Tip: Residential Real Estate Rule—New From FinCEN

Under FinCEN, a body under the US Treasury, a new rule has been issued that requires certain parties involved in real estate closings and settlements to report such closings if they fall within new parameters issued by FinCEN.

To backup for a moment, the Federal Government has been concerned for years that some people attempt to hide monies acquired by illegal means.  This is often referred to as  money laundering schemes. To avoid such illegal pursuits, Congress has passed many laws to detect such schemes.  One group of such laws falls within the Federal Bank Secrecy Act.  Because of recent events, FinCEN is now attempting to thwart such potential laundering schemes that are related to residential real estate closings.  FinCEN has stated in a release on 12/1/2025 that:  “…the U.S. Department of the Treasury (Treasury) has long recognized the illicit finance risks posed by criminals and corrupt officials who abuse opaque legal entities and trusts to launder ill-gotten gains through transfers of residential real estate. This illicit use of the residential real estate market threatens U.S. economic and national security and can disadvantage individuals and small businesses that seek to compete fairly in the U.S. economy.”  (Federal Register :: Anti-Money Laundering Regulations for Residential Real Estate Transfers)

The FinCEN reporting site summaries this new rule requiring reporting sales with some residential real estate transactions by stating:  “The Residential Real Estate Rule requires certain professionals involved in real estate closings and settlements to submit reports to FinCEN regarding certain non-financed transfers of residential real estate to legal entities or trusts. Reporting requirements apply to transfers occurring on or after March 1, 2026.” Residential Real Estate Rule | FinCEN.gov

The Helpful Guide from FinCen provided the following summary information:

“Quick Reference Guide Residential Real Estate Reporting Beginning March 1, 2026, certain real estate professionals involved in real estate closings and settlements nationwide are required to report information to FinCEN about non-financed transfers of residential real estate.

 A transfer is reportable when all four conditions are met:

1. The real property is residential;

2. The transfer is non-financed;

3. The property is transferred to a certain type of entity or trust; and

4. An exception does not apply.

What is residential real property? A property meets the definition of residential real property if it is located in the United States and the property is:

• Real property containing a structure designed principally for occupancy by one to four families;

• Land on which the transferee intends to build a structure designed principally for occupancy by one to four families;

• A unit designed principally for occupancy by one to four families within a structure on land; or

• Shares in a cooperative housing corporation.

What is a non-financed transfer? A non-financed transfer of residential real property is a transfer that does not involve an extension of credit to all transferees (the entity or entities buying or receiving the property) that is both:

• Secured by the transferred property; and

• Extended by a financial institution subject to antimoney laundering (AML) program requirements and Suspicious Activity Report (SAR) obligations. Transfers that are financed by a lender without an obligation to maintain an AML program and a requirement to file SARs are treated under the rule as non-financed transfers that must be reported if other criteria making a transfer reportable are met.

What is a transferee entity and a transferee trust? A transferee entity is defined as any person other than a transferee trust or an individual. For example, a transferee entity may be a corporation, partnership, estate, association, or limited liability company. Statutory trusts, which are trusts created or authorized under the Uniform Statutory Trust Entity Act or as enacted by a state, are also considered transferee entities, rather than transferee trusts, for the purposes of this reporting requirement.

There are 16 kinds of entities that are exempt from the definition of a transferee entity. A transferee trust is any legal arrangement created when a grantor or settlor places assets under the control of a trustee for the benefit of one or more beneficiaries or for a specified purpose, whether formed under the United States or a foreign jurisdiction. A transferee trust also includes legal arrangements that are similar to such legal arrangements in either structure or function.

However, certain types of trusts are exempted from the definition of a transferee trust. Filing Deadline A Real Estate Report must be filed by the later date of:

• The last day of the month following the month that closing occurred; or

• 30 calendar days after the date of closing.

Have questions?

• Visit fincen.gov/rre.

• Subscribe to FinCEN Updates for key announcements • Contact us at fincen.gov/contact” 

The details of this new Rule are very involved.  If one is involved in a residential transaction where this rule might apply, see the references noted above, which is the official government site for FinCEN.

By

Dr. Mark Lee Levine, Professor  University of Denver