For most transactions, this rule will not meaningfully change the closing process. However, for certain cash purchases involving entities or trusts, there is now an additional compliance step that must be handled properly.

By Michael Infanti, Real Estate Attorney and CEO of Preferred Settlement Services

What is the FinCEN Rule?

The Financial Crimes Enforcement Network, a bureau of the

, has implemented a rule requiring reporting for certain residential real estate transactions. The purpose is to increase transparency and prevent the use of anonymous shell entities to launder illicit funds through U.S. real estate.

The rule requires disclosure of beneficial ownership information in specific non-financed residential purchases. It is not a change to contract law, an inspection requirement, or a tax. It is a federal reporting obligation.

When Does the Rule Apply?

The rule generally applies when residential real property is being purchased without an instituational lender and the buyer is a legal entity or trust rather than an individual purchasing in their personal name.

If a traditional bank loan is involved, the rule typically does not apply because financial institutions already conduct anti-money laundering compliance and reporting. In short, financed transactions are usually unaffected. Cash purchases by entities or trusts require closer review.

What Must be Reported?

When applicable, certain information must be reported to FinCEN, including the identity of individuals who ultimately own or control the purchasing entity, beneficial ownership details, and specific transaction information. The report is submitted through a secure federal filing system. This information is not recorded in public land records. It is reported directly to the federal government.

Who is Responsible for Filing?

The rule designates a reporting person, typically the settlement agent or title company handling the closing. Realtors are generally not responsible for filing the report. However, agents should expect that in applicable transactions, buyers may be asked to provide additional identification or documentation so the requirement can be satisfied. When identified early, the process is typically straightforward.

Will this Delay Closings?

When addressed proactively, it should not. If overlooked until the last minute, it could. As with most compliance matters, early identification allows reporting to occur alongside the normal closing workflow.

What Should Realtors Do?

In most cases, very little. It is helpful to identify early whether the buyer is purchasing through an LLC, corporation, or trust, flag cash transactions, involve the title company early when an entity is involved, and prepare buyers for possible documentation requests.

Compliance in Context

The FinCEN reporting rule is a compliance requirement that becomes simply another step in the closing process when handled properly. Most transactions will proceed as they always have. For those that fall within the rule, awareness, communication, and coordination with your title partner are key. When managed correctly, the process should remain smooth and predictable.

The post Cash Deals Are Changing: Understanding the New FinCEN Rule first appeared on Preferred Settlement Services.

By Michael Infanti, Esq.

How to Explain Title Insurance to your Client

Title insurance protects property owners and lenders from problems that arose in the past, not from events that happen in the future. Unlike most insurance (such as homeowners or auto insurance), which covers future risks, title insurance looks backward.

Even if a home or improvement was built recently, the land itself may have existed for hundreds of years, and over that time many things can go wrong including undisclosed easements, recording errors, boundary disputes, missing heirs, or prior liens, to name just a few. Some of these issues may not be uncovered during a standard title search.

Title insurance protects the homeowner from those unknown or undiscovered defects in the chain of title. From the beginning of recorded history, up through the date of purchase, title insurance provides peace of mind to the buyer. Their ownership interest is protected.

A Real-World Example of Your Client

Imagine a Buyer purchases a home, and everything appears clean. Months later, they receive notice that a contractor from two owners ago never got paid $100,000 and had filed a valid lien against the property. Without title insurance, the current homeowner could be responsible for paying that lien or even face legal action. With title insurance, the policy steps in to cover the legal costs and, if necessary, the claim itself.

It’s peace of mind for something no buyer expects, but can be financially devastating if it happens.

Common Client Questions and Areas of Concern

“The title search already checks everything. Why do I need insurance?”

How to respond:
A title search greatly reduces risk, but it cannot catch everything. Public records can contain errors, missing documents, or fraudulent filings that don’t surface until later. Title insurance exists to protect the buyer if something slips through despite everyone’s best efforts. Moreover, a title search doesn’t provide any protection to the buyer.

“I’m paying cash, so I don’t need it.”

How to respond:
Cash buyers aren’t required to purchase title insurance, but they are actually taking on more risk by skipping it. There is a reason why every lender requires title insurance. They want protection and the buyer deserves that same protection for their investment.

“I’ve bought homes before and never needed to use it.”

How to respond:
That’s exactly how title insurance works when it does its job well. You don’t buy it expecting a problem, you buy it because if a problem arises, it can be extremely costly witout coverage. Most claims surface years after closing, long after memories and paperwork fade.

“It’s just another closing cost.”

How to respond:
Unlike many closing costs, title insurance is a one-time fee that provides lifetime coverage. When clients compare that to the potential legal fees or loss of ownership rights, the value becomes much clearer.

Final Thoughts of Agents

Your role isn’t to sell title insurance, it’s to educate and protect your clients. When you explain it clearly and confidently, clients feel informed rather than pressured. And when issues arise down the road, they’ll remember the guidance you provided that heped safeguard one of their largest investments.

Your role isn’t to sell title insurance, it’s to educate and protect your clients.

The post Why The Value of Title Insurance Is Hard to Explain first appeared on Preferred Settlement Services.

7 Key Takeaways from the NAR Settlement

By Michael Infanti, Esq.

On March 15, the prolonged legal battle surrounding the National Association of Realtors (NAR) reached its climax with a verdict favoring the plaintiffs. As a result, practice changes went into effect on August 17, 2024.

The resolution of this significant case has stirred unease within the real estate community, accompanied by a potential exaggeration of its repercussions by media outlets.

While the precise ramifications remain uncertain, several crucial aspects of the settlement are pertinent for agents to consider at this juncture:

1. MLS Participants cannot make any offers of compensation on the MLS.

    

2. The MLS is required to eliminate all broker compensation fields and cannot permit any offers of compensation in any MLS fields (such as relator remarks, etc.).

    

3. All MLS Participants must enter into a written commission agreement (that contains certain disclosures), before the buyer tours any home.

    

4. An MLS Participant may not receive compensation from any source that exceeds the amount agreed to in the written commission agreement (e.g., a buyer agent can’t agree to 2% in the agreement, but then accept 3% if the seller later offers it).

4. An MLS Participant may not receive compensation from any source that exceeds the amount agreed to in the written commission agreement (e.g., a buyer agent can’t agree to 2% in the agreement, but then accept 3% if the seller later offers it).

5. MLS Participants may not filter out or restrict listings based on the existence or level of compensation offered to the buyer broker.

6. Offers of compensation may be included in certain third-party websites (such as Zillow, etc.).

7. The Settlement Agreement does not prevent sellers from offering buyer concessions on the MLS (e.g., for buyer closing costs), provided that such concessions are not limited to or conditioned upon the payment to the cooperating broker.

In my opinion, #7 is important. I presume that we may start seeing many more sellers willing to offer a 3% concession in the MLS to cover the buyer’s ‘closing costs.

For more information:
FAQs: What You Need to Know Buyer Broker Agreements

The post Agent “Cheat Sheet” on NAR Settlement first appeared on Preferred Settlement Services.