FinCEN's New Real Estate Reporting Rule: What Solos Need to Know

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For those of us who haven't been tracking it, the Financial Crimes Enforcement Network ("FinCEN") "Residential Real Estate Rule" is now live and reporting obligations begin for any closings that take place on or after March 1, 2026.  If you're handling a reportable transaction and there's no exemption, "someone" has to file a Real Estate Report with FinCEN - and that someone could be you.

What triggers the reporting requirement, you ask? Any conveyance of residential real estate that's "all-cash" to an Entity.  "Residential real estate" includes 1-4 family dwellings, condos, co-ops, and even vacant land that the buyer intends to improve with any of the above.  "Entities" include LLCs, Corporations, Partnerships, and Trusts. "All-cash" includes financing by a non-bank lenders without anti money laundering obligations. 

Exemptions
  • Transfers at death (Will, Trust, Transfer on Death Deed ("TODD").
  • Transfers incident to divorce.
  • Court-ordered transfers.
  • Bankruptcy estate transfers.
  • Transfers by an individual to their own Trust for no consideration (estate planning).
  • Transfers to a Qualified Intermediary ("QI") in a 1031 exchange (although the subsequent transfer FROM the QI to an entity is potentially reportable).
  • Transfers where there's no "reporting person."
Who Has to File?

FinCEN set up a seven-tier priority system (similar to the 1099-S cascade). The first person on this list who's involved in the deal is the reporting person:
  1. Person listed as closing/settlement agent on the closing statement
  2. Person who prepares the closing statement
  3. Person who files the deed with the recording office
  4. Title insurance underwriter
  5. Person who disburses the most funds (including from escrow or attorney trust account)
  6. Person who provides title evaluation
  7. Person who prepares the deed
Attorneys can fall into multiple tiers here. If you're listed as settlement agent, you're tier one. If you prepared the settlement statement, tier two. If you're disbursing the most from your IOLA, tier five. If you drafted the deed, tier seven.

The Good News
  • You can enter into a "designation agreement" with another professional in the cascade (like the title company) to shift responsibility. No required format, it just needs to be in writing with basic transaction info. 
  • There's a "reasonable reliance" standard. You can rely on info provided by others unless you have reason to doubt it. For beneficial ownership info, the transferee or their rep must certify accuracy in writing.
  • Filing is free. You can file a PDF online.
  • There's no requirement to keep a copy of the report itself - just the beneficial ownership certification and any designation agreements for 5 years.
  • There's no requirement to keep copies of anyone's ID.
The Bad News
  • You cannot file an incomplete report. If the buyer refuses to provide info, there's no exception. FinCEN's guidance says if you can't collect the required info, "consider declining to perform the function that triggers the reporting obligation." In other words, walk away from the representation.
  • Fines of $1,430 per each negligent violation (up to $111,308 for a pattern). 
  • Civil penalties up to $286,184 or the amount of the transaction (and up to 5 years in prison and/or $250,000 fine) for willful violations. 
  • There's a short window to file - the end of the month following the closing, or 30 days after closing, whichever is later.
  • You must collect a lot of information, including: 
      • the entity/trust details, 
      • beneficial owners (anyone with 25%+ ownership or substantial control), 
      • signing individuals, 
      • seller info, 
      • property details, 
      • total consideration, and 
      • information about the payment, including bank account numbers.
Takeaways
  • Update your engagement/retainer to collect beneficial ownership information and certifications from your entity buyers. Consider adding language about the client's obligation to provide this info and the consequences if they don't.
  • If you want to avoid the filing obligation, work out a designation agreement with your title company now, before closings start piling up.
  • Create your login.gov account for BSA E-Filing if you don't already have one.
  • Setup a folder to save all certifications and any designation agreements.
For more information, visit: www.fincen.gov/rre




-Pete Weinman, Esq.


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