Effective December 1, 2025, a new regulation issued by the Financial Crimes Enforcement Network (FinCEN), as part of the Corporate Transparency Act (CTA), introduces reporting requirements for certain residential real estate transactions involving legal entities. This move represents a significant shift in real estate compliance and is aimed at increasing transparency in property dealings, particularly those involving entities that may be used for illicit financial activities.
Under the new rule, closing attorneys or title companies are mandated to submit a “Real Estate Report” to FinCEN when residential property is purchased by a non-natural person, such as a limited liability company (LLC), corporation, trust, or other legal entities. The requirement applies to a wide range of transactions, particularly those that are not financed through traditional institutional mortgage lenders. This includes all-cash sales, seller-financed purchases, and transactions involving private or hard-money lenders.
The reporting requirements are extensive and include detailed information about the purchasing entity, such as the identity of its beneficial owners, the individuals authorized to sign on behalf of the entity, the seller’s information, property details, and the sources of funding for the transaction. This level of disclosure aims to enhance the ability of regulatory agencies to detect and deter money laundering and other forms of illicit financing, which have been a growing concern in real estate markets.
For real estate developers, investment trusts, and corporations that frequently use legal entities to purchase residential properties—often for investment or rental purposes—this new rule represents a substantial compliance burden. These entities, which typically rely on anonymity or opaque structures in real estate transactions, will now face new reporting obligations that could affect their usual processes.
Closing agents and title companies will also need to implement new procedures to ensure they are collecting and transmitting the required data accurately. The rule introduces a significant change to the industry’s operational norms, especially in terms of paperwork and verification processes. Compliance experts warn that the adaptation to these new obligations is likely to face initial delays and logistical challenges, as market participants familiarize themselves with the new system and adjust their operations accordingly.
As a result, some transactions may experience longer closing times, which could potentially create delays for buyers and sellers. However, regulators argue that these initial hurdles are a necessary step in ensuring greater transparency and preventing the use of real estate for illicit financial activities. The new rule aligns with the broader goals of the Corporate Transparency Act, which seeks to combat money laundering and the misuse of anonymous companies in various financial sectors.
Overall, while the new regulation will likely impose additional burdens on certain real estate transactions, it is also seen as an important tool in the fight against illegal financial practices. The increased reporting requirements aim to shed light on opaque transactions and provide law enforcement and regulatory bodies with more tools to detect and prevent financial crimes in the real estate market.
