Residential Cash Sale Reporting Rule to Start Next Year

A final version of an anti-money laundering rule — in the works since December 2021 — is finally out from the federal Financial Crimes Enforcement Center, or FinCEN. It goes into effect December 1, 2025, and affects many types of personal residences, although not entire larger multifamily properties.

In the works since December 2021, the first version of the rule was proposed in February 2024 with the final release expected in mid-August. Apart from the many anti-money laundering regulations in effect for different sectors of the economy, this rule is focused on real estate because of concerns over how large cash property transactions can be a form of money laundering.

This is one of two rules passed — the second for investment advisors — to “increase transparency, limit the ability of illicit actors to anonymously launder illicit proceeds through the American housing market, and bolster law enforcement investigative efforts,” according to a FinCEN press release.

The rule officially requires “certain persons” involved in particular types of residential real estate transactions to keep records and file reports when the purchaser is a corporation, partnership limited liability company, or trust that pays cash. This does not apply to individuals because their large purchases are likely already tracked by banks and regulators.

The final definition of residential real estate covered by the rule includes single-family houses, townhouses, condominiums, and cooperatives. The latter two can be single units within large buildings that contain many units. Apartment buildings designed for one to four families are also covered. That means larger apartment buildings — five units and above that are typically seen as commercial properties — are outside the purview of the regulation. Transfers of vacant or unimproved land are also subject to reporting when the new owners plan to build a structure intended to house one to four families.

There are exemptions to reporting, including transfer of an easement, transfer resulting from the death of an individual, transfer to a bankruptcy estate; transfer incident to a divorce or dissolution of a marriage, transfer supervised by a court in the U.S, transfer by an individual or married couple to a trust where they are the settlor or grantor, or a transfer as part of a 1031 exchange.

Reporting obligations will generally rest with settlement agents, title insurance agents, escrow agents, and attorneys. Only one of them in a given transaction will have to do the reporting and there are predetermined ways of finding out which person will be responsible.

A filed report is due on the latter of either the final day of the month following the month in which the reportable transfer occurred, or 30 calendar days after the closing date.