FinCEN’s Residential Real Estate Rule Imposes New Reporting Obligations

Effective March 1, 2026, the Financial Crimes Enforcement Network (FinCEN) will implement its Residential Real Estate Rule (Rule) as part of an effort to combat money laundering. The Rule requires the filing of a Real Estate Report (Report) for certain non-financed transfers of U.S. residential real estate to legal entities and trusts. All real estate professionals, including agents, title companies, and other individuals involved in real estate closings, should evaluate internal procedures now to ensure full compliance.

Transfers Subject to the Rule

The Report must be filed for all “reportable transfers,” which generally emerges when all of the following three conditions are met:

1. Transfer of Residential Real Property, including

• Single-family homes, townhouses, condominiums, and cooperative units;
• Entire buildings designed for occupancy by one to four families;
• Residential units within mixed-use properties; and
• Vacant land intended for construct of one-to-four family residence(s).

2. Non-Financed Transfers

The reporting requirement applies to non-financed transfers. This covers transfers that do not involve credit secured by the property and extended by a financial institution that is subject to Anti-Money Laundering and Suspicious Activity Reports. Practically, this includes all-cash transactions and privately financed transfers.

3. Transferee is an Entity or Trust

The Rule applies where at least one transferee is a legal entity, like a corporation, estate, or limited liability company, and includes certain types of transfers to trusts.

Exceptions

There are several exceptions to the Rule. A few exempt transfers include the following:

• Transfers resulting from the death of an individual;
• Transfers incident to divorce or dissolution of marriage; and
• Transfers to certain trusts for no consideration where the transferor or spouse is also the grantor/settlor, as happens for residential asset management in many estate plans.

(The list provided is not intended to be exhaustive, and reporting individuals should ascertain how their specific circumstances fit into the reporting requirements of the Rule.)

Parties Required to File the Report

Only one party per reportable transaction is responsible for filing the Report (the “reporting person”). FinCEN assigns responsibility through a hierarchy, as identified in the Rule, unless an alternative written agreement exists between the persons described in the cascading reporting order. This begins with the closing or settlement agent identified on the settlement statement. If no settlement agent exists, responsibility passes sequentially to other participants that prepared the settlement statement, recorded the deed, underwrote the owner’s title insurance policy, and so on.

Information Required in the Report

The Report requires detailed information regarding:

• The reporting person;
• The property;
• The transferor (seller);
• The transferee entity or trust;
• Individuals representing the transferee;
• Beneficial owners of the transferee; and
• Financial details of the transaction.

Beneficial ownership information is a central component of the rule. Generally, beneficial owners include individuals who exercise substantial control over the entity or individuals who own or control at least 25% of its ownership interests. For trusts, this designation includes trustees, grantors, beneficiaries, and others with authority over trust assets. Beneficial ownership information must be certified in writing by the transferee or its representative.

Filing Deadline

The Report must be filed by the later date of:

• Thirty (30) calendar days after closing; or
• The last day of the month following the month of closing.

Fines for Non-Compliance

Negligent violations of the rule could result in a civil penalty up to $1,430 for each violation, and an additional civil money penalty of up to $111,308.

Willful violations could result in a civil penalty up to the greater of the amount involved in the transaction (not to exceed $286,184) or $71,545.

Criminal penalties for willful violations of the rule could result in a term of imprisonment up to five (5) years or a criminal fine up to $250,000, or both.

Purpose and Compliance Implications

FinCEN adopted the Rule to address longstanding concerns regarding the illicit use of legal entities, trusts, and all-cash real estate transactions. Requiring disclosure of beneficial ownership and transaction details is intended to increase transparency to combat and deter money laundering in the U.S. residential real estate sector.

The Rule places new, stricter, compliance burdens on real estate professionals, particularly settlement agents, title insurers, and others involved in closing and title functions. These professionals should:

• Identify whether their transactions fall within the reporting hierarchy;
• Develop procedures to collect and certify beneficial ownership information;
• Update closing documentation; and
• Consider written designation agreements to allocate reporting responsibility.

Key Takeaways

• The rule takes effect March 1, 2026.
• It applies primarily to non-financed transfers of residential real estate to entities and trusts.
• Only one reporting person is responsible per transaction, but responsibility may default to settlement professionals.
• Beneficial ownership disclosure is required and must be certified.
• Failure to comply may expose reporting persons to substantial fines.

Conclusion

The new Residential Real Estate Rule represents a significant expansion of federal reporting into the residential real estate sector. Real estate professionals and participants in entity-based real estate transactions should take proactive steps now to understand their obligations and implement procedures to ensure timely and accurate reporting.

For more information on the Rule, see www.fincen.gov/rre

If you have questions or are wondering how this new rule may apply to you, contact RCO Law at 419-249-7900 to speak with one of our seasoned Attorneys.

Article written by Natalie Sullivan Baker and Marissa K. Fitzpatrick.