Legal entities involved in residential real estate transactions must prepare for significant reporting changes effective March 2026.
The Shift in Real Estate Reporting Requirements
The Financial Crimes Enforcement Network (FinCEN) has announced a new Residential Real Estate Rule aimed at enhancing transparency in real estate transactions and combating money laundering. Starting March 1, 2026, all non-financed transfers of residential properties—specifically those involving structures or land for 1-4 family occupancy—will require detailed reporting when the buyer is a legal entity, such as an LLC, corporation, or trust. This rule replaces prior Geographic Targeting Orders and seeks to limit all-cash transactions that could facilitate illicit financial activities.
Scope of the Reporting Requirement
Under the new rule, certain transactions will be subject to reporting if they meet specific criteria: the buyer must be a legal entity or trust, the transfer must be non-financed, and the property must be residential. Notably, some transactions will be exempt, including:
- Transfers financed by institutional lenders with anti-money laundering obligations
- Sales to individual buyers or government entities
- Judicial sales and bankruptcy estate transfers
Practitioners are advised to monitor for any updates regarding judicial sales, as the current language may necessitate clarification.
Reporting Responsibilities and Process
The responsibility for filing reports will primarily fall on the settlement agent. In cases where no settlement agent is present, the obligation will cascade to others involved in the transaction, including the settlement statement preparer and title insurer. Reports must be submitted electronically via FinCEN’s BSA E-Filing System within 30 days of the closing or by the end of the following month, whichever is later. Notably, transactions closing before March 1, 2026, will not require reporting.
Compliance Impact
Firms must begin preparing for these new requirements by updating internal processes, training staff on compliance, and establishing protocols for data collection. Given the enhanced scrutiny on beneficial ownership, real estate professionals and investors may need to reassess their privacy strategies and be aware of the potential for increased costs. Non-compliance could result in serious civil and criminal penalties, emphasizing the importance of proactive adaptation to these changes.