of a Section 1031 like-kind exchange; or
- The transfer does not contain a “reporting person”.
We could spend all day pondering what these exceptions mean and their respective bounds, but there are some inherent ambiguities that exist. For example, one of the major reasons behind this FinCEN residential real estate reporting rule is to track transfers of residential real estate to trusts. That makes the sixth exception (namely, the exception pertaining to trusts) a bit murkier.
At least with respect to trusts, it seems that someone, or a couple, who aim to transfer their own home into a revocable trust for which they are the grantors, would not have to report. For some, this may be a big relief.
While the exceptions can offer some guidance as to the types of transfers that do not need to be reported, it can still be worrisome to rely on one’s own interpretation of these single-sentence exceptions. In any instance where there is uncertainty as to whether any of these exceptions apply, it may be best to consult with an experienced attorney who can offer proper guidance relative to the particular situation.
Who is Responsible?
The person responsible is called the “reporting person”. Per FinCEN, only one person in a particular transaction may be deemed a reporting person. That such person is the one who is required to file the report. The reporting person can be identified in one of two ways:
- By way of the reporting cascade (as identified earlier in this article, and further demonstrated in the FinCEN residential real estate reporting rules); or
- By way of a written designation agreement between the person described in the cascading reporting order.
In short, this seems to mean that, when determining who bears the burden of reporting, one should consult with the cascading reporting order and the first type of individual who is involved in that matter shall bear the burden of reporting. Understanding who bears this burden, and communicating it clearly with the other parties involved, can prove crucial when complying with this new rule.
Penalties for Failure to Comply with the FinCEN Residential Real Estate Reporting Rules
Negligent violations of the rule could result in a civil penalty of, as of 2025, not more than $1,430 for each violation, and an additional civil money penalty of up to $111,308 for a pattern of negligent activity. Willful violations could result in a civil penalty of not more than the greater of the amount involved in the transaction (not to exceed $286,184) or $71,545. This civil penalty structure generally applies to any willful violation of a Bank Secrecy Act requirement. For more information on civil penalties, see 31 U.S.C. 5321 and 31 CFR 1010.821.
Criminal penalties for willful violations of the rule could result in a term of imprisonment of not more than five years or a criminal fine of not more than $250,000, or both. For more information on criminal penalties, see 31 U.S.C. 5322.
The Grey Areas within the FinCEN Residential Real Estate Reporting Rules
Whenever there is a new law or rule, inevitably there are many items which were not fully considered. Accordingly, here are a few of the items that we have identified and our thoughts on each:
- Does it apply to transfers of LLCs that own real estate?
There doesn’t seem to be a direct answer to this question out there. The letter of the law seems that the rule does not apply to transfers of LLC interests. - Does it apply to transfers to Irrevocable Trusts for the Grantor’s spouse AND people besides the Grantor’s spouse (e.g. spouse and children)?
A transfer to an irrevocable trust for the benefit of the Grantor and/or the Grantor’s spouse is clearly exempt, but it does not clarify what happens if the spouse is only a partial beneficiary along with others. A trust for the benefit of spouse and descendants is a common option (such as in Medicaid Asset Protection Trusts), so it is unclear if a transfer of real estate to such a trust will trigger this reporting. - Do the exceptions about no reporting being required upon death or by contract mean we do not have to report when a revocable trust ends and it goes to a trust for kids upon death or Grantor?
We believe that no reporting is required in this situation. - Will this even proceed forward? (After all, the Corporate Transparency Act reporting requirements were essentially gutted it affected a very small group of people.)
Just last week, a FL District court granted FinCEN’s motion for summary judgment against Fidelity, upholding the impending AML regulations for the FinCen residential real estate reporting rules. We didn’t see any other challenges named specifically, however some sources just note “pending lawsuits”, and Fidelity will likely appeal and keep this challenge going. However, for now, it seems that the March 1 effective date stands.
Conclusion
The biggest takeaway from this article is that the new FinCEN residential real estate reporting rule will apply to many residential real estate transfers from here on out. Given some of the ambiguities surrounding reporting requirements and the parameters of the exceptions, relevant people and professionals should take the necessary steps to ensure they are well versed in what this rule requires.
This may spur some sensitive conversations where clients are to relay confidential information to the reporting person, and the reporting person is the one who is ultimately responsible to see it through that accurate, complete reporting is done. Nevertheless, it is a new norm that some individuals must become accustomed to.
If there is any uncertainty regarding the FinCEN residential real estate reporting rule, or any of its requirements, exceptions, or processes, we recommend consulting with an experienced attorney who can help further explain the rule and apply it to a particular situation. The information is this article is meant to be purely educational and informative, and is not meant to constitute any legal advice. Any legal determinations regarding the FinCEN residential real estate reporting rule will hinge on the specific facts of that case, and no such determination should be made based solely on the information provided in this article.
*Written by Brendan R. Hanley, Esq.
