FinCEN Real Estate Reporting

A: The biggest impact will be on title insurance companies, title agents and settlement agents, since they are mainly responsible for reporting qualifying transactions to FinCEN. Real estate professionals should also become familiar with the rule so they can answer client questions and help guide transactions. Legal entities and trusts involved in property transfers will need to understand their new reporting and compliance responsibilities. Because of the changes, everyone involved should expect to update their processes and complete additional training to remain compliant and avoid penalties.

A: FinCEN’s definition of residential real property is broader than just single-family homes. It also covers one-to-four family residences, vacant land intended for future development of one-to-four family homes, individual units in buildings designed for one-to-four families (such as condos or apartments), and shares in cooperative housing corporations (co-ops).

A: A non-financed transfer is any real estate transaction that doesn’t involve a loan or line of credit secured by the property, or where the financing comes from a source that isn’t regulated under federal anti-money laundering rules. This includes all-cash purchases, deals funded by the seller, private loans, or any transaction in which the lender isn’t subject to the Bank Secrecy Act (BSA) and related Anti-Money Laundering (AML) regulations. Simply put, if there’s no traditional mortgage or the lender isn’t regulated for AML, the transfer is considered non-financed.

A: Under the new rule, a buyer or transferee trust is any legal arrangement where a grantor places assets (like real estate) under the control of a trustee for the benefit of others or a specific purpose. Even if the property is titled in the trustee’s name rather than the trust’s, it still counts as a transferee trust for reporting purposes.

Exceptions: Reporting is generally not required for estate planning trusts (in which an individual or couple transfers property to a trust they created, with no payment involved), trusts with a securities reporting issuer as trustee, statutory trusts (which are treated as transferee entities) and subsidiaries of exempt trusts.

A: For transactions that fall under the new AML rule, several details must be included in the report to FinCEN. This includes information about the reporting party, the legal entity or trust receiving the property, individuals who exercise substantial control and all individuals with 25% or more ownership. If multiple legal entities or trusts are receiving ownership interests, each one must be evaluated individually, and reporting requirements apply to each qualifying transferee under the rule. The report must also include beneficiaries of any transferee trust, anyone signing on behalf of the transferee, the seller, the property being transferred, and key transaction details like the total amount paid and certain payment or bank information.

Yes, several types of transactions are exempt from the new reporting requirements. These exemptions include:

·       Transfers related to easements

·       Transfers that occur due to death (such as through a will, trust, contract or by operation of law)

·       Transfers resulting from divorce

·       Transfers to a bankruptcy estate

·       Transfers that are supervised by a U.S. court

Additionally, the following transactions are also exempt from reporting:

·       Transfers made without payment to a qualifying trust (if the individual or their spouse is the creator of the trust)

·       Transfers to a qualified intermediary as part of a 1031 exchange

·       Transactions in which there is no reporting person

These exceptions help clarify which transactions are not subject to the new reporting rules.

“Reasonable Reliance” refers to the ability of title companies, settlement agents or other reporting parties to trust the information provided by the buyer (transferee) or their representative, as long as it appears to be accurate and complete. For this rule to be satisfied, the information must come directly from the transferee or their representative and must be certified in writing. While the reporting party is not required to verify every detail independently, they should ensure that the information is properly documented and certified.

It is important to note that FinCEN has the authority to audit and request records to ensure compliance. Therefore, reporting parties are expected to maintain these records and documentation of reasonable reliance for at least five years.

A: If you’re selling a property where the buyer is subject to the new FinCEN rule—such as when a legal entity or trust is purchasing—the transaction details must be reported to FinCEN. While sellers are not responsible for filing the report, you may be asked to provide information or documentation to support the reporting process. Cooperating with your title company, closing attorney, or settlement agent helps ensure a smooth and compliant transaction.

A: Failing to comply with FinCEN’s reporting requirements can lead to significant penalties. These include failure to file a required report, filing false information, providing incomplete information, as well as the following penalties:

A: Visit FinCEN’s official site or contact us for guidance.