If your practice includes residential real estate transactions where the buyer is an entity or a trust and the deal is not financed through a traditional lender, an important new federal reporting requirement starts March 1, 2026. Read on for more information.
What is changing, in plain English
Beginning March 1, 2026, certain people (including lawyers, in some cases!) involved in real estate closings and settlements will have to file a report with the Financial Crimes Enforcement Network (FinCEN) (part of the U.S. Department of the Treasury) for certain residential real estate transactions that are not financed by a financial institution with an anti-money laundering program and suspicious activity reporting obligations.
Why? To make it harder to buy U.S. residential real estate through opaque entities and trusts, all cash, with little to no transparency.
The three questions that tell you if a particular transaction is reportable:
- Is the property “residential real property” (generally 1 to 4 family [including mixed residential\commercial properties!], certain vacant land intended for that use, and co-op shares)?
- Is the transferee an entity or a trust (not an individual buyer)?
- Is it “non-financed?” (meaning it does not include qualifying institutional financing secured by the transferred real estate – i.e. a traditional mortgage from a bank)?
If the answer is “yes” to all three, the transfer is generally reportable unless an exception or exemption applies.
Who has to file the report?
Depending on the transaction, the reporting party may be the settlement agent, the person preparing the settlement statement (often the lawyer for one of the parties), the person recording the deed (also often the lawyer for one of the parties), the title insurer, the primary disbursing party, the title evaluator, or the person preparing the deed or other instrument (again, often the lawyer).
They key is to make sure someone will file the report – as multiple parties involved in the same transaction could have a reporting obligation and only one report is required.
What information gets reported?
The report requires seven main pieces of information, including:
- The reporting person
- The transferee entity or trust
- Beneficial owners and signing individuals (using Corporate Transparency Act-style concepts like 25 percent ownership or substantial control)
- The transferor
- The property and closing date
- Payment details (amount, methods, financial institution and account details in certain cases, payor identity)
- Whether there is “hard money” or similar non-institutional financing
A few practical points
- Some common estate planning transfers may be exempted from the reporting obligation, including certain no-consideration transfers by an individual (or spouses) into their own trust.
- Transfers from an individual to that individual’s LLC are not broadly exempted. So routine “put the house into my LLC” transactions will become a trap for the unwary.
- Even if an entity already reported beneficial ownership under the Corporate Transparency Act, the real estate transfer is often still reportable.
- Penalties for non-compliance are not insignificant.
How filing is expected to work?
Filing will be electronic through FinCEN’s Bank Secrecy Act e-filing system here: https://www.fincen.gov/rre.
How to get ready
If your practice touches residential real estate, estate planning, or entity structuring, now is the time to spot the transactions that could be reportable and build the intake steps into your closing process, especially for:
- All-cash deals involving entities or trusts
- Private or family-financed transactions
- Transfers into holding entities as part of liability planning
- Closings where the reporting person is not obvious and collecting the necessary information could take time.
Thanks for reading, and see you next time!