The Financial Crimes Enforcement Network (FinCEN), which is a bureau of the U.S. Department of the Treasury, has implemented a new law requiring reporting on residential property transactions that will take effect as of March 1, 2026. The purpose of this new law is to combat money-laundering that is taking place through the transfer of residential real estate. Under the new rule, “reporting persons” which are defined as performing closing or settlement functions (ie/ escrow companies, title companies or attorneys) must report information on residential property transfers if the following criteria are met: (1) the property is residential real property, (2) the transfer is non-financed, (3) the property is transferred to a legal entity or trust, and (4) an exemption does not apply. There is no dollar limit on the transactions that have to be reported, and it applies to gift transfers as well. The report must be filed within 30 days after the close of escrow.
Only residential real property is subject to this reporting requirement, so commercial and industrial properties are exempt. Residential property includes single family homes, townhomes, condominiums, multi-family units, apartment buildings, mixed use residences above a commercial center, and vacant land zoned for residential construction.
For a transaction to be “non-financed” it must not involve an extension of credit (ie loan) to all buyers that is both (i) secured by the transferred property and (ii) extended by a financial institution subject to an AML program and Suspicious Activity Report (SAR) obligations. This means that private loans through seller financed transactions would be considered “non-financed” and reportable even though the deal is financed by the seller because private loans are not subject to the AML or SAR.
If at least one of the buyers is a trust or legal entity, then the third prong is met. Legal entities include both foreign and domestic limited liability companies, corporations, partnerships, and trusts.
Transfers that are exempt from the reporting requirement are as follows: (i) a transfer of an easement, (ii) a transfer due to the death of an individual through their will, trust, by operation of law, or by contract; (iii) transfer due to divorce or dissolution of marriage or civil union; transfer to bankruptcy estate; (iv) transfer supervised by a court in the US; (v) gift transfer or transfer for zero consideration between spouses, or to a trust created for the benefit of the transferor; (vi) transfer to a qualified intermediary for 1031 tax deferred exchange; (vii) a transfer where there is no reporting person.
It is recommended that residential purchase and sale contracts include language requiring both buyer and seller to disclose the required information to the escrow or title company to allow the reporting person to complete the FinCEN Report in a timely manner to avoid any escrow closing delays.
This article is intended for informational purposes only and is not intended to be legal advice. For questions concerning this article, please contact the Law Office of Ashley M. Peterson.