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Effective March 1, 2026, FinCEN’s Residential Real Estate Rule will impose streamlined reporting (the Real Estate Report) and recordkeeping requirements on certain persons involved in residential real estate closings and settlements (collectively, Reporting Persons). FinCEN published the Rule in the Federal Register on Aug. 29, 2024, and released related guidance, including a Fact Sheet and Frequently Asked Questions.
The Residential Real Estate Rule applies to non-financed transfers of residential real property to legal entities and trusts and does not apply to transfers to natural persons.
Although the Rule originally took effect Dec. 1, 2025, FinCEN issued exemptive relief extending the compliance date to March 1, 2026. The reporting requirements apply to reportable transfers that close on or after March 1, 2026.
Background
FinCEN issued the Residential Real Estate Rule pursuant to the Bank Secrecy Act of 1970 (BSA), which authorizes the Department of the Treasury to impose reporting requirements to combat money laundering. Although persons involved in real estate closings and settlements were previously exempt from certain AML program requirements and subject only to time-limited geographic targeting orders, the Residential Real Estate Rule establishes ongoing, nationwide reporting and recordkeeping obligations imposed not on buyers or sellers, but on certain professionals involved in effectuating residential real estate transactions, including settlement agents, title insurance agents, escrow agents, and attorneys.
Reportable Transfers of Residential Real Property
Under the Residential Real Estate Rule, parties must report transfers when they meet the following criteria: (1) the transfer of property relates to residential real property; (2) the transfer is non-financed; (3) the property is transferred to a legal entity or trust; and (4) an exemption does not apply.
What Is a Transfer of Ownership Interest?
The Residential Real Estate Rule defines a transfer of ownership interest in residential real property as any transfer of an ownership interest in residential real property that is demonstrated through certain mechanisms, including a deed or, for interest in a cooperative housing corporation, through stock, shares, membership, a certificate, or other contractual agreement evidencing ownership. Importantly, the definition includes purchases of residential real estate property, regardless of the amount of consideration, and includes transfers of ownership for which no consideration is exchanged, such as a gift.
What Is “Residential Real Property”?
The Rule applies to transfers of residential real property located in the United States, including single-family houses, townhouses, condominium units, cooperatives, and apartment buildings designed for occupancy by one to four families. “Residential real property” also includes vacant or unimproved land acquired with the intent of developing it for residential use, including land intended to be subdivided into residential lots or used for the construction of new residential homes. Mixed-use property that includes a residential component (e.g., a single-family residence located above a commercial enterprise) is also reportable.
What Is a Non-Financed Transfer?
Reporting obligations apply to a “non-financed transfer,” which FinCEN defines as a transfer that does not involve an extension of credit to all transferees that is both: (1) secured by the transferred property; and (2) extended by a financial institution subject to an AML program and SAR obligations. Importantly, transfers that involve financing only by a lender not subject to AML program and SAR obligations, such as certain non-bank private lenders, are treated as non-financed transfers that potentially must be reported.
Who Is a “Transferee Entity” or “Transferee Trust”?
A non-financed transfer of a residential property must be reported if at least one of the new owners is a “Transferee Entity” or “Transferee Trust.” The Rule defines the terms “Transferee Entity” or “Transferee Trust” broadly to encompass various domestic and foreign legal entities used for property ownership, such as limited liability companies, corporations, partnerships, estates, associations, and trusts. The way the residential real property is titled — whether in the name of the trust or in the name of the trustee acting in their capacity as trustee — does not affect the trust’s status as a Transferee Trust.
The Rule provides 16 exemptions to the definition of “Transferee Entity,” largely consistent with the Corporate Transparency Act (CTA) framework. However, the Residential Real Estate Rule does not exempt certain categories that the CTA does exempt, including investment advisers, pooled investment vehicles, large operating companies, and other specified entities.
Additionally, FinCEN has provided four exemptions to the definition of Transferee Trust, including: (i) securities reporting issuers; (ii) a trustee that is a securities reporting issuer; (iii) statutory trusts; and (iv) subsidiaries of an exempted trust.
Whether an exemption applies must be evaluated on a case-by-case basis.
Exemptions to Reportable Transfer
In addition to entity-level exemptions, the Residential Real Estate Rule provides exemptions based on the nature of the transfer itself, including: (i) transfers involving an easement; (ii) transfers resulting from the death of a property owner; (iii) transfers that occur as a result of a divorce; (iv) transfers to a bankruptcy estate; and (v) transfers for which there is no reporting person (i.e., transfers that do not involve a typical real estate-related professional as reflected in the cascade of potential Reporting Persons). The applicability of these exemptions depends on the specific facts and structure of the transaction.
Reporting Persons
FinCEN expects that the obligation to file reports will generally apply to settlement agents, title insurance agents, escrow agents, and attorneys. Only one Reporting Person is responsible for filing the Real Estate Report for any given reportable transfer.
Absent a written designation agreement, the Rule applies a “reporting cascade” to determine the Reporting Person. Under this framework, the Rule assigns reporting responsibility to the professional performing the highest-listed function among seven specified roles in the transaction, which include: (i) the person listed as the settlement agent on the closing statement; (ii) the person preparing the closing statement; (iii) the person conducting the closing; (iv) the person disbursing closing funds; (v) the person preparing or filing the deed; (vi) the person issuing title insurance; and (vii) the person recording the deed. If none of these functions are performed, the transfer does not require a Real Estate Report.
Alternatively, parties within the cascade may enter into a written designation agreement assigning one among them to serve as the Reporting Person. A separate written agreement is required for each reportable transfer, and the agreement must be retained for five years, but it is not filed with FinCEN.
The Real Estate Report
The Residential Real Estate Rule requires the Reporting Person to submit a Real Estate Report, identifying:
- the Reporting Person;
- the Transferee Entity or Transferee Trust;
- the beneficial ownership information of the Transferee Entity or Transferee Trust receiving the property;
- certain individuals signing documents on behalf of the Transferee Entity or Transferee Trust during the reportable transfer;
- the transferor (i.e., the seller);
- the residential real property being transferred; and
- total consideration and certain information concerning payments made.
FinCEN will maintain the information it collects under the Rule in a secured, non-public database, consistent with the framework used for CTA reporting.
The Residential Real Estate Rule adopts a reasonable reliance standard, which allows Reporting Persons to generally rely upon information provided by other persons if the Reporting Person does not have knowledge of facts that would reasonably call into question its accuracy. With respect to beneficial ownership information, reliance is permitted only if the Transferee Entity or Transferee Trust (or its representative) certifies the veracity of the information provided.
For recordkeeping purposes, the Reporting Person must retain a copy of any required certification and any designation agreement for five years. The Reporting Person is not required to retain a copy of the Real Estate Report submitted to FinCEN.
Beneficial Owners
Consistent with the definition of “beneficial owner” under the Beneficial Ownership Reporting Rule, a beneficial owner of a Transferee Entity is any individual who, on the date of closing, either directly or indirectly (i) exercises substantial control over the Transferee Entity or (ii) owns or controls at least 25% of the Transferee Entity’s ownership interests. Beneficial owners of a Transferee Trust may include trustees, certain beneficiaries, grantors or settlors with revocation rights, and other individuals with authority to dispose of trust assets.
Reporting Deadlines
The Residential Real Estate Rule requires a Reporting Person to file the Real Estate Report by the later of either: (i) 30 calendar days from the date of closing or (ii) the final day of the month following the month in which the date of closing occurred.
Criminal and Civil Liability
Violations of the Residential Real Estate Rule are subject to the civil and criminal penalties provided under the BSA. Negligent violations may result in a civil monetary penalty assessed on a per-violation basis, as well as an additional civil penalty for a pattern of negligent activity, in amounts adjusted annually for inflation. Willful violations may result in criminal penalties, including imprisonment of up to five years, a criminal fine of up to $250,000, or both, as well as civil penalties of up to the greater of an inflation-adjusted statutory amount or the value of the transaction (subject to applicable caps).
Considerations for Stakeholders
With the Residential Real Estate Rule’s reporting requirements set to take effect on March 1, 2026, persons involved in real estate closings and settlements should prepare for compliance. Reporting Persons should review the Rule and related guidance to ensure familiarity with the requirements and may wish to evaluate whether operational, staffing, procedural, or engagement letter updates are necessary to facilitate timely and accurate compliance. They should also consider implementing internal procedures to obtain required information sufficiently in advance of closing to meet applicable reporting deadlines.