There is a new reporting form coming to some residential real estate closings as of December 1, 2025. Reporting is required by the Financial Crimes and Enforcement Network (FinCEN), which is part of the U.S. Department of the Treasury. FinCEN’s mission is to prevent and detect domestic and international money laundering, which is a tool for terrorist financing and other financial crimes.
Some bad actors have used LLCs, corporations, or trusts to hide their identities when purchasing real estate. These bad actors usually purchase with cash (to maximize the amount they can launder in one transaction) or with private financing or seller financing, which allows borrowing part of the purchase price without the scrutiny involved in a bank loan. Those realities have prompted this rule.
The rule applies to residential real estate properties (1-4 dwelling units on a property), and also to vacant land on which the buyer intends to build 1-4 dwellings. It applies to condominiums, to the acquisition of second/vacation homes, and to residential investment property purchased as a rental or to flip.
Oddly, I think, it applies to gift transfers. For example, if a parent gifts a portion of their land to an adult child’s trust or LLC, the transfer is reportable. That seems odd because a gift doesn’t involve the transfer of any money, laundered or otherwise. There is no reporting required in the more common situation where the parent gifts part of their land to an adult child who takes title in their individual name, rather than through a trust or LLC.
It is also odd that the rule doesn’t apply to commercial real estate purchases. Risks of money laundering by a cash purchase of commercial real estate and residential real estate are the same. However, it sounds like there will be similar rule in the future for commercial transactions.
There are exceptions in the rule. No reporting requirement exists for, among other things:
1. Acquiring property by inheritance;
2. Change in title related to divorce;
3. Deeding property you already own to a trust you have set up (common in estate planning);
4. Transfers supervised by the bankruptcy court;
5. Deeds of easement (or changing or terminating an easement);
6. Where the buyer (or gift recipient) is an individual rather than a business entity or a trust; and
7. Where the parties prepare/record their own deed and swap money for the deed without any attorney or real estate professional being involved (which has its own risks of a defective deed, no title search or a bad title search, etc.).
If no exemption applies, what does this mean to you as the buyer or seller (or giver or recipient) of residential real estate where the buyer takes title through their trust or LLC? It means the closing attorney (or if there is no closing, the attorney who prepared or recorded the deed) will need to collect and report certain information from BOTH parties. The form (which FinCEN will finalize and release soon) will likely include information on the parties themselves (including the buyer/transferee’s Beneficial Owner Information, i.e., who exactly owns the entity), payment information (including source of funds), and property information. Expect to have to complete and have notarized an affidavit with your information, on which the attorney doing the reporting can then rely. Expect to have the attorney handling the matter ask to check your ID as a routine precaution. It is the attorney, rather than you as a party, who must file tlhe report.
And remember, none of this applies to you if there is a bank loan involved, or if it is a cash sale or gift deed where the person acquiring the property takes title in their individual name. Those are the most common scenarios with residential real estate acquisitions. If you are in those categories, nothing changes.
Kim K. Steffan is an attorney with Steffan & Associates, P.C. in Hillsborough. She can be reached at (919) 732-7300 or kim.steffan@steffanlaw.com.