FinCEN Increases Transparency Requirements for Residential Real Estate Transfers

The Financial Crimes Enforcement Network, an executive agency of the U.S. Treasury Department (“FinCEN”), is imposing stricter regulations on non-financed transfers of residential real estate.  Beginning March 1, 2026, certain parties must report to FinCEN regarding transfers (1) of residential real property; (2) without financing; (3) to a legal entity or trust. 

“Residential real property” includes residential and mixed-use property with occupancy capacity of one to four families.  This also includes transfers of undeveloped land intended for residential use.  “Financing” includes any extension of credit that (1) the transferred property secures and (2) a financial institution subject to an anti-money laundering program under the Bank Secrecy Act[i] or suspicious activity report obligations extends. 

FinCEN does not require reporting for residential real estate transfers: (1) of easements; (2) resulting from the death of an individual; (3) incident to divorce or dissolution of a marriage; (4) made to a bankruptcy estate; (5) supervised by a U.S. court; (6) made for no consideration to a trust operated by the transferor; (7) qualifying as a like-kind exchange; or (8) where there is no Reporting Party (defined below).  Certain highly-regulated entities are exempt from reporting.  These include certain banks and credit unions, securities brokers, insurance companies, and public utilities.  The exception includes subsidiaries of exempt entities. 

The report must include: (1) the reporting person; (2) the legal entity or trust receiving the property; (3) the beneficial owner of the property, meaning an individual exercising substantial control over the transferee entity or in control of at least 25% of the entity’s ownership interest; (4) the individual(s) signing on behalf of the legal entity of trust; (5) the transferor; (6) the residential real estate being transferred; and (7) the total consideration paid.

 The party responsible for filing the report (the “Reporting Party”) must be either:

(1) the closing agent;

(2) the closing statement preparer;

(3) the person filing the ownership transfer instrument (i.e., the deed) for record;

(4) the owner’s title insurance policy underwriter;

(5) the person that disburses the greatest amount of funds in connection with the transfer;

(6) the person that evaluates the status of the title; or

(7) the legal ownership transfer instrument preparer (i.e., the deed).  “Person” means both a natural person or an entity or trust.[ii]

FinCEN employs a cascade system to determine the Reporting Party that follows the above order.  For example, if a transaction does not include a closing agent or closing statement, the person recording the deed is the Reporting Party.  There is a mechanism for the Reporting Party to designate another to file the report. 

The Reporting Party must file the report with FinCEN by the later date of (1) the final day of the month following the month the reportable transfer occurred; or (2) thirty (30) calendar days after the date of closing.  We anticipate prior to the effective date FinCEN will issue a form for the Reporting Party to complete. 

Attorneys at Baird Holm specialize in various subject matter areas including municipal, administrative, commercial real estate and land use law.  Please contact us with any questions.

Spencer A. Hosch
Samuel P. Heffron, Summer Associate