What is FinCEN’s New Rule?
The Financial Crimes Enforcement Network (FinCEN) has introduced a new rule that changes how certain real estate transactions are reported across the entire country. This replaces the older Geographic Targeting Orders (GTOs) that only applied to specific areas. Here’s what you need to know.
Who Does It Affect?
The new rule primarily impacts all-cash purchases of residential properties made by legal entities (like LLCs) or trusts. It also includes private/seller financing and transactions where the loan isn't secured by the property.
No Purchase Limits or Geographic Boundaries
There's no minimum price for transactions, and it doesn't matter where you are in the U.S. From California to New York, if you qualify, your transaction needs to be reported.
What Do You Need to Report?
The closing agent—usually a title company—must file a report with FinCEN. This report collects detailed information about the transaction, property, buyers (and their beneficial owners), sellers, and the source of funds involved. It requires a lot of specific data—over 100 fields!
Who is Responsible for Reporting?
Typically, it’s the closing or settlement agent’s job to gather and submit this information to FinCEN, following a specific hierarchy outlined in the new rule.
What Transactions Are Exempt?
Some situations don’t require reporting, such as transfers due to court orders (like divorce or death), or if the transaction is financed through standard mortgage methods.
Compliance is Key
Title and settlement professionals need to adopt new strategies for collecting and verifying information. Failure to comply with these rules can lead to severe penalties.
Why Is This Rule Important?
The main aim is to prevent money laundering and improve transparency in the real estate market, especially against the backdrop of cash purchases that might hide illicit funds.
Preparing for the Changes
- Here’s how:For Buyers: If you're intending to purchase a property through an LLC or trust, let your agent and title company know early. Avoid switching to cash or non-institutional financing at the last minute to prevent complications.
- For Sellers: Be ready to provide information to help with reporting if the buyer is using an entity or trust.
Setting Expectations for Disclosure
While it might feel invasive, information collection is a legal requirement. Title companies will be asking for personal details to comply with FinCEN, so being transparent early on can ease the process.
Post-Closing Transfers
Keep in mind that title and settlement companies cannot process post-closing deeds that transfer ownership to an entity like an LLC without triggering a reporting requirement. Be prepared for potential adjustments to your closing timeline, as these new processes may take more time.
Engage with Your Title Company Early
If you’re involved in any transactions that include trusts, LLCs, or cash purchases, discuss these upfront with your title company. They can confirm whether the transaction will require reporting and help you gather necessary documents.
This new rule can feel daunting, but staying informed and planning ahead will make the process smoother for everyone involved in real estate transactions. If you have more questions, don’t hesitate to reach out!
Here is our contact information,
Thank you,
Scott and Caroline Doan Realtors®
(951) 541-3498
Realty Executives
28581 Old Town Front St. #100
Temecula, Ca. 92591
doanhomesale@gmail.com
Buyers start here
Sellers start here
DRE#02248461
We look forward to helping you navigate this exciting market!
