A new federal residential real estate rule aimed at cracking down on money laundering goes into effect Sunday.
Under the rule, when entities or trusts buy residential real property without financing, including all-cash sales and sales involving non-regulated lenders, a report listing the names of the entity or trusts’ individual beneficial owners, addresses, Social Security numbers and more, must be reported to the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). Exceptions are included herepdf.
In general, a closing or settlement agent is responsible for collecting the information and submitting the Real Estate Report approximately 30 days after closing; however, if a closing or settlement agent is not involved there’s a line of succession to whom the responsibility falls.
While real estate agents and brokers won’t be involved in the reporting process, it’s important they’re aware of the change to educate buyers so that their clients are prepared. Title companies and closing attorneys likely will not close one of these transactions unless all required information is collected prior to closing.
To help members under the rule and provide best practices, NAR is hosting a no-cost webinar featuring a FinCEN official at 2 p.m. ET on Wednesday, March 11. Members can register here. An FAQ page has just been published and a Window to the Law video will follow next week.
In addition, several state associations are publishing guidance including Ohio, Pennsylvania, Rhode Island and Wisconsin.
The reports, which the agency says will be maintained in a secure database and inaccessible to the public, are designed to deter bad actors from exploiting loopholes in the real estate settlement process.
“Although there are many legitimate reasons to use legal entities and trusts to own residential real property, illicit actors intent on laundering funds through residential real property often use legal entities and trusts to disguise their identities and make the proceeds of crime more difficult to identify,” FinCEN sayspdf. “Illicit actors often favor non-financed transfers (including ‘all-cash’ sales) of residential real estate to avoid scrutiny from financial institutions that have anti-money laundering and countering the financing of terrorism program and Suspicious Activity Report filing requirements under the Bank Secrecy Act.”
It’s difficult to approximate how many transactions this rule will impact. The National Association of REALTORS® has estimates for residential all-cash buyers and residential purchases by entities (including trusts), but not both.
Last year, roughly 28% of buyers did not finance their home purchase, according to an average of the NAR’s monthly REALTORS® Confidence Indexes. In addition, nearly 22% of residential purchases were bought by an entity (including trusts), the association found.
In its notice of proposed rulemaking, FinCEN said about 800,000–850,000 transactions annually will need a report.
The rule got off to a bit of a bumpy start. It was originally slated to take effect back in December 2025, but FinCEN postponed it in September to “provide the industry with more time to comply.” Just last week, however, it withstood a challenge in court filed by a title insurance company. The judge found in favor of the U.S. government that the rule was within the authority of FinCEN and did not violate the Fourth Amendment.
For more information FinCEN published an extensive FAQ on its website: https://www.fincen.gov/rre-faqs
