Is This Closing Reportable? Four Questions That Tell You

Not every real estate transaction is reportable. Most are not. The rule targets a specific pattern: an entity or trust buying residential property without a bank mortgage. You can determine reportability with four questions asked in sequence. If the answer at any step takes the transaction out of scope, you stop. If all four answers point toward reportability, you file.

The questions are: (1) Who is buying? (2) How are they paying? (3) What kind of property? (4) Does any exemption apply? That is it. No ambiguity for most transactions. The order matters because each question narrows the scope before you reach the next one.

If the buyer is an individual person, meaning a human being taking title in their own name, the transaction is not reportable under this rule. Stop here. The rule only applies when the buyer (the "transferee") is a legal entity like an LLC, corporation, or partnership, or a trust.

This is the single biggest filter. The majority of residential purchases are by individuals. When John and Maria Smith buy a house in their own names, this rule does not apply regardless of how they pay. But when Smith Holdings LLC buys the same house, you move to Question 2.

Watch for mixed situations. If an individual and an LLC are both on the deed, the entity's involvement can bring the transaction into scope. When in doubt, treat entity participation as a trigger to continue the analysis.

If the buyer is getting a mortgage from a bank, credit union, or other lender that is regulated under the Bank Secrecy Act, and that loan is secured by the property being purchased, the transaction is not reportable. Stop here. The logic is straightforward: the regulated lender is already required to do anti-money-laundering checks on the borrower. The oversight already exists.

The transaction stays in scope when there is no regulated lender involved. This means: all-cash purchases, seller financing, loans from private individuals or unregulated entities, hard money loans from non-BSA-regulated lenders, or any combination where the financing does not come from a BSA-regulated institution secured by the transferred property.

This is the core of what the rule targets. An LLC wiring $2 million in cash to buy a condo with no bank involved means nobody in the transaction is performing anti-money-laundering due diligence. That is the blind spot the rule closes. If there is no qualifying bank mortgage, move to Question 3.

The rule covers residential real property: single-family homes, townhouses, condominiums, cooperatives (including co-op shares), and buildings designed for 1-4 families. It also covers vacant land if the buyer intends to build housing for 1-4 families and the zoning supports it. Mixed-use properties that include any residential component are also covered.

If the property is purely commercial, meaning an office building, retail space, warehouse, or industrial facility with no residential units, the transaction is not reportable. Stop here. But be careful with mixed-use: a building with a commercial ground floor and residential units above is still covered because it has a residential component.

The rule carves out specific situations that are not reportable even when the first three answers point to reportability. The main exemptions are: transfers resulting from death (inheritance, survivorship), transfers incident to divorce or dissolution, transfers to a bankruptcy estate, transfers supervised by a U.S. court, transfers to a qualified intermediary in a 1031 exchange, and situations where no person in the 7-tier cascade performed any function in the transaction.

Exemptions require documentation, not assumptions. If you believe an exemption applies, record which exemption, why the facts support it, and what evidence you relied on. "The buyer mentioned it was a divorce situation" is not documentation. A copy of the divorce decree showing the property transfer as part of the settlement is documentation.

If no exemption applies, the transaction is reportable. You now need to identify the reporting person via the cascade, collect beneficial ownership data from the buyer, and file the Real Estate Report with FinCEN by the deadline.

Example A: Coastal Ventures LLC buys a beachfront condo for $1.2 million, paid entirely by wire transfer with no mortgage. Entity buyer, no regulated financing, residential property, no exemption. Reportable.

Example B: Riverdale Holdings LLC buys a single-family home for $650,000 with a mortgage from Wells Fargo secured by the property. Entity buyer, but there is qualifying financing from a BSA-regulated lender. Not reportable. The bank is already doing the compliance work.

Example C: Sarah Chen buys a townhouse for $900,000, all cash, no mortgage. Individual buyer. Not reportable. The rule only applies to entities and trusts, regardless of how an individual pays. Sarah could buy with a suitcase full of cash and this rule would not apply to her purchase. (Other rules might, but not this one.)