Trying to Avoid Reporting “All-Cash” Residential Real Estate Sales? Be Wary of NEW FinCEN Reporting Rule.

by Scott A. Meyer –

The Financial Crimes Enforcement Network (FinCEN) has finalized a new rule that aims to apply scrutiny to real estate transactions that currently avoid scrutiny. Specifically, the rule targets “all-cash” transactions in residential real estate deals.

Why? All-cash deals don’t get much legal scrutiny because they don’t go through the financial institutions with existing anti-money laundering reporting rules.

It’s no surprise illicit actors take advantage of a lack of scrutiny. FinCEN claims some of these “all-cash” transactions are being used to hide money sources and hide owner identities. This rule is intended to bring more transparency to these transactions.

The new rule is part of an ongoing effort to tackle money laundering.

FinCEN has an existing program for combatting some of this activity in its Residential Real Estate Geographic Targeting Order (GTO) program. That program requires title companies to report beneficial ownership information for certain types of transactions in select jurisdictions.

According to FinCEN, the new rule builds on the GTO program with nationwide reporting requirements.

What information is reported?

The new rule’s goal is to find out who the actual people are behind entities involved in transactions. So it’s not surprising that the rule’s definition of “beneficial owners of transferee entities” is very similar to the Corporate Transparency Act (CTA) definition of beneficial ownership.

In addition, the new rule requires reporting about basic transaction information. Generally, this is what FinCEN wants reported:

• the buyer (transferee) entity and the beneficial owners of it
• the real property being transferred
• the seller (transferor)
• any payments made
• the reporting person

How does FinCEN define “residential real estate”?

The rule only applies to residential real property located in the US. FinCEN defines the types of residential property that are reportable as:

“Reportable property includes single-family houses, townhouses, condominiums, and cooperatives, including condominiums and cooperatives in large buildings containing many such units, as well as entire apartment buildings designed for occupancy by one to four families. The rule also requires reporting on transfers of land, such as vacant or unimproved land, on which the transferee intends to build a structure designed for occupancy by one to four families. Furthermore, a transfer of property may be reportable even if the property is mixed use, such as a single-family residence that is located above a commercial enterprise.” (1)

Will this apply to EVERY “all-cash” residential real estate transaction?

No, but most of them. Per FinCEN:

“Transfers are reportable when they meet the following criteria: (1) the property is residential real property; (2) the transfer is non-financed; (3) the property is transferred to a legal entity or trust, and (4) an exemption does not apply.

Transfers meeting the rule’s requirements must be reported regardless of purchase price or the value of the property. Gift transfers are thus subject to the rule.” (1)

The new rule does list exceptions, aka “exemptions”.

“Exemptions are provided for certain common, lower-risk transfers. A reportable transfer does not include:

• a transfer of an easement;
• a transfer resulting from the death of an individual, whether pursuant to the terms of a decedent’s will or the terms of a trust, the operation of law, or by contractual provision;
• a transfer incident to divorce or dissolution of a marriage or civil union; a transfer to a bankruptcy estate;
• a transfer supervised by a court in the United States;
• a transfer made for no consideration by an individual, either alone or with their spouse, to a trust of which that individual, their spouse, or both of them, are the settlor or grantor; a transfer to a qualified intermediary for purposes of a like-kind exchange under Section 1031 of the Internal Revenue Code; and
• a transfer for which there is no reporting person. “ (1)

When will the new rule go into effect?

The final rule will take effect on December 1, 2025.

Questions about your specific transaction? Contact Scott Meyer at 469-916-7700 x115 or via email. We’ll evaluate your transaction and help you comply with FinCEN rules and regulations.

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¹ To see the sections quoted in context, and to learn more about the new rule for residential real estate “all-cash” transactions, see FinCEN’s Fact Sheet: FinCEN Issues Final Rule to Increase Transparency in Residential Real Estate Transfers.