New Federal Reporting Requirements Applicable To Certain Residential Real Estate Transactions

By David Hamerslough and Victoria B. Naidorf

The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) is in the process of finalizing a series of rules requiring the collecting and reporting of certain information about the buyer and seller in certain real estate transactions for the purpose of preventing money laundering. FinCEN refers to this as the “Final Rule.” The rule was to have been effective on December 1, 2025, but that deadline has been extended to March 1, 2026.

This article is a general discussion of the Final Rule as it currently stands in relationship to buyers, sellers, and brokers/agents in residential real estate transactions. It is not a complete discussion of all aspects of the Final Rule or its application to other professionals, financial institutions, etc.

In general, the Final Rule requires certain businesses to collect and report information to FinCEN if they perform certain closing or settlement functions for the non-financed sale or transfer of residential real property to an entity or trust. A non-financed transaction means one that does not involve an extension of credit that is secured by the transferred property and extended by a covered financial institution subject to a reporting program. A transfer involving multiple buyers would be non-financed if any single buyer’s purchase is also non-financed. Transfers financed by private lenders or sellers are also covered by the reporting requirement if the lender or seller is not otherwise subject to a reporting requirement.

For our purposes, the business that will likely be requesting this information is the title or escrow company responsible for closing the transaction. The Final Rule is similar to but broader than Geographic Targeting Orders (“GTOs”) that have been in effect since approximately 2016. As we currently understand it, the requirements for both GTOs and the Final Rule will remain in place once the Final Rule is implemented.

Under the current terms of the Final Rule, we anticipate that title and escrow companies will be requesting information on the following types of residential sale transactions irrespective of the purchase price:

1. 1-4 residential units (including single-family houses, townhouses, condominiums, and cooperatives as well as buildings and units of buildings that are designed for occupancy by 1-4 families);
2. Mixed-use property where there is a single-family residence above a commercial enterprise;
3. Vacant land upon which the transferee intends to build residential real property with 1-4 units;
4. Shares in a cooperative housing corporation;
5. Gift transactions involving these types of properties; and
6. Transactions in which the buyer is a legal entity or trust making an “all cash” purchase or financing the purchase through a bank or other institution that does not have an independent money-laundering reporting obligation.

What is exempted are transfers that involve an easement, occur as a result of the death of the property owner, are the result of a divorce or dissolution of marriage or civil union, are made to a bankruptcy estate, made for no consideration from an individual to a trust that they establish, or made to a qualified intermediary for purposes of a 1031 tax exchange.

These criteria should be contrasted with current GTOs, which require reporting by the buyer only if the purchase price is at least $300,000.00, the buyer is a legal entity, and the purchase price is paid without a bank loan or similar financing.

Under the Final Rule, entity buyers, beneficial owners of entity buyers, parties signing on behalf of entity buyers, trust buyers, entity trustees of trust buyers, individual trustees and beneficial owners of trust buyers will need to provide information. Individual sellers, entity sellers, trust sellers, and individual and entity trustees of trust sellers will also need to provide information.

The information that will need to be provided includes legal names, dates of birth, dates of execution, dates of trusts, addresses, DBAs, taxpayer identification numbers, and any payments that are made (including account-level information for the source of payments).

Under the Final Rule, the title or escrow company will have a fixed time (typically 30 days) in which to collect and report the required information. Our understanding is that if the required information is not provided, then title/escrow will not close the transaction because of the financial exposure they face in the event that the information is not collected and reported.

What does this mean for buyers, sellers, and brokers/agents on a practical level?

• We anticipate that PRDS and C.A.R. will be revising their purchase agreements to address these issues;
• These revisions will likely include a fixed number of days for the delivery of any required information;
• Either expressly or by implication, there will be a good-faith obligation on the part of the buyer and seller to timely provide the required information;
• Escrow is unlikely to close if the required information is not provided by both buyer and seller;
• As with other contractual obligations, if a buyer or seller fails to timely provide the required information, then a Notice To Perform should be signed and delivered;
• Non-performance following the delivery of a Notice To Perform may result in a cancellation and may result in liability for breach of contract, although there are other facts that may impact such a finding, including whether the information was in the control of a non-party to the contract;
• Buyers, sellers, and brokers/agents should identify as soon as possible transactions that will be subject to these reporting requirements and anticipate who will need to be contacted in order to obtain the required information and how much time it will take to do so;
• Identify who has the required information, and if they are not the actual buyer or seller, arrange to obtain that information from that source.
• If reporting is required, promptly contact the title/escrow company to see if they have a form that can be used to provide the information or what format they will require;
• Recognize that reporting is required from both the buyer and seller under the Final Rule. If the buyer or seller is having difficulty collecting the required information, determine the time frame in which the information can be collected, if at all, communicate with the other side of the transaction to update them on the situation and, where appropriate, amend the purchase agreement if more time is needed.

The deadline for implementation of the Final Rule was extended in order to allow for further input and/or commentary on its terms and conditions. All of us should continue to monitor its status to see if there are any further extensions and/or revisions before March 1, 2026. Consultation with qualified professionals on specific questions and/or concerns is recommended.