SANCAP LAW
David M. Platt
Starting March 1, the U.S. residential real estate landscape will face its most significant regulatory shift in decades. Under the Financial Crimes Enforcement Network’s (FinCEN) Residential Real Estate (RRE) Rule, certain professionals, including attorneys, title companies and other real estate professionals, must report details of non-financed residential transactions to the federal government.
While there are bills in Congress to repeal the rule and at least one challenge in Florida’s federal court, implementation seems imminent.
For attorneys, title companies and real estate professionals, this rule is more than a clerical update; it represents a major escalation in compliance responsibilities. Consumers need to understand that the information that professionals are required to now collect might seem intrusive but are now required to meet federal reporting requirements.
THE ‘RRE RULE’
The rule is designed to pull back the curtain on “all-cash” real estate deals where ownership is obscured by legal entities or trusts. FinCEN aims to deter money laundering by creating a paper trail for high-risk transactions that previously bypassed the scrutiny applied to bank-financed mortgages.
IS THE TRANSACTION REPORTABLE?
A transfer of residential property must be reported if it meets all four of these criteria:
– Residential property: Includes single-family homes, townhouses, condos, co-ops and even vacant land zoned for residential use.
– Non-financed: The transfer does not involve a loan from a financial institution with its own Anti-Money Laundering (AML) obligations. Note that private lending (“Bank of Dad”) and seller-financing (such as contracts for deeds) are considered “non-financed” and are reportable. This includes transfers for “nominal consideration,” such as “$10 in hand paid.”
– Transferee is an entity or trust: The buyer is a corporation, LLC, partnership or trust, including revocable trusts and irrevocable trusts.
– No exemption applies: While there are exemptions for certain transfers (e.g., those resulting from death, divorce or court supervision), most standard entity-based transfers are covered.
AFFECT ON CONSUMER TRANSACTIONS
Many real estate transactions are between related entities for little or no consideration: such as transferring real estate to a revocable trust, or transferring real estate to an LLC or a corporation. All of these transactions must now be reported to FinCEN. The attorney preparing the deed is responsible for reporting this transaction under the “Reporting Cascade” described below.
The attorney (or other reporting entity) must obtain and retain certain information from the parties, including their names, addresses, social security numbers, dates of birth and Employer Identification Number (EIN) for business entities, and report the exact legal description of the property. This information must be certified by the client as being true and accurate.
This additional reporting requirement will add to the cost of almost every real estate transaction.
THE ‘REPORTING CASCADE’
FinCEN uses a reporting cascade to determine which professional is legally obligated to file the report. Only one person is required to file per transaction. The duty falls to the first person on this list who is involved in the deal:
– Closing or settlement agent (listed on the settlement statement)
– Settlement statement preparer
– Deed filer
– Title insurance underwriter
– Largest fund disburser
– Title evaluator
– Deed or legal instrument preparer
PENALTIES FOR NON-COMPLIANCE
The costs of not complying are steep. As of 2026, civil penalties for negligent violations can reach roughly $1,400 per violation. Willful violation, including the failure to file or providing false information, can lead to criminal fines of up to $250,000 and up to five years in prison.
David M. Platt, Esq., is an estate planning and business attorney with SanCap Law.
