News

Effective March 1, 2026, a new federal reporting requirement will take effect that impacts certain residential real estate transactions across the United States, requiring the filing of a Residential Real Estate Report for specific transfers of residential property.  

Although the Residential Real Estate Reporting Rule is designed to address money laundering and illicit finance, it has very practical implications for buyers, sellers, investors, and professionals involved in residential real estate transactions—particularly where property is acquired through legal entities or trusts. With the effective date approaching, now is the time for clients to understand how the Rule works and how it may affect upcoming transactions. 

What Is the FinCEN Residential Real Estate Reporting Rule?
FinCEN, a bureau of the U.S. Department of the Treasury, administers and enforces the Bank Secrecy Act. Historically, many residential real estate transactions—particularly cash purchases and transactions involving legal entities—were not subject to comprehensive federal reporting requirements. 

FinCEN has now finalized the Rule, which creates a new federal reporting obligation for certain non-financed transfers of residential real estate to legal entities and trusts. Although the Rule was initially scheduled to apply in late 2025, FinCEN has issued exemptive relief postponing the mandatory reporting requirements until March 1, 2026. As a result, reporting persons are not required to file Reports for covered transactions that close before March 1, 2026.  

The Rule is intended to increase transparency in residential real estate ownership and reduce the use of residential property transfers for money laundering and other unlawful financial activity. 

What Types of Transactions Are Covered?
A Report is required for a “reportable transfer,” which generally includes: 

• A non-financed transfer (meaning the transaction does not involve a traditional mortgage loan or other extension of credit from a financial institution subject to federal anti-money-laundering reporting obligations; importantly, private loans, seller financing arrangements, and personal or business lines of credit that are not extended by such regulated financial institutions generally do not remove a transaction from the scope of the Rule), 

• Of an ownership interest in residential real property (including any transfer that conveys ownership or meaningful control of the property),  

• To a legal entity (such as an LLC, corporation, or partnership) or a trust as the transferee. 

For purposes of the Rule, residential real property generally includes single-family homes, townhomes, condominiums, cooperative units, and residential buildings designed for occupancy by one to four families. In certain circumstances, undeveloped or partially developed land intended for residential use may also fall within the Rule’s scope. 

Importantly, the reporting requirement is not limited to purchase transactions. A reportable transfer may occur whether the property is transferred for value (such as a sale) or without consideration (such as a gift, capital contribution, or estate-planning transfer). Common examples may include deeding a personally owned residence into an LLC or trust, contributing residential property to a newly formed entity, or re-titling property as part of an internal restructuring. 

What Transactions Are Not Covered?
Not every residential real estate transfer will trigger a federal reporting obligation. The Rule includes several exclusions, including: 

• Transfers that are financed by a traditional mortgage loan, meaning the transferee(s) receive an extension of credit that is secured by the property and extended by a financial institution subject to certain federal requirements; 

• Transfers to individuals, rather than to legal entities or trusts, even if the transaction is an all-cash sale or a gift; 

• Transfers occurring by operation of law, such as those resulting from death, divorce, probate administration, or court order; 

• Certain limited property interests, including easements, licenses, rights-of-way, and similar non-ownership interests that do not convey ownership or control of the property; 

• Transfers completed as part of a qualifying §1031 like-kind exchange, where the transaction meets applicable federal tax requirements; and 

• Transfers involving certain exempt or regulated entities, as specifically identified in the Rule (including governmental entities, organizations recognized as exempt under §501(c) of the Internal Revenue Code, insurance companies, etc.). 

These exclusions are intended to focus the reporting requirement on transactions where residential real estate ownership becomes less transparent, rather than on routine personal, judicial, or financing-related transfers. 

Because the availability of an exclusion can depend on how a transaction is structured and documented, the determination of whether a transfer is reportable may be fact-specific. Early review and coordination with counsel and closing professionals is especially important as transactions approach closing in 2026. 

Who Is Responsible for Filing the Report?
Only one Report is filed for each reportable transaction. However, responsibility for filing the Report does not automatically fall on the buyer or the seller. In fact, neither the seller/transferor nor the buyer/transferee directly designates the reporting person by written agreement or otherwise for purposes of the Rule.  

Instead, the Rule assigns responsibility to a single “reporting person” involved in the transaction, determined by the following regulatory reporting hierarchy, in order of priority: 

• A closing or settlement agent; 

• The party preparing the settlement statement; 

• The party recording the deed or other transfer instrument; 

• A title insurance underwriter or title agent; 

• The party disbursing funds in connection with the closing; 

• The party evaluating title; or 

• The party preparing the deed or other transfer instrument. 

Once a party is identified at a higher level in the hierarchy, parties listed later in the hierarchy are not responsible for filing the Report.  The party that would otherwise be responsible for filing under this hierarchy may, by written designation agreement, designate another eligible party in the hierarchy to serve as the reporting person for that transaction. 

As the reporting requirements take effect, identifying the applicable reporting person early—and documenting any designation by written agreement—is expected to become a routine part of transaction planning and closing coordination. 

What Information Must Be Reported?
For each reportable transfer, the Report requires the reporting person to collect and submit detailed transaction and ownership information, including: 

• The residential property being transferred, sufficient to clearly identify the property, such as its street address and tax identification/parcel number; 

• The transferee entity or trust, including its legal name, address, and formation or organizational details; 

• The individuals considered beneficial owners of the transferee, meaning the natural persons who ultimately own or control the entity or trust acquiring the property; and 

• Information regarding the consideration paid and the method of payment, including whether the transfer involved cash, wire transfers, private financing, or other non-traditional payment arrangements. 

For legal entities, beneficial owners generally include individuals who own 25% or more of the entity and those who exercise substantial control over the entity, even if they hold little or no equity interest. 

For trusts, reportable individuals may include trustees, grantors or settlors, certain beneficiaries, and other individuals with authority or control over trust assets, depending on the structure of the trust and the rights granted under the governing documents. 

Although the information reported to FinCEN is not publicly available, the reporting obligation is federal in nature, and accuracy and completeness are critical. In practice, this means that transferees should expect to provide ownership, control, and payment information as part of the closing process, and reporting persons will need sufficient time and cooperation to verify and submit required details. 

Filing Deadlines, Recordkeeping, and Penalties
For each reportable transfer, the required Report must be filed by the later of: 

• Thirty (30) calendar days after the date of the closing or transfer, measured from the date the ownership interest in the property is legally transferred (which, in the case of deed-based transfers, is typically the date the deed is executed and delivered); or 

• The last day of the month following the month in which the closing or transfer occurs. 

These deadlines provide limited flexibility for post-transaction coordination but also mean that reporting obligations may arise shortly after ownership is transferred, including in transactions that do not involve a traditional purchase closing. 

In addition to filing the Report, the reporting person is required to retain certain records for a period of 5 years following the closing or transfer. Required records generally include documents and certifications relied upon in preparing the Report, as well as any written designation agreement used to allocate reporting responsibility. 

Failure to comply with the reporting or recordkeeping requirements may result in civil and, in certain cases, criminal penalties under the Bank Secrecy Act. Penalties may apply where a required Report is not filed, is filed late, or contains materially incomplete or inaccurate information. While liability generally rests with the reporting person, parties that provide inaccurate or incomplete information relied upon in a filing may face indirect exposure through contractual remedies or regulatory scrutiny. 

Because these compliance obligations extend beyond the closing or transfer date, reporting persons must ensure that required information is collected, verified, and documented in a timely manner. As a practical matter, this underscores the importance of early coordination among the parties and professionals involved in the transaction, particularly where legal entities or trusts are involved and ownership or control structures are complex. 

What About Costs?
FinCEN has not announced a government filing fee for submitting a Report. However, compliance is not cost-free. 

Clients should expect that reporting will involve: 

• Administrative or reporting fees charged by the reporting person for collecting, reviewing, and submitting required information; 

• Potential additional legal fees if ownership structures are complex or unclear; and/or 

• Possible transaction delays if required information is not provided promptly. 

As the Rule takes effect, these costs are expected to become a standard part of applicable residential real estate closings. 

What Should Clients Be Doing Now?
With the reporting requirements taking effect in a matter of days, clients involved in residential real estate transactions—particularly those involving legal entities or trusts—should begin preparing now. Practical steps to consider include: 

• Confirm whether upcoming transactions involve an entity or trust as a transferee, including non-purchase transactions such as gifts, capital contributions, estate-planning transfers, or internal restructurings; 

• Review entity and trust ownership or control information for accuracy and completeness, including identifying individuals who may be considered beneficial owners under the Rule; 

• Anticipate additional information requests during the transaction or shortly after closing, particularly relating to ownership, control, and payment details; 

• Address responsibility for FinCEN reporting and related administrative costs early in purchase agreements, closing instructions, or other transaction documents, rather than leaving these issues to be resolved at closing; and 

• Coordinate early with legal counsel, title companies, and other closing professionals to confirm who will serve as the reporting person and to ensure required information can be collected and submitted on time. 

Early planning and coordination can help avoid last-minute delays, confusion over reporting responsibility, and unnecessary compliance risk as these new federal requirements take effect. 

Our firm has been closely following the implementation of the FinCEN Residential Real Estate Reporting Rule and is assisting clients as this new requirement takes effect. We regularly advise clients on real estate transactions and entity structuring and are available to help clients navigate these new reporting obligations.