We are compelled to inform our readers when there is a substantial change to regulations affecting real estate transactions. As of March 1, 2026, sweeping changes to financial reporting are in effect. By way of background, “FinCEN”, otherwise known as the Financial Crimes Enforcement Network, has pertained to financial reporting of particular transactions, defined by amount and location. Now, FinCEN, has been more broadly applied in all fifty states, regardless of the size of transaction (even zero consideration) and is a Federal compliance requirement to satisfy.
FinCEN has always been intended to quash potential money laundering in real estate transactions. It is meant to deter those who would funnel potentially illegally obtained funds by buying and selling real estate using an entity (such as a corporation or limited liability company) without identifying the individual parties behind the entity. All cash transactions involving entities or trusts have been identified as “high risk” for money laundering due to the potential for anonymity of the parties. All real estate transactions as of this month are subject to evaluation as to whether reporting is required. Further, an updated New York State transfer tax return is to be used. The new FinCEN regulations are to be applied to residential real estate transactions with an entity buyer that is purchasing without an institutional lender. Private lending and hard money transactions are subject to reporting because such lenders typically do not evaluate the individuals behind a purchasing entity as carefully as would an institutional lender.
Exemptions include transfers to trusts where the transferor and transferee are essentially one and the same party. For instance, a person wishes to transfer his house to a trust in which he is the trustee. In addition, transfers pursuant to administering an estate or life events such as divorce are also exempt from reporting.
