FinCEN Residential Real Estate Reporting

I’m happy to announce that my new book, FinCEN Reporting for Residential Real Estate, is now available on Amazon.

The FinCEN Residential Real Estate Reporting Rule

FinCEN’s new Residential Real Estate Reporting Rule, takes effect December 1, 2025. Once implemented, the Rule will require real estate attorneys and title agents who conduct residential real estate closings to change dramatically the way they process transactions. Those residential real estate transactions that are (1) non-financed, (2) transfer title to a “transferee entity” or “transferee trust”, and (3) where the transferee entity or transferee trust is not in an exempt category, will require a report to be filed with FinCEN.

The Rule will replace FinCEN's current “geographic targeting orders” or “GTOs” which require beneficial ownership reporting in certain transactions within specified zip codes. 

The Big Risk for Real Estate Pros

The biggest risk coming out of FinCEN’s new Rule is not the report itself. If a transaction is reportable (and you have correctly determined the “reporting person”), it’s not too difficult to prepare the report and identify the required information.

The challenge for most busy residential closing shops is the evaluation of transactions to determine which are reportable, and which are not.

Most residential real estate closing offices conduct more than 100 transactions per month. At that volume, it will be challenging for an attorney to budget additional time to each deal to determine whether it triggers a report. The attorney will prefer to develop a procedure so that a paralegal or legal assistant can make that determination.

But the determination can be a complex one. And, if the individual making the determination gets it wrong (i.e., a “false negative” or incorrect conclusion that the transaction is not reportable), the outcome could be that the office fails to file a report when one is due.

Failing to file a report could be prosecuted as an intentional violation of the Bank Secrecy Act, the statute under which FinCEN has adopted its new regulation. While most BSA prosecutions have dealt with banks failing to file SARs or CTRs, an intentional violation of the BSA can result in a sentence of up to five years imprisonment (which can be increased to up to ten years if the amount involved exceeds $100,000, as will often be the case in a residential real estate transaction).

To manage a large volume of transactions and minimize the risk of a false negative evaluation, real estate attorneys and title offices will need to develop a robust procedure for evaluating transactions.

Who is the Reporting Person?

Another tough question that real estate pros will need to answer, in any transaction that is reportable, is “who is the reporting person?”

FinCEN’s new Rule defines a “cascade of responsibility” that determines who is the reporting person for any transaction. In order of priority, the reporting person will be:

(i) The person listed as the closing or settlement agent on the closing or settlement statement for the transfer;

(ii) If no person is described in paragraph (i), then the person that prepares the closing or settlement statement for the transfer;

(iii) If no person is described in paragraph (i) or (ii), then the person that files with the recordation office the deed or other instrument that transfers ownership of the residential real property;

(iv) If no person is described in paragraphs (i) through (iii), then the person that underwrites an owner's title insurance policy for the transferee with respect to the transferred residential real property, such as a title insurance company;

(v) If no person is described in paragraphs (i) through (iv), then the person that disburses in any form, including from an escrow account, trust account, or lawyers' trust account, the greatest amount of funds in connection with the residential real property transfer;

(vi) If no person is described in paragraphs (i) through (v), then the person that provides an evaluation of the status of the title; or

(vii) If no person is described in paragraphs (i) through (vi), then the person that prepares the deed or, if no deed is involved, any other legal instrument that transfers ownership of the residential real property, including, with respect to shares in a cooperative housing corporation, the person who prepares the stock certificate.

If the real estate professionals want to agree amongst themselves that someone else will act as the “reporting person,” they can do that if they complete a “designation agreement.” The Rule contains specific requirements for a valid designation agreement. The designation agreement must be signed by the person who would have been the reporting person (as determined by the cascade) and also the person who is agreement to assume that responsibility.

In either event, practitioners will need to understand the cascade of responsibility to know if they are “it.” If the cascade-designated reporting person doesn’t want the responsibility, that individual will need to prepare and complete a designation agreement that satisfies the Rule and have it signed by the individual who agrees to bear the burden.

FAQs About the FinCEN Residential Real Estate Rule

I’ve spoken at a few seminars and CLE presentations about the FinCEN Residential Real Estate Rule, and there are a lot of frequent questions:

What qualifies as residential real property?

What is a transferee entity or transferee trust?

When is a transaction “non-financed”?

When is a report due (if a report is required)?

Is the reporting person an individual, or the firm to which that individual relates?

I’ve made sure to cover all these FAQs in the book. As much as possible, I’ve tried to give real life examples and fact patterns to show how the correct answer can change with small changes in the facts.

The book guides the reader through the regulation and numerous examples and simulations to make it easier to begin apply the rule in daily practice.