FinCEN Residential Real Estate Rule Is on Hold, but Reporting Requirements Could Return

The Financial Crimes Enforcement Network (FinCEN) finalized its Residential Real Estate Rule (the Rule) in 2024, and reporting was originally scheduled to begin on March 1, 2026. The Rule would require reporting for certain non-financed transfers of U.S. residential real estate to legal entities and trusts. For now, however, the Rule is not in effect, and no filing is required. On March 19, 2026, the U.S. District Court for the Eastern District of Texas vacated the Rule in Flowers Title Companies, LLC v. Bessent, and FinCEN filed an appeal to the U.S. Court of Appeals for the Fifth Circuit on May 11, 2026. Reporting persons are not currently required to file Real Estate Reports and are not subject to liability for failing to do so.

What This Means for Your Transactions

If the appellate court reverses the lower court's decision, reinstatement of the Rule will affect transaction planning, diligence, closing coordination, and post-closing compliance obligations. The Rule imposes new reporting requirements on certain non-financed transfers of U.S. residential real property to legal entities or trusts.

The Rule's definition of "non-financed" is broader than a typical understanding of an "all-cash" deal. A deal is treated as non-financed—and therefore subject to reporting obligations—unless it involves financing that is:

• extended to all transferees,
• secured by the property being transferred, and
• provided by a financial institution already subject to the Bank Secrecy Act anti-money laundering and suspicious activity reporting requirements.

That means that in practice, financing from a private lender that is not already subject to reporting requirements under the Bank Secrecy Act generally would fall within the Rule, as would deals in which financing is extended to fewer than all transferees.

Covered Property Includes:

• one-to-four family residential property,
• land on which a buyer intends to build one-to-four family residential property,
• condominium and similar units,
• interests in a cooperative housing corporation, and
• mixed-use property that includes a residential structure or unit designed principally for occupancy by one to four families.

Exceptions

Transactions involving certain highly regulated entities and certain lower-risk or separately regulated trusts, such as government authorities, broker-dealers, banks, and ERISA-regulated trusts, are exempt from filing requirements. The Rule also excludes certain transactions, including:

• easements,
• death-related transfers,
• divorce-related transfers,
• bankruptcy transfers,
• court-supervised transfers,
• no-consideration transfers to certain settlor trusts,
• transfers to qualified intermediaries in Section 1031 exchanges, and
• transfers where no reporting person exists.

Because these exceptions are fact-specific, they should be checked carefully in any deal that may otherwise fall within the Rule. DWT is available to help clients confirm the applicability of the Rule to any potentially regulated transaction.

Who Would Be Responsible for Filing

The Rule uses a single-reporting-person framework. Unless the parties make a valid written designation, the filing obligation falls on the person who performed the highest-listed function in FinCEN's priority cascade. In most transactions, that will likely be the title or escrow officer. In some transactions, however, depending on the deal structure and who performs the closing functions, a law firm or closing attorney could be the reporting person.

In practice, parties should not assume another party or professional involved in the transaction will handle the filing. If the Rule returns, the reporting person should be identified early in the transaction, and the designation should be documented where appropriate.

What Information Would Need To Be Reported

If the Rule is reinstated, a required Real Estate Report would be filed electronically through FinCEN's BSA E-Filing System by the later of 30 calendar days after closing or the last day of the month following the month of closing. The filing would require information about:

• the reporting person,
• the transferee,
• the transferee's beneficial owners,
• individuals signing on behalf of the transferee,
• the transferor,
• the property, and
• the consideration and payment details.

The payment reporting requirements are extensive. The report would require the total consideration, each method of payment, the amount paid by each method, and identifying information for the source of each payment, such as the relevant account, payment instrument, or payment processor.

Parties should also be mindful of the beneficial ownership reporting requirement and prepared to identify the relevant "beneficial owners," which is defined differently for entities and trusts under the Rule. For an entity transferee, beneficial owners generally include individuals who, directly or indirectly, own or control at least 25% of the entity's ownership interests; for a trust transferee, beneficial owners may include trustees, certain beneficiaries, settlors of revocable trusts, and others with authority over trust assets.

The reporting person would be required to retain relevant records, including reported information, for five years.

Consequences of Noncompliance

If a reportable transaction is not reported on time, the designated or default reporting person may face civil penalties under the Bank Secrecy Act. Willful noncompliance can create more serious civil penalties and potential criminal liability.

How To Prepare

While the Rule is not currently in effect, owners, investors, developers, and other parties that frequently buy or sell residential real estate through entities or trusts should be prepared in the event the Rule is reinstated. In particular, they should be prepared to:

• identify early whether a deal could be covered,
• confirm whether the transaction would be treated as "non-financed" under the Rule,
• determine who will be the reporting person,
• collect beneficial ownership information, and
• document payment sources.

Key Takeaways

• No filing is required right now because the Rule has been vacated.
• FinCEN has appealed, so the Rule could be reinstated.
• If reinstated, the Rule would apply to a broad range of "non-financed" residential transfers to entities and trusts.
• In many transactions, the filing obligations would likely fall on the title or escrow officer, but could fall on transaction parties and their counsel.
• If the Rule returns, transaction parties should expect requests for beneficial ownership and payment-source information, and the reporting person would be subject to a five-year record-retention requirement.

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Drolma Gesang and Megan Raymond are associates and Clayton Graham is a partner in DWT's Seattle office. We are tracking developments of this Rule closely. For any questions about how this Rule could affect pending or future transactions, please reach out to the authors or another member of our real estate team and sign up for our alerts for more insights.