On Dec. 1, title professionals will begin submitting reports to FinCEN regarding certain non-financed transfers of residential real estate to legal entities or trusts.
While title agents are scrambling to figure out how they are going to fulfill the new real estate reporting rule (RER) from an operational and financial standpoint, they are also confronted with the challenge of educating confused clients who may not be as aware of the new requirements.
As you are working through your procedures for implementation, consider creating a comprehensive strategy for informing clients as well.
Here is a checklist of things to take into consideration as you finalize your policies for implementing this new requirement.
Real estate agent clients
Comb through your data to determine which clients in the past have brought transactions to you involving the transfer of residential property to a legal entity or trust in an all-cash transaction, or who have represented buyers who are legal entities or trusts involved in non-financed transactions. Alanna Insights is one great way to do this efficiently!
Communicate directly with these clients now to prepare them for future transactions that may be impacted by the new real estate reporting rule.
Prepare flyers, notices and educational pieces for real estate agent clients that can be disseminated as needed when they bring these types of transaction to you so that they are informed from the outset what will be required before the transaction can be consummated.
Buyers and Sellers
Prepare flyers, notices and educational pieces outlining the new requirements for buyers and sellers who will be using entities or trusts in non-financed transactions, outlining the beneficial ownership information that will be needed before the closing can take place.
Be specific in the requirements and the timing, putting clients on alert that any hold-up in providing and verifying the information could result in closing delays.
Remind clients that vacant land zoned for residential construction will be impacted as well as single-family homes, townhouses, co-ops, and condominiums.
There are some exemptions, so clients will need to be apprised of these as well. According to FinCEN FAQs, exemptions include a transfer that is a grant, transfer, or revocation of an easement; results from the death of an individual; is incident to divorce; is made to a bankruptcy estate; is supervised by a court; is concluded with no consideration; where the individual or spouse are the settlors or grantors; and a transfer to a qualified intermediary for the purposes of a like-kind exchange.
Listen carefully to client concerns and direct them to retain legal counsel if ownership issues are complex or difficult to sort out for purposes of reporting.
Under the RER rule, foreign investors may encounter increased scrutiny, so getting everyone on top of this from the outset of the transaction could be more critical for foreign buyers and sellers.
At Alanna, one of our core missions is to help you elevate the customer experience through consistent communication during the transaction process. Our Intelligent Assistant, proactive messaging, automated notifications and real-time milestone tracking can be your most invaluable tool in effectively managing this additional regulatory responsibility. Contact us today to learn more.