Real Estate Reporting Done Right: A Trust-Building Blueprint for Success
The U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) will change real estate reporting effective December 1, 2025. These new rules apply to non-financed residential real estate transfers. The most important change will make the real estate market more transparent and stop money laundering.
FinCEN’s new regulations will impact the industry deeply. More than 172,000 Reporting Persons must follow these requirements and file over 800,000 Real Estate Reports each year. On top of that, it will take 640,000 staff members to learn these reporting functions. The rules apply to all property transfers regardless of purchase price, and even gifts need reporting in certain cases.
These new regulations might look complex at first. The reporting process lets you rely on information from others unless you have doubts about its accuracy. This piece will help you understand reportable transfers, filing responsibilities, key exemptions, and essential report details. We want to help you master these requirements and turn compliance into a trust-building chance for your business.
Understanding Reportable Real Estate Transfers
The new reporting requirements apply to transfers that meet three criteria. The property must be residential real estate. The transfer can’t be financed. A legal entity or trust must receive the property.
What qualifies as residential real property
FinCEN’s definition of “residential real property” has four specific categories:
- U.S. real property that has a structure built mainly for 1-4 families
- U.S. land where someone plans to build a 1-4 family structure
- A unit meant for 1-4 families within a bigger structure
- Shares in a cooperative housing corporation with U.S. property underneath
Properties with both residential and commercial space still need to be reported. The property type determines if you need to report it, not its size or value. This differs from other real estate reporting rules that usually set minimum values.
What makes a transfer ‘non-financed’
We call a transfer “non-financed” when there’s no credit backed by the property from a financial institution that has anti-money laundering (AML) program obligations. This means:
Purchases made entirely in cash
Deals with seller financing or private loans
Loans from places that don’t need to follow AML and Suspicious Activity Report (SAR) rules
A transfer becomes non-financed if even one buyer pays their share without financing from an AML-obligated institution. This applies to partially financed deals with multiple buyers.
When a transfer to a trust or entity becomes reportable
A “transferee entity” means any non-individual legal person except a trust. This covers corporations, partnerships, LLCs, and similar groups. Some regulated entities and their wholly-owned subsidiaries don’t need to report.
A “transferee trust” means any legal setup where someone puts assets under a trustee’s control to benefit others or serve specific purposes. The trust counts whether the property’s title is in the trust’s name or the trustee’s name as trustee.
The transaction needs reporting if any non-individual entity or trust gets an ownership stake in residential real property through a non-financed transfer. This rule applies whatever the size of their property interest.
Exemptions and Non-Reportable Transactions
FinCEN’s new regulations don’t require reporting for all residential real estate transfers. You’ll find several specific exemptions that prevent unnecessary reporting of lower-risk transactions.
Transfers due to death or divorce
Property transfers that happen after someone’s death don’t need reporting. This applies to transfers through wills, trust terms, operation of law (like intestate succession or transfer-on-death deeds), or contractual provisions like beneficiary designations. The same goes for transfers linked to divorce or dissolution of marriage or civil union. These exemptions make sense since such transfers rarely pose money laundering risks.
Court-supervised and bankruptcy-related transfers
Bankruptcy estate transfers get a complete pass from reporting obligations. This includes all transfers that US courts supervise. The exemption works well because sellers in court-supervised cases often don’t know much about the property. These transactions already face heavy oversight, which cuts down illicit finance risks by a lot.
Gifts to trusts by individuals or spouses
The rules don’t require reporting when individuals (alone or with spouses) transfer property to trusts without payment, as long as they or their spouses are the settlors or grantors. This exception recognizes common estate planning while you retain control over riskier trust setups.
Transfers with no reporting person
Transfers become automatically exempt when there’s no designated reporting person. This practical rule prevents gaps where compliance would be impossible. The rules also exempt transfers to qualified intermediaries for Section 1031 like-kind exchanges and grants or revocations of easements.
This is just a part of it when it comes to non-reportable transfers. Professionals need to review each transaction’s specific details against the rules to figure out reporting requirements. The focus stays on catching higher-risk deals while cutting down unnecessary paperwork.
Who is Responsible for Filing the Report
Each reportable real estate transfer has exactly one “reporting person” FinCEN designates to file the required report. This approach will give clear accountability and flexibility to real estate professionals involved in the transaction.
The reporting person cascade explained
FinCEN uses a seven-tier “reporting cascade” to determine who must file the Real Estate Report. The professional with the most important role in a transaction gets assigned the responsibility. The cascade works this way:
- The person listed as the closing or settlement agent on the closing statement
- The person who prepared the closing statement if no agent exists
- The person who filed the deed with the recordation office if no closing statement was prepared
- The person who underwrote the owner’s title insurance policy if no deed was filed
- The person who disbursed the greatest amount of funds if no title insurance was provided
- The person who provided an evaluation of title status if no funds were disbursed
- The person who prepared the deed or other ownership transfer instrument if no title evaluation occurred
Many professionals find implementation straightforward since this structure matches existing industry practices for IRS Form 1099-S compliance.
Designation agreements between professionals
Real estate professionals can sign written designation agreements to decide who will file the report. These agreements are a great way to get flexibility while reducing the overall compliance burden. The agreement must include:
- The date of the agreement
- Names and addresses of all parties to the agreement
- Names and addresses of transferor and transferee
- Property identification information
- Name and address of the designated reporting person
The agreement needs no specific format but must be in writing. All parties must sign and keep copies for five years. A new agreement is needed for each reportable transfer.
When no one is required to report
Some circumstances don’t require reporting despite a seemingly reportable transaction. No one needs to file a report if none of the seven functions in the reporting cascade are performed. Financial institutions with anti-money laundering program obligations cannot be reporting persons. The reporting duty goes to the next available person in the cascade in such cases.
What Must Be Included in the Real Estate Report
Real estate professionals just need to focus on four key information categories when preparing a full report. The 2-year old FinCEN complete reporting requirements create transparency in residential real estate transactions.
Details about the transferee entity or trust
Reports for a transferee entity must include the full legal name, trade names or “doing business as” names, street address of the principal place of business, and a unique identifying number. Transferee trust reports need different details. These include the full title of the agreement that sets up the trust, the date of trust instrument execution, a unique identifying number, revocable trust status, and identifying information for each trustee that is a legal entity. This level of detail helps identify the purchasing entity correctly.
Beneficial ownership information
Entities and trusts have different definitions of beneficial owners. Beneficial owners of transferee entities are individuals who exercise “substantial control” or own at least 25% of the entity’s ownership interests directly or indirectly. The trust’s beneficial owners include trustees, individuals who can dispose of trust assets, certain beneficiaries, and grantors/settlors with power to revoke the trust. Each beneficial owner’s full legal name, birth date, residential address, citizenship, and taxpayer identification number must appear in the report. This transparency reveals who controls or benefits from the property.
Payment and funding source disclosures
Reports must show the total consideration paid for the property. It also needs information about the transferee entity’s or trust’s payments. This includes payment methods, financial institution details, account numbers, and the payor’s name if someone else makes the payment. The report should disclose hard money loans, private loans, or lending arrangements not from financial institutions under anti-money laundering requirements.
Information about the property and transferor
Property details must include the street address, legal description like section, lot, and block, and closing date. Individual transferors’ reports need their full legal name, birth date, current residential address, and a unique identifying number. Entity transferors must provide similar details including full legal name, trade names, principal business address, and identifying numbers. This accurate information lets authorities track property ownership changes effectively.
Conclusion
Navigating the New Regulatory Landscape
The new FinCEN reporting requirements mark a radical alteration for real estate professionals. These regulations want to curb money laundering and increase transparency in the market. You have time to prepare before the December 2025 implementation date.
Reportable transfers need three vital criteria: residential property involvement, non-financing, and transfer to a legal entity or trust. Many exemptions apply to lower-risk transactions like those from death, divorce, or court supervision.
A reporting cascade system establishes responsibility clearly. One person files each required report. This approach gives real estate professionals clarity and flexibility through designation agreements.
Your reports need detailed information about transferee entities or trusts, beneficial ownership details, payment sources, and property specifics. This attention to detail does more than ensure compliance – it builds credibility with clients and authorities.
These new requirements create opportunities rather than obstacles. Becoming skilled at these reporting obligations shows your steadfast dedication to professional standards and ethical practice. Clients value professionals who make transparency and regulatory compliance their priority.
Good reporting practices protect you and your clients from legal issues. The initial effort to adapt brings lasting benefits to your reputation and business operations. The investment pays off well.
Your systems and team training should start now. This forward-thinking approach sets you up for success when these regulations begin. You can turn compliance requirements into opportunities that build trust with clients.
