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Anti-Money Laundering Regulations for Residential Real Estate Transfers
A Rule by the Financial Crimes Enforcement Network on 08/29/2024
This document has been published in the Federal Register . Use the PDF linked in the document sidebar for the official electronic format.
- Document Details Published Content - Document Details Agencies Department of the Treasury Financial Crimes Enforcement Network CFR 31 CFR chapter undef Document Citation 89 FR 70258 Document Number 2024-19198 Document Type Rule Pages 70258-70294 (37 pages) Publication Date 08/29/2024 RIN 1506-AB54 Published Content - Document Details
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- Document Dates Published Content - Document Dates Effective Date 12/01/2025 Dates Text Effective December 1, 2025. Published Content - Document Dates
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SUPPLEMENTARY INFORMATION:
I. executive summary, ii. background, a. addressing high-risk transfers of residential real estate, 1. authority to require reports from persons involved in real estate closings and settlements, 2. reporting high-risk transfers of residential real estate, a. benefits of reporting, b. necessity of a permanent nationwide reporting requirement, b. the notice of proposed rulemaking, c. comments received, iii. discussion of final rule, a. overview, b. comments addressing the rule broadly, 1. authority, 2. suggested alternatives to proposed rule, 3. attorneys as potential reporting persons, 4. reasonable reliance standard, 5. penalties, 6. unique identifying numbers, c. section-by-section analysis, 1. 31 cfr 1031.320(a) general, 2. 31 cfr 1031.320(b) reportable transfer, a. residential real property, b. non-financed transfers, c. excepted transfers, d. transferee entities, e. transferee trusts, 3. 31 cfr 1031.320(c) determination of reporting person, a. reporting cascade, b. designation agreements, 4. 31 cfr 1031.320(d) information concerning the reporting person, 5. 31 cfr 1031.320(e) information concerning the transferee, a. general information concerning transferee entities, b. general information concerning transferee trusts, c. beneficial ownership information of transferee entities and trusts, 6. 31 cfr 1031.320(f) information concerning the transferor, 7. 31 cfr 1031.320(g) information concerning the residential real property, 8. 31 cfr 1031.320(h) information concerning payments, 9. 31 cfr 1031.320(i) information concerning hard money, private, and similar loans, 10. 31 cfr 1031.320(j) reasonable reliance, 11. 31 cfr 1031.320(k) filing procedures, 12. 31 cfr 1031.320(l) retention of records, 13. 31 cfr 1031.320(m) exemptions, 14. 31 cfr 1031.320(n) definitions, iv. effective date, v. severability, vi. regulatory analysis, a. assessment of impact, 1. economic considerations, a. broad economic considerations, b. consideration of comments received, i. comments pertaining to burden estimates, ii. comments suggesting additional analysis, 2. baseline and affected parties, a. regulatory baseline, i. residential real estate gtos, ii. boi reporting rule, iii. customer due diligence (cdd) rule, iv. other (form 1099-s), b. baseline of affected parties, i. transferees, legal entities, excepted transferees, ii. reporting entities, c. market baseline, i. reportable transfers, ii. current market characteristics, iii. current market practices, settlement and closing, records search, 3. description of final rule requirements, a. reportable transfers, b. reporting persons, c. required information, 4. expected economic effects, a. costs to entities in the reporting cascade, i. training, ii. reporting, iii. recordkeeping, iv. other costs, b. government costs, 5. economic consideration of policy alternatives, b. eos 12866, 13563, and 14094, c. regulatory flexibility act, certification, d. unfunded mandates reform act, e. paperwork reduction act, f. congressional review act, list of subjects in 31 cfr part 1031, authority and issuance, part 1031—rules for persons involved in real estate closings and settlements, subparts a and b [reserved], subpart c—reports required to be made by persons involved in real estate closings and settlements.
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Department of the Treasury
Financial crimes enforcement network.
- 31 CFR Chapter X
- RIN 1506-AB54
Financial Crimes Enforcement Network (FinCEN), Treasury.
Final rule.
FinCEN is issuing a final rule to require certain persons involved in real estate closings and settlements to submit reports and keep records on certain non-financed transfers of residential real property to specified legal entities and trusts on a nationwide basis. Transfers made directly to an individual are not covered by this rule. This rule describes the circumstances in which a report must be filed, who must file a report, what information must be provided, and when a report is due. These reports are expected to assist the U.S. Department of the Treasury, law enforcement, and national security agencies in addressing illicit finance vulnerabilities in the U.S. residential real estate sector, and to curtail the ability of illicit actors to anonymously launder illicit proceeds through transfers of residential real property, which threatens U.S. economic and national security.
Effective December 1, 2025.
The FinCEN Regulatory Support Section at 1-800-767-2825 or electronically at [email protected] .
Among the persons required by the Bank Secrecy Act (BSA) to maintain anti-money laundering and countering the financing of terrorism (AML/CFT) [ 1 ] programs are “persons involved in real estate closings and settlements.” [ 2 ] For many years, FinCEN has exempted such persons from comprehensive regulation under the BSA. However, information received in response to FinCEN's geographic targeting orders relating to non-financed transfers of residential real estate (Residential Real Estate GTOs) has demonstrated the need for increased transparency and further regulation of this sector. Furthermore, the U.S. Department of the Treasury (Treasury) has long recognized the illicit finance risks posed by criminals and corrupt officials who abuse opaque legal entities and trusts to launder ill-gotten gains through transfers of residential real estate. This illicit use of the residential real estate market threatens U.S. economic and national security and can disadvantage individuals and small businesses that seek to compete fairly in the U.S. economy.
Earlier this year, pursuant to the BSA's authority to impose AML regulations on persons involved in real estate closings and settlements, FinCEN proposed a new reporting requirement. Under the proposed rule, certain persons involved in real estate closings and settlements would be required to report on certain transfers that Treasury deems high risk for illicit financial activity—namely, non-financed transfers of residential real property to legal entities and trusts.
FinCEN is now issuing a final rule that adopts the proposed rule with some modifications. The final rule imposes a streamlined suspicious activity report (SAR) filing requirement under which reporting persons, as defined, are required to file a “Real Estate Report” on certain non-financed transfers of residential real property to legal entities and trusts. Transfers to individuals, as well as certain transfers commonly used in estate planning, do not have to be reported. The reporting person for any transfer is one of a small number of persons who play specified roles in the real estate closing and settlement, with the specific individual determined through a cascading approach, unless superseded by an agreement among persons in the reporting cascade. The reporting person is required to identify herself, the legal entity or trust to which the residential real property is transferred, the beneficial owner(s) of that transferee entity or transferee trust, the person(s) transferring the residential real property, and the property being transferred, along with certain transactional information about the transfer.
The final rule adopts a reasonable reliance standard, allowing reporting persons to rely on information obtained from other persons, absent knowledge of facts that would reasonably call into question the reliability of that information. For purposes of reporting beneficial ownership information in particular, a reporting person may reasonably rely on information obtained from a transferee or the transferee's representative if the accuracy of the information is certified in writing to the best of the information provider's own knowledge.
FinCEN has sought to minimize burdens on reporting persons to the extent practicable without diminishing the utility of the Real Estate Report to law enforcement and believes the final rule appropriately balances the collection of information that is highly useful to Treasury, law enforcement, and national security agencies against the burdens associated with collecting that information, particularly on small businesses.
The BSA is intended to combat money laundering, the financing of terrorism, and other illicit financial activity. [ 3 ] The purposes of the BSA include requiring financial institutions to keep records and file reports that “are highly useful in criminal, tax, or regulatory investigations or proceedings” or in the conduct of “intelligence or counterintelligence activities, including analysis, to protect against international terrorism.” [ 4 ] The Secretary of the Treasury (Secretary) has delegated the authority to implement, administer, and enforce compliance with the BSA and its implementing regulations to the Director of FinCEN. [ 5 ]
The BSA requires “financial institutions” to establish an AML/CFT program, which must include, at a minimum, “(A) the development of internal policies, procedures, and controls; (B) the designation of a compliance officer; (C) an ongoing employee training program; and (D) an independent audit function to test programs.” [ 6 ] The BSA also authorizes the Secretary to require financial institutions to report any suspicious transaction relevant to a possible violation of law or regulation. [ 7 ] Among the financial institutions subject to these ( print page 70259) requirements are “persons involved in real estate closings and settlements.” [ 8 ]
In particular, section 5318(g) of the BSA authorizes the Secretary to require financial institutions to report, via SARs, any “suspicious transactions relevant to a possible violation of law or regulation.” [ 9 ] However, the BSA affords the Secretary flexibility in implementing that requirement, and indeed directs the Secretary to consider “the means by or form in which the Secretary shall receive such reporting,” including the relevant “burdens imposed by such means or form of reporting,” “the efficiency of the means or form,” and the “benefits derived by the means or form of reporting.” [ 10 ] A provision added to the BSA by section 6202 of the Anti-Money Laundering Act of 2020 (AML Act) further directs FinCEN to “establish streamlined . . . processes to, as appropriate, permit the filing of noncomplex categories of reports of suspicious activity.” In assessing whether streamlined filing is appropriate, FinCEN must determine, among other things, that such reports would “reduce burdens imposed on persons required to report[,]” while at the same time “not diminish[ing] the usefulness of the reporting to Federal law enforcement agencies, national security officials, and the intelligence community in combating financial crime, including the financing of terrorism[.]” [ 11 ]
Most transfers of residential real estate are associated with a mortgage loan or other financing provided by financial institutions subject to AML/CFT program requirements. As non-financed transfers do not involve such financial institutions, such transfers can be and have been exploited by illicit actors of all varieties, including those that pose domestic threats, such as persons engaged in fraud or organized crime, and foreign threats, such as international drug cartels, human traffickers, and corrupt political or business figures. Non-financed transfers to legal entities and trusts heighten the risk that such transfers will be used for illicit purposes. Numerous public law enforcement actions illustrate this point. [ 12 ] As such, FinCEN believes that the reporting of non-financed transfers to legal entities and trusts will benefit national security by facilitating law enforcement investigations into, and strategic analysis of, the use of residential real estate transfers having these particular characteristics to facilitate money laundering. [ 13 ]
Indeed, since 2016, FinCEN has used a targeted reporting requirement—the Residential Real Estate GTOs—to collect information on a subset of transfers of residential real estate that FinCEN considers to present a high risk for money laundering. [ 14 ] Specifically, the Residential Real Estate GTOs have required certain title insurance companies to file reports and maintain records concerning non-financed ( print page 70260) purchases of residential real estate above a specific price threshold by certain legal entities in select metropolitan areas of the United States. In combination with the numerous public law enforcement actions illustrating the heightened risks posed by non-financed transfers to legal entities and trusts, information obtained from the Residential Real Estate GTOs, as well as other studies conducted by Treasury and FinCEN, FinCEN has confirmed the need for a more permanent regulatory solution that would require consistent reporting of information about certain high-risk real estate transfers.
The Residential Real Estate GTOs have been effective in identifying the risks of non-financed purchases of residential real estate by providing relevant information about such transfers to law enforcement within specified geographic areas. Indeed, FinCEN regularly receives feedback from law enforcement partners that they use the information to generate new investigative leads, identify new and related subjects in ongoing cases, and support prosecution and asset forfeiture efforts. Law enforcement has also made requests to FinCEN to expand the Residential Real Estate GTOs to new geographic areas, which FinCEN has done multiple times, adding both additional metropolitan areas and methods of payment. This has provided law enforcement with additional insight into the risks in both the luxury and non-luxury residential real estate markets.
The Residential Real Estate GTOs have also proven the benefit of having reports identifying high risk residential real estate transfers housed in the same database as other BSA reports, such as traditional SARs and currency transaction reports (CTRs). For example, housing reports filed under the Residential Real Estate GTOs in the same database as other BSA reports enables FinCEN to cross-reference identifying information across reports, and having done so, FinCEN has been able to determine that a substantial proportion of purchases reported under the Residential Real Estate GTOs have been conducted by persons also engaged in other activity that financial institutions have characterized as suspicious. Specifically, FinCEN has found that from 2017 to early 2024, approximately 42 percent of non-financed real estate transfers captured by the Residential Real Estate GTOs were conducted by individuals or legal entities on which a SAR has been filed. In other words, individuals engaging in a type of transaction known to be used to further illicit financial activity—the non-financed purchase of residential real estate through a legal entity—are also engaging in other identified forms of suspicious activities. The ability to connect these activities across reports allows law enforcement to efficiently identify potential illicit actors for investigation and build out current investigations.
The Residential Real Estate GTOs, while effective within the covered geographic areas, do not address the illicit finance risks posed by certain real estate transfers on a nationwide basis—a significant shortcoming. For instance, a study of money laundering through real estate in several countries by Global Financial Integrity, a non-profit that studies illicit financial flows, money laundering, and corruption, found that, of Federal money laundering cases involving real estate between 2016 and 2021, nearly 61 percent involved at least one transfer in a county not covered by the Residential Real Estate GTOs. FinCEN believes that money laundering through real estate is indeed a nationwide problem that jurisdictionally limited reporting requirements are insufficient to address. [ 15 ] Furthermore, the Residential Real Estate GTOs were also intended to be a temporary information collection measure. Thus, FinCEN believes that a more comprehensive and permanent regulatory approach is needed.
On February 16, 2024, FinCEN published a notice of proposed rulemaking (NPRM) proposing a reporting requirement to address the risks related to non-financed transfers of residential real estate to either a legal entity or trust on a nationwide basis. [ 16 ] The proposal targeted the transfers that posed a high risk for illicit finance and was built on lessons learned from the Residential Real Estate GTOs and from public comments received in response to an Advance Notice of Proposed Rulemaking. [ 17 ] Importantly, the NPRM was narrowly focused and did not propose a reporting requirement for most transfers of residential real estate—for example, it excluded purchases that involve a mortgage or other financing from a covered financial institution, as well as any transfer, including all-cash transfers, to an individual.
In the NPRM, FinCEN proposed that certain persons involved in residential real estate closings and settlements file a version of a SAR—referred to as a “Real Estate Report”—focused exclusively on certain transfers of residential real property. The persons subject to this reporting requirement were deemed reporting persons for purposes of the proposed rule. Under the proposed rule, a reporting person would be determined through a “cascading” approach based on the function performed by the person in the real estate closing and settlement. The proposed cascade was designed to minimize burdens on persons involved in real estate closings and settlements, while leaving no reporting gaps and creating no incentives for evasion. [ 18 ] To provide some flexibility in this reporting cascade, FinCEN's proposal included the option to designate (by agreement) a reporting person from among those in the cascade.
As proposed, information to be reported in the Real Estate Report would identify the reporting person, the legal entity or trust (including any legal arrangement similar in structure or function to a trust) to which the residential real property was transferred, the beneficial owners of that transferee entity or transferee trust, the person that transferred the residential real property, and the property being transferred, along with certain transactional information about the transfer. Regarding beneficial ownership information that a reporting person would be required to report, the rule proposed that a reporting person could collect such information directly from a ( print page 70261) transferee or a representative of the transferee, so long as the person certified that the information was correct to the best of their knowledge. On the timing of the reports, the proposed rule stated that the reporting person was required to file the Real Estate Report no later than 30 days after the date of closing.
In response to the NPRM, FinCEN received 621 comments, 164 of which were unique. Submissions came from a broad array of individuals, businesses, and organizations, including trade associations, transparency groups, law enforcement representatives, and other interested groups and individuals.
General support for the rule was expressed by law enforcement officials, transparency groups, certain industry associations, and individuals. For instance, attorneys general of 25 states and territories jointly submitted a comment stating that the proposed regulations would permit Federal, State, and local law enforcement to access information about suspicious real estate transfers more efficiently because that information would all be available from a single source, and that the information would aid them in identifying suspicious residential real estate transfers on a nationwide basis that might otherwise remain undetected. These attorneys general and one industry association applauded FinCEN's choice to use a transaction-specific reporting mechanism rather than imposing an AML/CFT program requirement on persons involved in real estate closings and settlements. One non-profit commenter expressed support for FinCEN's recognition of the wide-ranging impacts that money laundering through real estate can have on tenants, homebuyers, and the affordability and stability of regional housing markets and believed the rule will improve housing access. Two industry associations expressed strong support for the proposed rule, with one commenter expressing the view that it reflected a pragmatic approach. One industry association and an individual commenter stated that a permanent and nationwide rule would provide greater predictability and certainty to industry than Residential Real Estate GTOs.
Other commenters expressed opposition to the proposed rule. Some expressed concern about FinCEN's legal authority to impose a reporting requirement in the manner set forth in the proposed rule. Other commenters argued that the proposed reporting requirement would be ineffective, burdensome, or would require reporting of information that is reported to the government through other avenues. The majority of private sector commenters—primarily small businesses, individuals employed in the real estate industry, and certain trade associations—asserted that the proposed reporting requirements are too broad and complex and would be burdensome to implement. They further assert that this would result in increased costs for businesses and, ultimately, consumers, potentially delaying closings and causing consumers to decline to seek their services. Many of these commenters expressed concerns that the proposed regulations, if finalized without significant change, would impose numerous and costly reporting and recordkeeping requirements on small businesses. Some commenters suggested the proposed rule would put large businesses at a competitive disadvantage while others suggested the same about small businesses. These commenters also suggested that the proposed regulation would create privacy and security concerns with respect to personally identifiable information. A number of these commenters suggested that FinCEN either not issue a final regulation or adopt a narrower approach, requiring reporting of less information on fewer transfers. Several commenters suggested that attorneys that fulfill any of the functional roles set out in the reporting cascade should not be required to report, primarily due to concerns about attorney-client privilege and confidentiality requirements.
Furthermore, many commenters suggested a range of modifications to the proposed regulations to: enhance clarity; reduce the potential burdens to industry; include or exclude certain professions from reporting requirements; refine the impact to certain segments of the industry; and enhance the usefulness of the resulting reports. Several commenters also asked hypothetical questions that sought clarification on the application of the proposed rule to certain situations.
FinCEN carefully reviewed and considered each comment submitted, and a more detailed discussion of comments appears in Section III. FinCEN believes that the regulatory requirements set out in this final rule reflect the appropriate balance between ensuring that reports filed under the rule have a high degree of usefulness to law enforcement and minimizing the compliance burden incurred by businesses, including small businesses. As detailed in Section III, FinCEN has made several amendments to the proposed rule that are responsive to commenters and that may also reduce certain anticipated burdens.
FinCEN is issuing a final rule that generally adopts the framework set out in the proposed rule but makes certain modifications and clarifications that are responsive to comments. The final rule imposes a reporting requirement on “reporting persons” that are involved in certain kinds of transfers of residential real property. In response to comments, the rule adopts a reasonable reliance standard, allowing reporting persons to, in general, reasonably rely on information obtained from other persons. FinCEN has also made other amendments in the final rule that are intended to clarify and simplify the reporting requirements, such as clarifying the definition of residential real property. Additionally, the rule excludes several additional transfers from needing to be reported, including one designed to exempt certain transfers commonly executed for estate and tax planning purposes. FinCEN also limited the requirement to retain certain records. We discuss these and other specific issues, comments, modifications, and clarifications in this section, beginning with issues that cut across the entire rule and continuing with a section-by-section analysis of changes and clarifications to the regulatory text, including sections for which FinCEN received no feedback from commenters.
FinCEN notes that it will consider issuing frequently asked questions (FAQs) and other guidance, as appropriate, to further clarify the application of the rule to specific circumstances. FinCEN also intends to continue to engage with stakeholders, for example through public outreach events, to assist with ensuring that the rule's requirements are understood by affected members of the public, including small businesses.
FinCEN received several comments that cut across various provisions of the rule or were otherwise broadly applicable. The subjects addressed by these comments include: FinCEN's authority to issue the rule; alternatives to the reporting and recordkeeping requirements; attorneys as reporting persons; the extent to which a reporting person can rely on information received from other persons; penalties for noncompliance; and the collection of unique identifying numbers. FinCEN ( print page 70262) has carefully considered these comments and addresses them below.
Proposed Rule. The NPRM set out the legal authority that authorized the agency's issuance of the rule. Specifically, the NPRM cited the BSA provisions set forth at 31 U.S.C. 5312(a)(2) , which defines a financial institution to include “persons involved in real estate closings and settlements,” and at 31 U.S.C. 5318(g) , authorizing FinCEN to impose a requirement on financial institutions to report suspicious activity reports, and to establish streamlined processes regarding the filing of such reports.
Comments Received. Several commenters questioned the legal authority underpinning the rule and the BSA reporting regime more generally, with one commenter stating that “the Constitutionality of this regime is not an entirely closed question.” These commenters argued that the rule potentially infringes on certain constitutional rights and that it is inconsistent with certain statutes and Executive Orders (EOs), citing primarily to Gramm-Leach-Bliley Act (GLBA) and E.O. 12866 . With regard to GLBA, one commenter stated that “[t]he [r]ule proposed by FinCEN directly clashes with the legal guideposts and requirements of the GLBA.”
Final Rule. FinCEN is issuing this final rule pursuant to its BSA authority to require “financial institutions” to report “suspicious transactions” under 31 U.S.C. 5318(g)(1) ; the rule falls squarely within the scope of this authority. As discussed in the NPRM and in Section II.A.1 of this final rule, “persons involved in real estate closings and settlements” are a type of “financial institution” under the BSA. [ 19 ] As such, FinCEN has clear statutory authority to require “persons involved in real estate closings and settlements” to file reports on suspicious activity, [ 20 ] and courts have long affirmed the constitutionality of, such reporting requirements. [ 21 ] Furthermore, a more recent amendment to the BSA at 31 U.S.C. 5318(g)(5)(D) provides FinCEN with additional flexibility to tailor the form of the SAR reporting requirement. Consistent with that authority, FinCEN is instituting a streamlined SAR filing requirement to require specified “persons involved in real estate closings and settlements” to report certain real estate transactions that FinCEN views as high-risk for illicit finance.
With regard to the comment concerning the relationship between the final rule and GLBA, FinCEN notes that information in reports filed under the BSA, which will include any information in a Real Estate Report, is exempt from the requirements of GLBA. [ 22 ] Finally, FinCEN notes that significant comments relating to applicable E.O. are addressed in the regulatory impact analysis in this final rule.
Proposed Rule. The NPRM proposed that certain persons involved in the closing and settlement of real estate report and keep records about certain non-financed transfers of residential real estate to certain legal entities and trusts.
Comments Received. Commenters suggested several alternatives to the proposed reporting and recordkeeping requirement. One commenter suggested expanding the Internal Revenue Service (IRS) Form 1099-S to include the collection of buyer-side information in addition to the seller-side information already collected. Some commenters suggested that, rather than requiring reporting by real estate professionals, FinCEN should require reporting from county clerk offices when they accept a deed for a reportable transfer or directly from transferees before a reportable transfer. Finally, other commenters urged FinCEN to fund alternative databases or purchase access to electronic records at each county clerk's office and monitor filed deeds.
Final Rule. The final rule retains the fundamental framework of the proposed rule. FinCEN believes that the alternatives suggested by commenters are either technically or legally unworkable and would likely not result in the reporting of information that is equally useful to law enforcement. First, the IRS Form 1099-S is filed annually, making it significantly less useful to law enforcement and, as discussed in the NPRM, [ 23 ] is not readily available for FinCEN or broader law enforcement uses due to confidentiality protections around federal taxpayer information. Second, FinCEN believes that county clerks' offices and individuals do not typically play a role in the kinds of transfers that would require reporting. Therefore, these individuals would not likely be in a position to interact with both the transferor(s) and the transferee(s), and thus, may not have ready access to reportable information. Regarding the suggested alternative of collecting reportable information directly from transferees instead of through reporting persons, FinCEN believes that buyers and sellers would be less willing to share personal information with each other than with a real estate professional fulfilling a function described in this rule's reporting cascade. Third, simply monitoring deeds at the county clerk level would likely not produce the information, including beneficial ownership and payment information, that FinCEN believes is important to law enforcement in combating illicit actors' abuse of opaque legal structures in the residential real estate market. Further, funding alternative databases would similarly not result in this information being made available to law enforcement, as private service providers would be unable to gather the same variety of highly relevant information, and any information they did provide would not be consolidated in a database with other BSA reports. The consolidation of Real Estate Reports with other BSA reports—including, but not limited to, traditional SARs, CTRs, Reports of Cash Payments Over $10,000 Received in a Trade or Business (Forms 8300), and Reports of Foreign Bank and Financial Accounts—is important for law enforcement purposes, as doing so will allow law enforcement to efficiently cross-reference information across the various BSA reports.
Proposed Rule. Under the proposed rule, attorneys could potentially be subject to a reporting requirement if they perform any of the real estate closing and settlement functions described in the reporting cascade. The proposed rule did not differentiate between attorneys and non-attorneys when they perform the same functions involving transfers of residential real property.
Comments Received. A number of commenters addressed the inclusion of attorneys in the reporting cascade. In general, legal associations opposed the inclusion of attorneys performing certain closing and settlement functions in the cascade as reporting persons, while others, in particular transparency organizations, supported the inclusion of attorneys as reporting persons. Commenters opposed to inclusion of attorneys generally argued that an attorney could not act as a reporting ( print page 70263) person without either breaching the attorney's professional ethical obligations to maintain client confidentiality or violating attorney-client privilege. Some commentors also suggested that FinCEN lacks legal authority to regulate attorneys under the BSA.
Final Rule. FinCEN declines to amend the reporting cascade to exclude attorneys from the requirement to report.
First, FinCEN does not believe that attorneys would violate their professional ethical obligations by filing a Real Estate Report. Although commenters noted that the ABA Model Rules on Professional Conduct generally require attorneys to keep client information confidential regardless of whether it is subject to the attorney-client privilege, Rule 1.6(b)(6) of the Model Rules states that “[a] lawyer may reveal information relating to the representation of a client to the extent the lawyer reasonably believes necessary . . . to comply with other law or a court order.” The annotations to the Model Rules further elaborate that “[t]he required-by-law exception may be triggered by statutes, administrative agency regulations, or court rules.” FinCEN believes that the Real Estate Report falls squarely within the required-by-law exception described in Rule 1.6(b)(6).
Second, FinCEN believes that the information required in the Real Estate Report ( e.g., client identity and fee information) is of a type not generally protected by the attorney-client privilege, and accordingly FinCEN is not persuaded that attorneys should be categorically excluded from the reporting cascade on that basis. [ 24 ] Moreover, even if there were an unusual circumstance in which some information required to be reported in the Real Estate Report might arguably be subject to the attorney-client privilege, an attorney in such an unusual situation need not assume a reporting obligation, as that attorney might allow other parties in the reporting cascade to file the Real Estate Report through a designation agreement or, in certain circumstances, might decline to perform the function that triggers the obligation. It is therefore unlikely that any attorney would necessarily be required to disclose privileged information. Nonetheless, FinCEN expects to issue guidance that will address the rare circumstance in which an attorney is concerned about the disclosure of potentially privileged information, which will provide further information on the mechanism for asserting the attorney-client privilege and appropriately filing the relevant Real Estate Report.
Similarly, FinCEN is not persuaded by commentors who argued that FinCEN lacks the authority to regulate attorneys under the BSA, claiming that the BSA does not clearly evince an intention to regulate attorneys. The BSA expressly authorizes regulation of “persons involved in real estate closings and settlements,” and it is common for such persons to be attorneys. Congress thus made clear its intention to authorize regulation of functions commonly performed by attorneys, and it would be anomalous to regulate those functions only when performed by non-attorneys. FinCEN also notes that attorneys are not exempt from submitting reporting forms to FinCEN in other contexts in which they are not explicitly identified by statute, such as with FinCEN Form 8300, which must be submitted by any “[a]ny person . . . engaged in a trade or business.” All courts of appeals that have considered the question have concluded that Form 8300 reporting requirements do not per se violate the attorney-client privilege and that attorneys must file such a form absent certain narrow exceptions. [ 25 ]
Proposed Rule. Proposed 31 CFR 1031.320(e)(3) provided that the reporting person may collect beneficial ownership information for the transferee entity or transferee trust directly from a transferee or a representative of the transferee, so long as the person certifies in writing that the information is correct to the best of their knowledge. However, the proposed rule did not state whether and to what extent a reporting person could rely on information provided by other persons in the context of other required information ( i.e., other than beneficial ownership information) required under the rule or to make any determination necessary to comply with the rule.
Comments Received. Several commenters asked for clarification of this provision, suggesting that the burden to industry would be significant if reporting persons were required to verify the accuracy of each piece of reportable information provided by a transferee or another party, with one commenter questioning whether true verification is possible. Several commenters also expressed liability concerns, including that reporting persons could be penalized if a third party provides information that turns out to be incorrect.
To resolve these concerns, commenters suggested that reporting persons should be able to rely on information provided by the transferee or that the transferee should certify the accuracy of required information beyond beneficial ownership information. One industry group took the reliance standard a step further, suggesting that the reporting person be able to rely on the representations of the transferee for purposes of determining whether the transferee is an exempt entity or trust. One transparency group suggested that the final rule require that reporting persons perform a “clear error” or “best efforts” check to ensure they are not reporting obviously fraudulent information.
Some commenters suggested that, where a transferee is unwilling to provide complete or accurate information, reporting persons should be allowed to file incomplete forms, with some arguing that “good faith attempts” to file reports that are ultimately incomplete should not be penalized. Another argued that the reporting person should be able to simply file the information provided without any responsibility for its accuracy or completeness. However, one transparency group argued that reporting persons should not be allowed to file incomplete forms and that the final rule should clarify that, where a reporting person cannot gather complete information from a transferee, then the reporting person should decline to take part in the real estate transfer. Other commenters similarly questioned whether a reporting person can continue to facilitate a transfer if the transferee refuses to cooperate in providing reportable information. Additionally, one industry group requested that the final rule impose a clear duty on other persons described in the reporting cascade to share information reportable under the proposed rule.
Final Rule. In 31 CFR 1031.320(j) , the final rule adopts a reasonable reliance standard that allows reporting persons to reasonably rely on information provided by other persons. As a result, the reporting person generally may rely on information provided by any other person for purposes of reporting information or to make a determination necessary to comply with the final rule, but only if the reporting person does not have knowledge of facts that would ( print page 70264) reasonably call into question the reliability of the information. This reasonable reliance standard is consistent with that used by certain financial institutions subject to customer due diligence requirements. [ 26 ]
This reasonable reliance standard is slightly more limited when a reporting person is reporting beneficial ownership information of transferee entities or transferee trusts. As expressed in the proposed rule, and as adopted in the final rule, when a reporting person is collecting the beneficial ownership information of transferee entities and transferee trusts. In those situations, the reasonable reliance standard applies only to information provided by the transferee or the transferee's representative and only if the person providing the information certifies the accuracy of the information in writing to the best of their knowledge.
FinCEN recognizes the necessity of permitting reliance on information supplied to the reporting person, considering the time and effort it would take for the reporting person to verify each piece of information independently. FinCEN believes that the reasonable reliance standard is significantly less burdensome than an alternative full verification standard, while still ensuring that obviously false or fraudulent information would not be reported.
As an example, FinCEN expects that the reporting person would be able to reasonably rely on the accuracy of a person's address provided orally or in writing, without reviewing government-issued documentation such as a drivers' license, provided the reporting person does not have reason to question the information provided ( e.g., if the information provided were to contain a numerically unlikely ZIP code or the person providing it makes comments bringing into question the reliability of the address or has provided other unreliable information).
As an additional example, in the context of ascertaining whether particular transfers are “non-financed transfers,” [ 27 ] a reporting person may rely on the information provided by the relevant lender extending credit secured by the underlying residential real property as to whether the lender has an obligation to maintain an AML program and an obligation to report suspicious transactions under 31 CFR Chapter X , provided the reporting person does not have reason to question the lender's information ( e.g., if the lender were to represent that he (as a natural person) is subject to AML obligations).
In response to the comment requesting that FinCEN permit the filing of an incomplete report, FinCEN declines to add language to the regulation to provide for that option. FinCEN believes that allowing for the submission of incomplete reports could make it easier for transferees to avoid reporting requirements while simultaneously also making it difficult for FinCEN to ensure compliance with the rule. It could also greatly reduce the reports' utility to law enforcement. FinCEN believes the adoption of the reasonable reliance standard addresses many of the concerns expressed about access to reportable information.
Finally, FinCEN does not adopt the suggestion that a legal duty be imposed on other persons in the reporting cascade to share reportable information with the reporting person. FinCEN believes that the reasonable reliance standard will make the sharing of information easier and therefore will decrease potential friction among the persons described in the reporting cascade. Further, FinCEN believes that reporting persons are unlikely to perform the function described in the reporting cascade until they have either obtained the required information or are reasonably certain that they will be able to obtain it soon after the date of closing. If information cannot be obtained from a person in the reporting cascade, the reporting person would reach out directly to a relevant party to the transfer ( e.g., the transferee) to gather the missing information.
FinCEN notes that there is no exception from reporting under the final rule should a transferee fail to cooperate in providing information about a reportable transfer. The final rule does not authorize the filing of incomplete reports, and a reporting person who fails to report the required information about a reportable transfer could be subject to penalties. However, FinCEN will consider issuing additional public guidance to assist the financial institutions subject to these regulations in complying with their reporting obligations.
Proposed Rule. The proposed rule did not include a specific reference to potential penalties for noncompliance, as those penalties are already set forth in the provisions of the BSA that discuss criminal and civil penalties for violating a BSA requirement.
Comments Received. Several commenters sought clarification about penalties for noncompliance, with one commenter noting that the proposed rule did not explicitly address potential penalties for failing to file a report or for filing an inaccurate report.
Final Rule. Consistent with the NPRM, FinCEN believes that it is unnecessary to list potential penalties in the regulatory text because the applicable penalties are already set forth by statute. Negligent violations of the final rule could result in a civil penalty of, as of the publication of the final rule, not more than $1,394 for each violation, and an additional civil money penalty of up to $108,489 for a pattern of negligent activity. [ 28 ] Willful violations of the final rule could result in a term of imprisonment of not more than five years or a criminal fine of not more than $250,000, or both. [ 29 ] Such violations also could result in a civil penalty of, as of the publication of the final rule, not more than the greater of the amount involved in the transaction (not to exceed $278,937) or $69,733. [ 30 ] This penalty structure generally applies to any violation of a BSA requirement. [ 31 ] FinCEN intends to conduct outreach to potential reporting persons on the need to comply with the final rule's requirements.
Proposed Rule. Proposed 31 CFR 1031.320(e) set forth requirements for the reporting person to report a unique identifying number of the transferee entity or transferee trust, the beneficial owners of the transferee entity or trust, the individuals signing documents on behalf of the transferee entity or trust, and the trustee of a transferee trust. FinCEN proposed that the specific form of unique identifying number required would be a taxpayer identification number (TIN) issued by the IRS, such as a Social Security Number or Employer Identification Number. However, the proposed rule provided that, when no IRS TIN had been issued, the proposed rule required the reporting of a foreign tax identification number or other form of foreign identification number, such as a passport number or entity registration number issued by a foreign government.
Comments Received. One commenter argued against the collection of TINs as a unique identifying number, citing to the reporting requirements of the Beneficial Ownership Information ( print page 70265) Reporting Rule (BOI Reporting Rule). [ 32 ] In the NPRM for the BOI Reporting Rule, [ 33 ] which was issued pursuant to the Corporate Transparency Act (CTA), [ 34 ] FinCEN initially proposed the voluntary reporting of TINs by a reporting company of its beneficial owners but eliminated this optional reporting in the final rule. The final BOI Reporting Rule does, however, require that reporting companies report their own TINs. [ 35 ]
Final Rule. In the final rule, FinCEN adopts the proposed requirement to collect the unique identifying numbers of entities and individuals, including their TINs, but clarifies that, for legal entities, a unique identifying number is required only if such number has been issued to that entity. The proposed rule contained a similar provision for transferee trusts, which the final rule adopts. In the trust context, no unique identifying number would need to be reported if a unique identifying number has not been issued to the trust. For instance, there may be a situation in which a transferee trust has not been issued an IRS TIN, nor has it been issued any of the foreign identifying numbers set out in the rule. With the clarifying edit to the unique identifying numbers required for legal entities, the rule makes clearer that a unique identifying number would similarly not be required to be reported in such a situation. FinCEN notes that the final rule does not extend this language to the TINs of individuals, as FinCEN expects that individuals will have been issued one of the unique identifying numbers required by the regulations.
While FinCEN continues to acknowledge that IRS TINs are subject to heightened privacy concerns and that the collection of such information could entail cybersecurity and operational risks, several factors weighed heavily in its decision to retain this requirement. TINs are commonly required on other BSA reports, including, for example, Forms 8300, which FinCEN notes are commonly filed by the real estate industry. Furthermore, TINs are frequently necessary to identify the same actors, particularly those with similar names or those using aliases, across different BSA reports and investigations. FinCEN believes that nearly all reporting persons—primarily businesses performing functions typically conducted by settlement companies, including many that already file reports containing TINs with the government—will have preexisting data security systems and programs to protect information such as TINs, particularly since such information is often collected in the course of financed transfers of residential real estate.
FinCEN did not receive any comments to the general paragraph of the proposed rule found in proposed 31 CFR 1031.320(a) , which provided a framework for the rule. That paragraph has been adopted in the final rule without substantial change. The technical changes that have been made include the renumbering of paragraph references, the addition of a reference to a new paragraph discussing the concept of reasonable reliance, and certain clarifying changes, such as the addition of language clarifying that reports required under this section and any other information that would reveal that a reportable transfer has been reported are not confidential.
The proposed rule defined a reportable transfer as a non-financed transfer of any ownership interest in residential real property to a transferee entity or transferee trust, with certain exceptions. These proposed exceptions, found in 31 CFR 1031.320(b) , reflected FinCEN's intent to capture only higher risk transfers. The proposed rule provided that transfers would be reportable irrespective of the value of the property or the dollar value of the transaction; there was no proposed dollar threshold for a reportable transfer. The proposed rule also provided that transfers would only be reportable if a reporting person is involved in the transfer and if the transferee is either a legal entity or trust. Transfers between individuals would not be reportable.
Proposed Rule. Proposed 31 CFR 1031.320(b) defined “residential real property” to include real property located in the United States containing a structure designed principally for occupancy by one to four families; vacant or unimproved land located in the United States zoned, or for which a permit has been issued, for the construction of a structure designed principally for occupancy by one to four families; and shares in a cooperative housing corporation.
Comments Received. Several commenters argued that reporting persons would not have ready access to the zoning or permitting information necessary to determine whether vacant or unimproved land is reportable under the rule. Commenters noted that reporting persons do not routinely determine zoning information and that accurate zoning information may take several weeks to obtain. Examination of permits, they argued further, would take similar time and effort. Some commenters also noted that purchases of unimproved or vacant land are often for lower dollar amounts and therefore present a lower risk for money laundering. Two other commenters suggested that the determination of whether a property is “residential real property” as defined under the rule should turn on whether the real estate sales contract or purchase and sale agreement describes the property as being residential.
Furthermore, two commenters suggested that the proposed definition of residential real property lacked clarity, with one focusing on the treatment of mixed-use property and the other requesting that the definition provide clearer criteria, taking into account the treatment of residential real estate under tax law, zoning processes, and mortgage agreements, with examples provided. Another commenter suggested that FinCEN provide a non-exhaustive list of possible transfers intended to be subject to reporting requirements and that the list specifically include any transfer of ownership and any creation of an equitable interest, whether in whole or in part, directly or indirectly, in the property. One commenter requested clarity as to whether a transfer of residential real property as defined under the rule includes assignment contracts.
Final Rule. The definition of residential real property in paragraph 31 CFR 1031.320(b) , as adopted in the final ( print page 70266) rule, contains several modifications and clarifications of the language in the proposed rule. This definition continues to include vacant or unimproved land, as FinCEN does not agree with the comment suggesting that transfers of such property inherently pose a lower risk for money laundering.
The revised definition addresses the difficulty raised by commenters in determining whether vacant or unimproved land is zoned or permitted for residential use by focusing on whether the transferee intends to build on the property a structure designed principally for occupancy by one to four families. Furthermore, the new provision added to the rule concerning reasonable reliance permits the reporting person to reasonably rely on information provided by the transferee to determine such intent. To address comments that requested clarity on whether mixed-use property qualifies as residential real property, the definition of residential real property also clarifies that separate residential units within a building, such as individually owned condominium units, as well as entire buildings designed for occupancy by one to four families, are included.
Taking into account the above changes, the definition of residential real property is now: (1) real property located in the United States containing a structure designed principally for occupancy by one to four families; (2) land located in the United States on which the transferee intends to build a structure designed principally for occupancy by one to four families; (3) a unit designed principally for occupancy by one to four families within a structure on land located in the United States; or (4) any shares in a cooperative housing corporation for which the underlying property is located in the United States. Given the ability for a reporting person to reasonably rely on information obtained from other persons, FinCEN declines to adopt the other suggestions made by some of the commenters to facilitate the determination of whether the property is residential in nature. FinCEN further notes that the definition is meant to include property such as single-family houses, townhouses, condominiums, and cooperatives, including condominiums and cooperatives in large buildings containing many such units, as well as entire apartment buildings designed for one to four families. Furthermore, transfers of such properties may be reportable even if the property is mixed use, such as a single-family residence that is located above a commercial enterprise.
FinCEN also notes that the rule is not designed to require reporting of the transfer of contractual obligations other than those demonstrated by a deed or, in the case of a cooperative housing corporation, through stock, shares, membership, certificate, or other contractual agreement evidencing ownership. Therefore, the transfer of an interest in an assignment contract would not be reportable. Assignment contracts typically involve a wholesaler contracting with homeowners to buy residential real property and then assigning their rights in the contract to a person interested in owning the property as an investment. The eventual purchase of the property by the assignee investor may be reportable under this rule because a transfer of an ownership interest demonstrated by a deed has occurred, but the initial signing of the contract between the assignor and the original homeowner would not be reportable.
Proposed Rule. Proposed 31 CFR 1031.320(b)(1) defined the term “reportable transfer” to only include transfers that do not involve an extension of credit to all transferees that is both secured by the transferred residential real property and extended by a financial institution that has both an obligation to maintain an AML program and an obligation to report suspicious transactions under 31 CFR Chapter X . As explained in the NPRM, FinCEN considers such transfers to be “non-financed” for purposes of this rule.
Comments Received. One industry organization noted that the proposal would result in reporting when an individual transfers property subject to qualified financing to a trust, because the qualified financing is in the name of the transferor rather than the transferee trust. Another commenter similarly requested clarity as to whether the reporting of non-financed transfers applies only with respect to qualified financing held by the transferee, as opposed to qualified financing held by the transferor.
Two transparency organizations requested that FinCEN clarify whether partially financed transfers are reportable. These commenters cited as examples a situation in which some or all of the source of funds originate from entities or beneficial owners that have not undergone AML checks from a covered financial institution or where qualified credit is extended to some, but not all, beneficial owners of transferees. Finally, one commenter requested clarity as to how the reporting person would determine if the transfer is non-financed.
Final Rule. The substance of the definition of a “non-financed transfer” is adopted as proposed, but FinCEN has elected to move the definitions paragraph of the rule to 31 CFR 1031.320(n)(5) . FinCEN declines to adopt the commenter's suggestion to include a specific carveout in the definition to account for transfers where the qualified financing is extended to the grantor or settlor of a trust, rather than to the trust itself—an issue raised in the comments. This situation is addressed, however, in the new exception for certain transfers to trusts for no consideration, discussed in depth in Section III.C.2.c.
In regards to requests for clarity about whether partially financed transfers meet the definition of a non-financed transfer, FinCEN notes that partially financed transfers involving one transferee (for example, in which the transferee entity or transferee trust puts down a 50 percent down payment but obtains a mortgage to finance the rest of the transfer) would not be reported. However, the definition of a non-financed transfer would result in reporting of transfers in which there are multiple transferee entities or transferee trusts receiving the property and financing is secured by some, but not all, of the transferees.
As to the comment questioning how reporting persons would determine whether a transfer is non-financed, it has been FinCEN's experience with the Residential Real Estate GTOs that persons required to report have readily determined whether a given financial institution extending financing has such AML program obligations by asking the financial institution directly. The reporting person can reasonably rely on the representations made by the financial institution.
Proposed Rule. Proposed 31 CFR 1031.320(b)(2) provided exceptions for transfers that are: the result of a grant, transfer, or revocation of an easement; the result of the death of an owner; incident to divorce or dissolution of marriage; to a bankruptcy estate; to individuals; or for which there is no reporting person.
Comments Received. Support for the proposed exceptions came from an industry group that applauded the decision to except transfers made to individuals. Other commenters did not oppose the proposed regulation and instead suggested modifications or clarifications that built on the proposed ( print page 70267) exceptions. Numerous commenters also proposed additional exceptions.
However, FinCEN received several comments suggesting that FinCEN clarify or otherwise amend certain other exceptions, including those proposed for death, divorce, and bankruptcy. Two legal associations proposed that FinCEN clarify the exception for transfers that are the result of a death to ensure that the exception applies even if a transfer is not executed pursuant to a will or where the decedent is not technically the owner of the property at death because the property is owned by a revocable trust set up by the decedent. One legal association suggested that FinCEN expand the proposed exceptions for divorce, death, or bankruptcy to include transfers to certain specific types of trusts. One State bar association suggested that the rule build on the exceptions for death and divorce by excepting any transfers made in connection with a court-supervised legal settlement. A transparency organization recommended limiting the exceptions to transfers made to family members or heirs pursuant to divorce, probate proceedings, or a will, expressing concern that transfers resulting from death or divorce would remain at risk for money laundering.
Multiple commenters requested additional exceptions. Several commenters focused on exceptions for transfers to trusts used for estate or tax planning purposes. A State bar association requested the exclusion of transfers for estate planning purposes that involve no monetary consideration. One commenter suggested excepting gifts between family members, whether being transferred into a trust or legal entity, and in particular suggested excluding transfers to revocable trusts in which the trustee confirms by affidavit that the trustee or the settlor is the same person as the primary beneficiary. Similarly, another State bar association suggested that FinCEN except any intrafamily transfers and transfers into certain trusts created for estate or tax planning purposes, including revocable trusts, irrevocable trusts, irrevocable life insurance trusts, grantor trusts, purpose trusts, qualified personal residence trusts, pooled trusts, special needs and supplemental trusts, creditor protection trusts, various charitable trusts, certain State business trusts, and certain State business associations.
Some commenters suggested exceptions built around the relationship between the transferor and the transferee in the context of estate planning. Two such commenters requested that the final rule exclude any transfer where the transferor is the settlor of a transferee trust, because beneficial ownership of the property would remain the same. A State bar association suggested excluding transfers that include the creation of a self-settled revocable or irrevocable trust, wherein the grantor(s)/settlors(s) of the trust have created it for the benefit of the grantor(s) or members of their family, arguing that such trusts for the purposes of estate planning are low risk for money laundering, and therefore of little interest to FinCEN, and that their exclusion would reduce the number of reports required from reporting persons. In a similar vein, a State land title association suggested the exclusion of living trusts with the same name as the property owner, citing the example of an individual purchasing property in a non-financed transfer and then subsequently transferring the property to a trust for estate planning purposes. A trust and estate-focused legal association similarly suggested the exclusion of transfers to trusts in which at least one of the beneficial owners is the same as the transferor or in which the transfer is for the benefit of the family of the transferor. One legal association asked that exceptions be made for transfers in which there is no change in beneficial ownership of the property and two other commenters similarly requested that FinCEN exclude any transfers where the transferor is the managing or sole member of a transferee entity or is the settlor of a transferee trust. The legal association also suggested an exception when the ownership interest in the property remains within a family.
Two commenters suggested the exclusion of sequential transfers involving a trust. One described these sequential transfers as occurring when an individual purchases residential real property in their own name with a mortgage and subsequently transfers the property to a trust, or when an individual seeks to refinance property held in a trust by transferring title of the property from the trust to the individual, refinancing in the name of the individual, and then transferring title of the property back to the trust. Another commenter stated that properties held in revocable trusts for estate planning are often only removed from the trust for refinancing or taking on additional debt and therefore have oversight from those processing mortgage loans. Such transfers, argued the commenters, are low risk and would result in unnecessary and redundant reporting.
Some commenters suggested excepting transfers where the transferee or transferor is a qualified intermediary for the purposes of 26 U.S.C. 1031 (1031 Exchange), also known as a like-kind exchange. A national trade association for 1031 Exchange practitioners suggested adding an exception that would mirror the exception found in the BOI Reporting Rule for reporting of individuals acting as nominee, intermediary, custodian, or agent on behalf of another individual. [ 36 ] Three title insurance associations and two State bar associations urged FinCEN to include an exception for corrective conveyances, one commenter requested exclusion of transfers involving additional insured endorsements, another commenter suggested that FinCEN explicitly exclude foreclosures and evictions, and several commenters suggested that the final rule focus only on foreign transferees.
FinCEN also received a range of comments related to whether a dollar threshold should be included, below which reporting would not be required. In general, commenters representing transparency organizations supported the lack of a threshold in the proposed rule, with one commenter arguing that any threshold would provide a clear path for evasion. Other commenters—mostly real estate associations, businesses, or professionals—advocated for the inclusion of a threshold to reduce the number of reports that would need to be filed and avoid the reporting of transfers perceived as low risk for money laundering. One commenter suggested implementing a $1 threshold, others suggested $1,000, one suggested $10,000, and another suggested adopting the same threshold as FinCEN's Residential Real Estate GTOs.
Final Rule. In the final rule, FinCEN is adopting the exceptions proposed in 31 CFR 1031.320(b)(2) and adding several additional exceptions.
First, in response to comments asking FinCEN to clarify the scope of the exception for transfers resulting from death, FinCEN has adopted language, set forth at 31 CFR 1031.320(b)(2)(ii) , to clarify that the exception includes all transfers resulting from death, whether pursuant to the terms of a will or a trust, by operation of law, or by contractual provision. In the context of transfers resulting from death, transfers resulting by operation of law include, without limitation, transfers resulting from intestate succession, surviving joint owners, and transfer-on-death deeds, and transfers resulting from contractual provisions include, without limitation, transfers resulting from beneficiary designations. With respect to inclusion ( print page 70268) of transfers required under the terms of a trust, by operation of law, or by contractual agreements, FinCEN believes such transfers are akin to transfers required by a will, as they result from the death of the grantor or settlor or individual who currently owns the residential real property. As described in the NPRM, the exception was meant to include transfers governed by preexisting legal documents, such as wills, or that generally involve the court system. FinCEN believes that the adopted language will clarify the intended scope of the exception, which is meant to exclude only low-risk transfers of residential real property involving transfers that are required by legal or judicial processes at the time of the decedent's death.
Second, the rule adds an exception for any transfer supervised by a court in the United States at 31 CFR 1031.320(b)(2)(v) . This exception builds on a commenter's suggestion to expand the list of exceptions to include transfers made in connection with a court-supervised legal settlement, but is focused on transfers required by a court instead of simply supervised by a court, which narrows the opportunity for such transfers to be abused by illicit actors. FinCEN believes that, like probate and divorce, transfers required as a result of judicial determination in the United States are generally publicly documented and subject to oversight and therefore are subject to a lower risk for money laundering.
Third, while FinCEN did not receive comments on the scope of the exception for transfers incident to divorce or the dissolution of marriage, FinCEN believes it is appropriate to clarify in the regulation that the exception also applies to the dissolution of civil unions and has done so at 31 CFR 1031.320(b)(2)(iii) . Civil unions are similar to marriages with regard to property issues in form and function and are terminated in a similar manner—generally with the involvement of courts.
Fourth, in response to the comments requesting exceptions for estate planning techniques and for sequential transfers to trusts, an exception is added at 31 CFR 1031.320(b)(2)(vi) for transfers of residential real property to a trust where the transfer meets the following criteria: (1) the transfer is for no consideration; (2) the transferor of the property is an individual (either alone or with the individual's spouse); and (3) the settlor or grantor of the trust is that same transferor individual, that individual's spouse, or both of them. FinCEN expects that this addition will except many common transfers made for estate planning purposes described by commenters, including transfers described in the exception where the grantor or settlor's family are beneficiaries of the trust, as well as sequential transfers to trusts, such as where the qualified financing is extended to the grantor or settlor rather than to the trust itself and the grantor or settlor then is transferring the secured residential real property for no consideration to the trust.
FinCEN intended to scope this exception in a manner that was responsive to comments but that would not create an overly broad exception that would be open to significant abuse. To be sure, illicit actors are known to use estate planning techniques to obscure the ownership of residential real estate, and all non-financed transfers of residential real estate not subject to this rule are subject to less oversight from financial institutions than financed transfers and are therefore inherently more vulnerable to money laundering. However, transfers in which an individual who currently owns residential real property is funding their own trust with that property are believed to be a lower risk for money laundering because the true owner of the property is not obscured when the property is transferred. Given this limitation on the exception and how common it is for an individual to place residential real property into a trust, whether revocable or irrevocable, for estate planning purposes, FinCEN believes it is appropriate to except such transfers at this time. Additionally, the expanded exception benefits from relying on information readily available to the reporting person, as the reporting person will know the identity of the transferor and can ascertain, such as through a trust certificate, whether the transferor is the grantor or settlor of the trust.
FinCEN does not agree with some commenters that the exception should be broader by excepting transfers where beneficial ownership does not change or where the transfer is an intrafamily one. An exception for such transfers would be difficult for the reporting person to administer, as it would require a review of the dispositive terms of the trust instrument, and it would be difficult for the reporting person to assess the reliability of information provided to them about beneficial ownership or family relationships. FinCEN also does not agree that all such transfers are automatically low risk for money laundering, especially when consideration is involved. Overall, the adopted exception offers a low-risk, bright line that should be easy to understand and implement, lowering the burden on both industry and the parties to the transfer, when compared with the proposed rule.
FinCEN also does not believe that this same logic can be extended to justify excepting transfers of property by an individual to a legal entity owned or controlled by such individual, as some commenters suggested. In the exception described above concerning no consideration transfers to trusts, the exception applies when the transferor of residential real property is also the grantor or settlor of the trust—the identity of the grantor or settlor of the trust is a fact tied to the creation of the trust, is revealed on the face of the trust instrument, and generally cannot be changed. Although the trustee and beneficiaries of the trust may change over time, the identification of the settlor or grantor of the trust generally allows FinCEN to identify the source of the property being contributed to the trust, a factor that is critical to the identification and prevention of money laundering. That same identification and persistent connection with the transferor does not exist in the context of transfers of residential real property to a legal entity, where it is common for various owners of interests in the entity to each contribute assets to it.
Finally, the final rule adopts an exception, at 31 CFR 1031.320(b)(2)(vii) , for transfers made to qualified intermediaries for purposes of effecting 1031 Exchanges. Such exchanges are commonly conducted to defer the realization of gain or loss, and, thus, the payment of any related taxes, for Federal income tax purposes. [ 37 ] This exception is limited to transfers made to the qualified intermediary; transfers from a qualified intermediary to the person conducting the exchange (the exchanger) remain potentially reportable if the exchanger is a legal entity or trust. When taking ownership of property in a 1031 Exchange, the qualified intermediary is acting on behalf of the exchanger for the limited purpose of effecting the exchange. In addition, the qualified intermediary may hold the property for only a limited ( print page 70269) period of time before it jeopardizes the transaction's ability to qualify as a valid 1031 Exchange. Accordingly, FinCEN has determined that requiring the reporting of transfers made to a qualified intermediary would likely result in information that is of lower value to law enforcement. FinCEN considered whether to resolve commenter concerns around qualified intermediaries by relying, as one commenter suggested, on the rule's definition of transferee entity, which adopts by reference the exception found in 31 CFR 1010.380(d)(3)(ii) for the reporting of individuals who are acting as a nominee, intermediary, custodian, or agent. Without noting whether such exception for nominees, intermediaries, custodians, or agents would appropriately apply in the context of qualified intermediaries, FinCEN believes that allowing the broader exception for 1031 Exchanges in this rule more clearly resolves commenter concerns.
The final rule does not adopt the suggestions to exclude corrective conveyances and additional insured endorsements, as FinCEN believes such exceptions are not necessary. Corrective conveyances are used to correct title flaws, such as misspelled names, and are not used to create a new ownership interest in a property. As such, corrective conveyances do not involve a transfer of residential real property and are therefore not reportable. Similarly, additional insured endorsements are used to extend coverage of title insurance to an additional party identified by the policyholder and do not meet the rule's definition of a reportable transfer of residential real property.
The final rule also does not adopt the suggestion to exclude foreclosure sales, although FinCEN notes that foreclosure court proceedings wherein a lender obtains a judgment to foreclose on property would be excluded under the exception for transfers required by a court in the United States. Outside of such court-supervised foreclosure proceedings, FinCEN does not agree that potential reporting persons involved in sales of foreclosed property should be treated differently from other transfers, as such sales, where the property is sold to a third party, do not necessarily present a lower risk for money laundering.
FinCEN also declines to implement the suggestion that the final rule collect information only on foreign transferee entities and trusts. Law enforcement investigations and FinCEN's experience with the Residential Real Estate GTOs have repeatedly confirmed that non-financed transfers of residential real estate to both foreign and domestic legal entities and trusts are high risk for money laundering.
Furthermore, the rule does not adopt suggestions to include a dollar threshold for reporting. Low value non-financed transfers to legal entities and trusts, including gratuitous ones for no consideration, can present illicit finance risks and are therefore of interest to law enforcement. Although the Residential Real Estate GTOs have had an evolving dollar threshold over the course of the program, ranging from over $1 million to the current threshold of $300,000, FinCEN's experience with administering the program and discussions with law enforcement shows that money laundering through real estate occurs at all price points. FinCEN believes that incorporation of a dollar threshold could move illicit activity into the lower priced market, which would be counter to the aims of the rule. [ 38 ] Rather than specifically exclude all such transfers from being reported, the final rule includes additional exceptions, discussed here and in Section III.C.2.c, that FinCEN believes will focus the reporting requirement on higher-risk low-value transfers.
Proposed Rule. Proposed 31 CFR 1031.320(j)(10) provided that a “transferee entity” is any person other than a transferee trust or an individual and set out the exceptions from this definition for certain entities, including certain highly regulated entities and government authorities. The definition of transferee entity was meant to include, for example, a corporation, partnership, estate, association, or limited liability company. Among the exceptions FinCEN proposed was an exception for any legal entity whose ownership interests are controlled or wholly owned, directly or indirectly, by an exempt entity.
Comments Received. Some commenters supported the proposed rule's inclusion of transferee entities as defined in the proposed rule, with one transparency organization highlighting that pooled investment vehicles (PIVs) and non-profits are largely exempt from beneficial ownership information reporting requirements under the CTA, which increases their risks for money laundering.
Final Rule. In 31 CFR 1031.320(n)(10) , the final rule adopts the proposed definition of “transferee entity” with technical edits to two specific exceptions from that definition. First, in 31 CFR 1031.320(n)(10)(O) , FinCEN removed the unnecessary inclusion of the acronym “(SEC)” because the Securities and Exchange Commission is referred to only once in 31 CFR 1031.320 . Second, FinCEN removed the term “ownership interests” from 31 CFR 1031.320(n)(10)(P) , so that the regulation now excludes from the definition of a transferee entity a “legal entity controlled or wholly owned, directly or indirectly, by [an excepted legal entity].” FinCEN made this amendment to avoid potential confusion because the term “ownership interests” is specifically defined in the regulations at 31 CFR 1031.320(n)(6) and employed only in relation to residential real property.
Proposed Rule. Proposed 31 CFR 1031.320(j)(11) defined “transferee trust” as any legal arrangement created when a person (generally known as a grantor or settlor) places assets under the control of a trustee for the benefit of one or more persons (each generally known as a beneficiary) or for a specified purpose, as well as any legal arrangement similar in structure or function to the above, whether formed under the laws of the United States or a foreign jurisdiction. The NPRM proposed several exceptions for certain types of trusts that FinCEN views as highly regulated—for instance, trusts that are securities reporting issuers and trusts that have a trustee that is a securities reporting issuer. Accordingly, such trusts were not covered by the proposed rule. Similarly, the proposed rule excluded statutory trusts from the definition of a transferee trust but, instead, proposed to capture statutory trusts within the definition of a transferee entity.
Comments Received. Several commenters supported the general inclusion of trusts within the scope of the rule and provided examples of money laundering through real estate transfers to trusts. One transparency organization highlighted that trusts are not required to directly report beneficial ownership information under the CTA and are therefore a higher risk for money laundering. However, other commenters were not supportive of the inclusion of trusts, arguing that trusts are: complicated arrangements for which the paperwork would not be easily understood by reporting persons; used for probate avoidance; and inherently low risk. ( print page 70270)
Several commenters suggested excluding living trusts. Three commenters suggested excluding transfers to irrevocable living trusts, arguing either that such trusts are low risk for money laundering or that such reporting is redundant with information received by the IRS. Some focused on revocable trusts, particularly those used for estate planning, arguing that they are subject to a lower risk of money laundering and that requiring reporting on such trusts would be burdensome given how commonly they are used.
Other commenters suggested the exclusion of specialized types of trusts. Two suggested excluding transfers to a qualified personal residence trust and another suggested excluding transfers to an intentionally defective grantor trust, charitable remainder trust, any qualified terminal interest property trust benefitting the contributing homeowner, testamentary trust, third-party common law discretionary trust, a discretionary support trust, or a trust for the support of an incapacitated beneficiary, including supplemental or special needs trusts, arguing that these transfers generally do not involve property purchased in cash within the last year and are low risk for money laundering.
Final Rule. In the final rule, FinCEN retains the requirement to report transfers to transferee trusts and, in 31 CFR 1031.320(n)(11) , adopts the definition of “transferee trust” as proposed with one technical edit to make certain language consistent across similar provisions in the rule. As discussed in Section II.A.2, FinCEN continues to believe that non-financed residential real estate transfers to certain trusts present a high risk for money laundering. FinCEN also believes that the potential difficulties described by commenters, such as the need to review complex trust documents to determine whether a trust is reportable, will be minimized by the addition of new exceptions and by the reasonable reliance standard adopted in the final rule which is discussed in Section III.B.4.
FinCEN considered comments suggesting that it adopt additional exceptions from the definition of a transferee trust for specific types of trusts. In particular, comments suggested exceptions for all living trusts, all revocable trusts, or all irrevocable trusts, as well as more specialized types of trusts such as qualified personal residence trusts or defective grantor trusts. FinCEN believes that the suggested exceptions would be overly broad and, as such, would exclude from reporting certain transfers that pose a high risk for illicit finance. However, depending on the particular facts and circumstances of a trust arrangement, some of the aforementioned trusts may be covered under the more tailored exception for “no consideration transfers” to trusts described in Section III.C.2.c. We also note that certain trusts, such as testamentary trusts, are not captured by the reporting requirement, as such trusts are created by wills and therefore fall within the exception for transfers occurring as a result of death.
Proposed 31 CFR 1031.320(c) set forth a cascading reporting hierarchy to determine which person providing real estate closing and settlement services in the United States must file a report for a given reportable transfer. As an alternative, the persons described in the reporting cascade could enter into an agreement to designate a reporting person.
Proposed Rule. Through the proposed reporting cascade, a real estate professional would be a reporting person required to file a report and keep records for a given transfer if the person performs a function described in the reporting cascade and no other person performs a function described higher in the reporting cascade. For example, if no person is involved in the transfer as described in the first tier of potential reporting persons, the reporting obligation would fall to the person involved in the transfer as described in the second tier of potential reporting persons, if any, and so on. The reporting cascade includes only persons engaged as a business in the provision of real estate closing and settlement services within the United States. The proposed reporting cascade was as follows: (1) the person listed as the closing or settlement agent on the closing or settlement statement for the transfer; (2) the person that prepares the closing or settlement statement for the transfer; (3) the person that files with the recordation office the deed or other instrument that transfers ownership of the residential real property; (4) the person that underwrites an owner's title insurance policy for the transferee with respect to the transferred residential real property, such as a title insurance company; (5) the person that disburses in any form, including from an escrow account, trust account, or lawyers' trust account, the greatest amount of funds in connection with the residential real property transfer; (6) the person that provides an evaluation of the status of the title; and finally (7) the person that prepares the deed or, if no deed is involved, any other legal instrument that transfers ownership of the residential real property.
Comments Received. Some commenters, including real estate agent associations and transparency organizations, supported the use of a reporting cascade, believing it to be functional and useful in preventing arbitrage, while one commenter specifically opposed it, arguing that the cascading approach would be burdensome. One industry group asked that FinCEN exclude banks and other financial institutions subject to AML/CFT program requirements as reporting persons, arguing that such financial institutions are already subject to a higher standard of BSA compliance. Some commenters variously opposed the inclusion of settlement and closing agents, title agents, or escrow agents as reporting persons because they felt it threatened their status as neutral third parties with limited responsibilities when facilitating a transfer of residential real property. Other commenters expressed concern that certain professionals in the reporting cascade would be ill-equipped to report.
Associations representing real estate agents agreed with the absence in the cascade of functions typically associated with real estate agents, while two escrow industry commenters proposed including real estate agents as reporting persons. One commenter suggested adding appraisers as reporting persons, arguing that required inclusion of appraisers would help to identify potential market distortion by illicit actors and that appraisers are otherwise well-equipped to be reporting persons. That commenter also suggested that FinCEN require appraisals be included in every non-financed transfer. One industry association urged FinCEN to exempt small businesses from reporting altogether. One commenter asked for a clear exclusion for homeowners associations, arguing that their burden would be high. A transparency organization and an industry commenter suggested that FinCEN explicitly prohibit transferees, transferors, and their owners from being reporting persons.
Some commenters argued that certain functions described in the proposed reporting cascade should be moved further up in the cascade to ensure parties with what they viewed as the best access to information are the first-line reporters. One commenter suggested that 31 CFR 1031.320(c)(1)(iii) be modified to include the person who prepares a stock certificate or a ( print page 70271) proprietary lease to better cover potential reporting persons closing transfers of cooperative units, and another requested clarity as to who files deeds with the recording office.
Two commenters noted that the reporting cascade may result in more than one reporting person in split settlements, in which the buyer and seller use separate settlement agents. One of those commenters also suggested that certain scenarios could result in the identification of multiple reporting persons, such as when transfers are closed by independent escrow companies but also involve title insurance or when an attorney performs the document preparation, document signing, and disbursement of funds in a transfer that also involves title insurance. Finally, one commenter noted that, in some locations, it is possible for title insurance to be issued several months after closing.
Final Rule. FinCEN adopts the reporting cascade largely as proposed. The reporting cascade is designed to efficiently capture both sale and non-sale transfers, and FinCEN notes that the real estate industry already uses a similar reporting cascade to comply with requirements associated with IRS Form 1099-S. [ 39 ]
As set forth at 31 CFR 101.320(c)(3) , FinCEN adopts the suggestion made by one commenter to exclude from the definition of a reporting person financial institutions with an obligation to maintain an AML program. Where a financial institution would have otherwise been a reporting person, the reporting obligation falls to the next available person described in the reporting cascade. The intent of this rulemaking is to address money laundering vulnerabilities in the U.S. real estate market, recognizing that most persons involved in real estate closings and settlements are not subject to AML program requirements. FinCEN considered imposing comprehensive AML obligations on such unregulated persons, but ultimately decided, as reflected in the final rule, to impose the narrower obligation of a streamlined SAR filing requirement. Financial institutions that already have an obligation to maintain AML programs, however, generally already have a SAR filing requirement that is more expansive than the streamlined reporting requirement adopted by this final rule. Therefore, FinCEN believes that it would not be appropriate at this time to add a streamlined reporting requirement to the existing obligations of a financial institution with an obligation to maintain an AML program. FinCEN also believes that the removal of financial institutions from the cascade of reporting persons will generally result in real estate reports simply being filed by others in the reporting cascade, not in those reports remaining unfiled.
FinCEN is not persuaded by commenters suggesting that other types of professionals should be added to or excluded from the cascade. Excluding categories of real estate professionals that execute functions listed in the reporting cascade based on their professional title or business size would result in a significant reporting loophole that illicit actors would exploit. FinCEN believes it is also unnecessary for the effectiveness of the reporting cascade to include additional functions, such as the provision of appraisal services or services that real estate agents typically provide to buyers and sellers. FinCEN believes that the reporting cascade, as adopted, will effectively capture high risk non-financed transfers of residential real estate and any additional functions would unnecessarily increase the complexity of the rule. Furthermore, real estate agents and appraisers usually perform their primary functions in advance of the actual closing or settlement and therefore generally do not perform a central role in the actual closing or settlement process, unlike real estate professionals performing the functions described in the reporting cascade. FinCEN believes that focusing the reporting cascade on functions more central to the actual closing or settlement is necessary to ensure the reporting person has adequate access to reportable information. Regarding homeowners associations, FinCEN believes that is not necessary to explicitly exempt them the definition of a reporting person because they do not traditionally play the roles enumerated in the reporting cascade.
FinCEN is also not persuaded by commenters' suggestion that the reporting obligation would affect or decrease the neutral position of settlement agents and escrow agents. These real estate professionals are “neutral” in that they have similar obligations to both the transferee and transferor and are therefore seen as an independent party acting only to facilitate the transfer, as opposed to a party acting primarily to advance the interests of just one of the parties to the transfer. The reporting obligation does not upset the balance between service to the transferee and transferor. It merely requires the professional to report additional information about the transfer.
FinCEN confirms that transferees, transferors, and their beneficial owners cannot be reporting persons unless they are engaged within the United States as a business in the provision of a real estate closing and settlement service listed in the reporting cascade, but declines to explicitly prohibit transferees, transferors, and their beneficial owners from being reporting persons when they do play these roles, as it would create an exploitable loophole in the reporting cascade, if such persons were the only real estate professionals involved in the transfer.
The final rule adopts clarifications proposed by commenters with respect to cooperatives. For cooperatives, the stock certificate is akin to a deed prepared for other types of residential real estate, and therefore FinCEN believes that it is appropriate to include these types of functions in the reporting cascade. However, FinCEN declines to modify the language for the person that files with the recordation office the deed or other instrument that transfers ownership of the residential real property, as requested by one commenter. FinCEN believes the proposed language clearly captures a person engaged as a business in the provision of real estate closing and settlement services that files the deed with the recordation officer. It would not include the individual clerk at the office who accepts the deed or other instrument.
In regard to concerns raised by a commenter about split settlements, the definition of “closing or settlement statement” found in 31 CFR 1031.320(n)(2) is modified in the final rule to make clarify that the closing or settlement statement is limited to the statement prepared for the transferee only. FinCEN does not agree that the other situations described by the commenter would result in multiple reporting persons being identified, given the inherent nature of the reporting cascade wherein the reporting responsibility flows down the cascade depending on the presence of a person performing each listed function.
The final rule does not adopt any changes to account specifically for title insurance purchased a significant period of time after a transfer of property. In those situations, FinCEN expects that the underwriting of title insurance would not be part of the closing or settlement process, and therefore another person in the reporting cascade would file the report. However, in the rare situation where there is no other person in the reporting ( print page 70272) cascade participating in the closing or settlement of a reportable transfer, the underwriter of title insurance may ultimately be required to file the report when the insurance is eventually purchased.
Proposed Rule. Proposed 31 CFR 1031.320(c)(3) set forth the option for persons in the reporting cascade to enter into an agreement deciding which person should be the reporting person with respect to the reportable transfer. For example, if a real estate professional involved in the transfer provides certain settlement services in the settlement process, as described in the first tier of the reporting cascade, that person may enter into a written designation agreement with a title insurance company underwriting the transfer as described in the second tier of the reporting cascade, through which the two parties agree that the title insurance company would be the designated reporting person with respect to that transfer. The person who would otherwise be the reporting person must be a party to the agreement; however, it is not necessary that all persons involved in the transfer who are described in the reporting cascade be parties to the agreement. The agreement must be in writing and contain specified information, with a separate agreement required for each reportable transfer.
Comments Received. Two business associations requested that the rule allow for what they described as “blanket” designation agreements. Such agreements would allow two or more persons described in the reporting cascade to designate a potential reporting person for a set period of time or a set number of transfers. For example, a commenter put forward the example of a title insurance company and a settlement company entering into an agreement wherein, for any transfer in which they are both involved, the title insurance company would be the designated reporting person. One of these commenters stated that blanket designation agreements would bring a type of certainty that is required for them to benefit from the costs savings provided by designation agreements. A third business association argued that designation agreements will not be effective, resulting in settlement companies being the primary reporting person. A fourth business association asked whether a third-party vendor could be a designated reporting person.
Final Rule. In the final rule, FinCEN adopts the allowance for designation agreements in 31 CFR 1031.320(c)(4) as proposed. Although FinCEN sees the potential benefits of blanket designation agreements, such agreements would undermine FinCEN's ability to enforce the rule, particularly when a Real Estate Report is not filed as required, and accordingly the final rule does not permit a blanket designation agreement in lieu of a separate designation agreement for each relevant transfer. A single transfer could be subject to multiple, potentially overlapping, blanket designation agreements between different parties. In such a situation, it would be difficult for FinCEN to determine which person had ultimate responsibility for filing the report, and even the persons described in the reporting cascade may not know who had filing responsibility. By comparison, a separate designation agreement for each transfer, describing the specific details of the transfer, makes that determination straightforward. The designation agreement is designed to provide an optional alternative to the reporting cascade that can be effectively and efficiently implemented by reporting persons if they choose. However, nothing in the final rule prohibits persons in the reporting cascade from having an understanding, in writing or otherwise, as to how they generally intend to comply with the rule, provided that they continue to effect designation agreements for applicable transfers.
The final rule also does not allow for third-party vendors who are not described in the reporting cascade to be designated as a reporting person, as such vendors are not financial institutions that can be regulated by FinCEN; a reporting person could outsource the preparation of the form to a third-party vendor, but the ultimate responsibility for the completion and filing of the report would lie with the reporting person.
Proposed Rule. Proposed 31 CFR 1031.320(d) set forth a requirement that reporting persons must report their full legal name and the category into which they fall in the reporting cascade, as well as the street address of their principal place of business in the United States.
Comments Received. FinCEN did not receive any comments on reportable information concerning the reporting person.
Final Rule. FinCEN is adopting 31 CFR 1031.320(d) as proposed.
Proposed Rule. Proposed 31 CFR 1031.320(e)(1) set forth a requirement for the reporting of the name, address, and unique identifying number of a transferee entity, as well as similar identifying information for the beneficial owners of the transferee entity and the persons signing documents on behalf of the transferee entity.
Comments Received. One organization requested that the final rule collect legal entity identifiers (LEIs) for transferee entities. As described by the commenter, the LEI was developed by the International Organization for Standards and is “the only global standard for legal entity identification.”
Final Rule. In the final rule, FinCEN adopts 31 CFR 1031.320(e)(1) as proposed. It does not incorporate the suggestion to require reporting of LEIs. For purpose of this reporting requirement, FinCEN believes that a TIN is preferable, as it is broadly utilized by law enforcement and may be easily connected to other BSA documents.
Proposed Rule. Proposed 31 CFR 1031.320(e)(2) set forth a requirement to report certain information about transferee trusts, including the name of the trust, the date the trust instrument was executed, the address of the place of administration, a unique identifying number, and whether the trust is revocable. Proposed 31 CFR 1031.320(e)(2) also required the reporting of information about each trustee that is an entity, including full legal name, trade name, current address, the name and address of the trust officer, and a unique identifying number. Furthermore, proposed 31 CFR 1031.320(e)(2) required the reporting of identifying information about the trust's beneficial owners and the individuals signing documents on behalf of the trust.
Comments Received. Two industry organizations and two other commenters associated with the title insurance industry argued that information reportable for trusts should align with that on trust certificates issued under State law. As described by one industry organization, “[u]nder the Uniform Trust Act promulgated by the Uniform Law Commission and enacted in 35 states, a trustee is authorized to issue a certification of trust containing much of the information sought under ( print page 70273) this proposed rule.” Another commenter requested that the beneficial ownership information collected under this rule align more closely with that collected under the BOI Reporting Rule. One other commenter, a non-profit organization, requested that the final rule collect legal entity identifiers (LEIs) for transferee trusts, for the reason discussed in Section III.C.5.a above with respect to legal entities.
Final Rule. In the final rule, FinCEN adopts 31 CFR 1031.320(e)(2) largely as proposed. FinCEN is persuaded by the recommendation to align information collected about trust transferees more closely with what is available on trust certificates. While they vary by state, trust certificates generally contain much of a trust's basic identifying information, such as the name of the trust, the date the trust was entered into, the name and address of the trustee, and whether the trust is revocable. The final rule eliminates the proposal to report information identifying the trust officer or the address that is the trust's place of administration, as this information is not commonly found on trust certificates and FinCEN believes other information collected will be sufficient to support law enforcement investigations. However, reporting persons are still required to report some information that may not be available on trust certificates, such as the identifying information for the trustee, as this is basic information necessary to conclusively identify the trust and to effectively conduct investigations into illicit activity. FinCEN believes this information will be readily collected by reporting persons; for example, because trustees generally manage the assets of the trust, the trustee will likely be directly involved in the transfer of residential real property to the trust.
The final rule does not adopt the suggestion to completely align the collection of beneficial ownership information with that collected under the BOI Reporting Rule. While the two rules do align in the collection of the beneficial owner's name, date of birth, and address, they differ in two key respects: first, regarding the unique identifying number, the real estate rule relies largely on TINs instead of passport numbers; and second, the real estate rule collects citizenship information, while the BOI Reporting Rule does not. As discussed in Section III.B.6, TINs are a key piece of identifying information for purposes of the database that would hold Real Estate Reports, and other BSA reports typically require TINs for this reason. Furthermore, FinCEN believes that the collection of citizenship information is necessary in this context to better analyze the volume of illicit funds entering the United States via entities or trusts beneficially owned by non-U.S. persons and is a key element for ensuring that the implementation of this rule will enhance and protect U.S. national security. FinCEN notes that such citizenship information, along with TINs, are reported on traditional SARs. Finally, the rule does not incorporate the suggestion to require reporting of LEIs, for the reasons discussed in Section III.C.2.d with respect to information collected for transferee entities.
Proposed Rule. Proposed 31 CFR 1031.320(e) set forth requirements to report certain beneficial ownership information with respect to transferee entities and transferee trusts. Proposed 31 CFR 1031.320(j)(1)(i) largely defined beneficial owners of transferee entities through a reference to regulations in the BOI Reporting Rule, specifically 31 CFR 1010.380(d) . Similarly, proposed 31 CFR 1031.320(j)(1)(ii) established a definition for the beneficial owners of transferee trusts by leveraging concepts from the BOI Reporting Rule. For both transferee entities and transferee trusts, the proposed regulation set forth that the determination of beneficial ownership would be as of the date of closing. The proposed rule did not require reporting persons to determine whether an individual was a beneficial owner, allowing them instead to use a certification form described in 31 CFR 1031.320(e)(3) to collect beneficial ownership information directly from a transferee trust or a person representing a trust in the reportable transfer, as discussed further in Section III.B.4.
Comments Received. Three commenters expressed support for the collection of beneficial ownership information on the Real Estate Report, with one transparency organization specifically supporting the proposed rule's adoption of definitions from the BOI Reporting Rule. This commenter noted that the proposal would minimize confusion, promote consistency, and maximize the ability to cross-reference data. Multiple commenters, however, argued that the collection of beneficial ownership information under the proposed rule is unnecessary due to the collection of similar information under the BOI Reporting Rule. Some of these commenters also argued that, if beneficial ownership information is collected, it should be limited to the reporting of a FinCEN Identifier, which is an identification number that reporting entities and their beneficial owners may use to report beneficial ownership information under the BOI Reporting Rule. An industry group representing trust and estate lawyers argued that the definition of a beneficial owner of a transferee trust should be limited to trustees, rather than also including grantors/settlors and beneficiaries.
One commenter requested that the final rule retain the exception from beneficial ownership information reporting found in 31 CFR 1010.380(d)(3)(ii) for nominees, intermediaries, custodians, and agents, while two other commenters requested that the rule should except reporting where a beneficial owner is a minor.
Final Rule. The final rule retains the requirement to provide beneficial ownership information in the report, as proposed, with one technical edit to correct a cross reference. FinCEN agrees that the Real Estate Report will contain some information that is also reported under the BOI Reporting Rule. However, because these two distinct reports would be filed on different facets of a single legal entity's activities, FinCEN believes it is appropriate for some of the same information to be reported on both forms. As FinCEN explained in the NPRM, the beneficial ownership information report (BOIR) and the report required by this rule serve different purposes.
The information reported on a BOIR informs FinCEN about the reporting companies that have been formed or registered in the United States, while Real Estate Reports will inform FinCEN about the legal entities, some of which may be “reporting companies” within the meaning of the BOI Reporting Rule, that have participated in reportable real estate transfers that Treasury believes to be at high risk for money laundering. Real Estate Reports, by including beneficial ownership information and real estate transfer information in a single report, will enable law enforcement to investigate potential criminal activity in a timely and efficient manner, and will allow Treasury and law enforcement to connect money laundering through real estate with other types of illicit activities and to conduct broad money laundering trend analyses. BOIRs are kept secure but are intended to be made available not only to government agencies but to financial institutions for certain compliance purposes. Real Estate Reports will be subject to all of the protections and limitations on access and use that already apply to SARs. ( print page 70274)
The need for two different types of report, of course, does not mean that FinCEN is not concerned about eliminating unnecessary duplication of effort. FinCEN appreciates the suggestion that reporting persons be allowed to submit FinCEN Identifiers in lieu of collecting and submitting beneficial ownership information for legal entities that are considered reporting companies under the BOI Reporting Rule. However, FinCEN has identified a number of legal and operational limitations that would prevent FinCEN from accepting FinCEN identifiers outside of the CTA context. [ 40 ] For instance, information provided to FinCEN under the CTA, including the information provided in order to obtain FinCEN identifiers, is housed in an information technology system kept separate from other Bank Secrecy Act reports. The CTA imposes strict limits on access to that system, and those statutory limits are reflected in implementing regulations and the relevant Privacy Act System of Records Notice. [ 41 ] There is no reason to think that persons entitled to access to CTA information will routinely also be entitled to access to SARs and other BSA reports, or vice versa. Thus, at this time, allowing FinCEN identifiers to be reported in lieu of the underlying information would limit the usefulness of Real Estate Reports to law enforcement. As discussed in Section II.A.2 in the context of cross-referencing data from Residential Real Estate GTOs with SARs, the ability to link non-financed transfers of residential real property with other BSA reports is of significant value to law enforcement. Thus, FinCEN has not adopted this suggestion in the final rule.
With regard to the comments suggesting a more limited definition of a beneficial owner, FinCEN does not adopt the suggestion that beneficial owners of trusts be limited to trustees. The final rule instead adopts the approach in the proposed rule, which set forth several positions in a transferee trust that FinCEN considers to be occupied by the beneficial owners of the trust, including: the trustee; an individual other than a trustee with the authority to dispose of transferee trust assets; a beneficiary that is the sole permissible recipient of income and principal from the transferee trust or that has the right to demand a distribution of, or withdraw, substantially all of the assets from the transferee trust; a grantor or settlor who has the right to revoke the transferee trust or otherwise withdraw the assets of the transferee trust; and the beneficial owner(s) of any legal entity that holds at least one of these positions. The persons holding these positions have clear ownership or control over trust assets and therefore should be reported as beneficial owners of the trust.
For legal entities, 31 CFR 1031.320(n)(1)(i) continues to reference 31 CFR 1010.380(d) and therefore the final rule incorporates exceptions from the definition of beneficial owner of a reporting company; these exceptions include nominees, intermediaries, custodians, and agents, as well as minor children (when certain other information is reported). For transferee trusts, the definition of beneficial owner in 31 CFR 1031.320(n)(1)(ii) does not contain exceptions mirroring those found in the definition of a beneficial owner of a transferee entity. FinCEN considered adding an exception for minor children as suggested by commenters but believes at this time that such an exception is not appropriate for trusts. Trusts, unlike legal entities, are largely designed to transfer assets to family members such as minor children, and therefore the reporting of minor children will accurately reflect the nature of the trust and, in aggregate, will allow FinCEN to more accurately determine the risks related to trusts. FinCEN notes, however, that the definition of beneficial owner is unlikely to result in significant reporting of minor children, as minor children would fall into only one category of beneficial owner—as the beneficiary of the transferee trust, and only when the minor child is the beneficiary who is the sole permissible recipient of income and principal from the transferee trust.
Proposed Rule. Proposed 31 CFR 1031.320(f) required the reporting person to report information relevant to identifying the transferor, such as the transferor's name, address, and identifying number. If the transferor is a trust, similar information would be reported identifying the trustee.
Comments Received. One think tank supported the collection of information on transferors, while three industry organizations opposed it, arguing that such information is unnecessary for law enforcement and is redundant with other information available to law enforcement through public land records, BOI reports filed under the CTA, or IRS Form 1099-S.
Final Rule. In the final rule, FinCEN adopts 31 CFR 1031.320(f) as proposed. Information identifying the transferor is necessary to identify certain money laundering typologies, such as where the transferor and transferee are related parties mispricing the real estate in order to transfer value from one to the other. There is therefore a significant benefit to having the transferor's information on the same report as the transferee's information. The transferor's information is basic information about the transferor and does not include information that may be more difficult to gather, such as beneficial ownership information. There is a significant value in adding transferor information in the same report as transferee information and in the same database as information from other BSA reports. FinCEN has addressed the suggestion that similar information is available through reports filed under the BOI Reporting Rule or IRS Form 1099-S in Section III.B.2.
Proposed Rule. Proposed 1031.320(g) required the reporting person to report the street address, if any, and the legal description (such as the section, lot, and block) of each residential real property that is the subject of a reportable transfer.
Comments Received. FinCEN did not receive any comments related to the reporting of information concerning residential real property.
Final Rule. FinCEN adopts 31 CFR 1031.320(g) with technical edits that are meant to lay out the requirements more clearly, and a modification to the text to require the reporting of the date of closing. The NPRM requested comments as to whether the proposed information reported regarding the description of the transferred residential real property was sufficient. Although FinCEN received no comments regarding the reporting of date of closing, FinCEN has subsequently determined that such information is necessary for it to confirm whether reporting persons are complying with the final rule. The term “date of closing” was defined in the NPRM (and is adopted in the final rule) to mean the date on which the transferee entity or transferee trust receives an ownership interest in the residential real property. As proposed in the NPRM and adopted in the final rule, reporting persons have to ascertain the date of closing to make key determinations, such as the filing ( print page 70275) deadline, discussed in Section III.C.11, and whether an individual is a beneficial owner, discussed in Section III.C.5.c. Because the date of closing is information that a reporting person must obtain to comply with the final rule and, relatedly, is information FinCEN also must receive to enforce compliance with the rule, the reporting of such information is a logical outgrowth of the NPRM. The parties to the transfer will know the date of closing and be able to report that date easily on the Real Estate Report.
Proposed Rule. Proposed 31 CFR 1031.320(h) set forth a requirement that reporting persons report detailed information about the consideration, if any, paid in relation to any reportable transfer. This would include total consideration paid for the property, the amount of each separate payment made by or on behalf of the transferee entity or transferee trust, the method of such payment, the name of and account number with the financial institution originating the payment, and the name of the payor.
Comments Received. Several commenters argued that reporting persons would not have ready access to the proposed information to be collected about payments. An industry group, for example, stated that state-level “good funds” laws limit settlement agents to accepting fully and irrevocably settled and collected funds, meaning typically wire payments and cashier's checks, which would not contain information such as the originator's full account number. A business clarified that, for wire payments, a settlement company would only see: the date on which the wire transfer was received; the amount of the wire transfer; the name on the originator's account; the routing number for the sending bank; the name of the bank used by the beneficiary; the beneficiary's account number; the beneficiary's name and address; and wire information providing a reference number relevant to escrow. Some commenters also argued that the originating financial institution would be unlikely to provide the relevant information; that the person holding the originating account, such as an escrow company or attorney, would similarly be unlikely to provide the relevant information; or that transferees may refuse to provide information, believing the reporting of account numbers would put them at risk.
To remedy these issues, commenters argued that payment information should instead be limited to either the total consideration or to the information readily available on wire instructions or a check. Some commenters suggested eliminating the reporting of payment information entirely, questioning the usefulness of reporting such information given that covered financial institutions are likely involved in the processing of such payments and that the reporting person may be separately required to report payment information on a Form 8300, and also raising concerns about the potential increased risk of fraud if detailed account information is required to be reported.
Final Rule. In the final rule, FinCEN adopts 31 CFR 1031.320(h) largely as proposed, with edits to clarify the reporting of the total consideration paid. FinCEN acknowledges that the information required may be beyond what is normally available to the reporting person, but nevertheless believes that the information can be readily collected from the transferee. FinCEN expects that the adoption of the reasonable reliance standard in this rule will help relieve concerns articulated by commenters about the burden of verifying payment information or their ability to collect such information. FinCEN also notes that filers of IRS Form 1099-S must report the account numbers of transferors and therefore believes these to be accessible to reporting persons, many of whom file such forms.
FinCEN appreciates commenters' concerns about potential risks associated with collecting and retaining detailed payment information in relation to reportable transfers and believes that the removal of the requirement to retain Real Estate Reports, in which personal information would be aggregated, for five years, as discussed in Section III.C.12, will help mitigate this risk.
Proposed Rule. Proposed 31 CFR 1031.320(i) set forth the requirement that reporting persons report whether the transfer involved an extension of credit from any institution or individual that does not have AML program obligations.
Comments Received. FinCEN did not receive any comments about the reporting of information concerning hard money, private, and similar loans.
Final Rule. In the final rule, FinCEN adopts 31 CFR 1031.320(i) as proposed. FinCEN believes this information will be valuable to understanding the risks presented by private lenders. FinCEN notes that, as discussed in Section III.C.2.b covering the definition of a non-financed transfer, reporting persons may rely on information from the lender as to whether the lender has an AML program obligation.
The final rule adopts a reasonable reliance standard, set forth in 31 CFR 1031.320(j) , that generally allows reporting persons, whether when reporting information required by the final rule or when necessary to make a determination to comply with the rule, to reasonably rely on information provided by other persons. This change from the proposed rule is explained in detail in Section III.B.4.
Proposed Rule. Proposed 31 CFR 1031.320(k) set forth a requirement that reporting persons file a Real Estate Report with FinCEN no later than 30 calendar days after the date of a given closing.
Comments Received. One transparency organization supported the 30-day filing period, arguing that 30 days is both reasonable and necessary to ensure that current and useful information is available to law enforcement soon after a reportable transfer takes place. Two other commenters, however, argued that a 30-day window would be too short a timeframe in which to gather the required information and that it would be burdensome to monitor differing filing dates for each reportable transfer. As an alternative, these commenters proposed an annual filing deadline, akin to IRS Form 1099-S, with another suggesting that a quarterly filing deadline would also be an improvement.
Final Rule. In the final rule, FinCEN adopts, in 31 CFR 1031.320(k)(3) , a reporting deadline of the final day of the following month after which a closing took place, or 30 days after the date of the closing, whichever is later. FinCEN believes that this approach will reduce date tracking burdens for industry and may further reduce the logistical burden of compliance by providing a longer period of time in which to gather the reportable information, while still providing timely information to law enforcement. FinCEN recognizes that Real Estate Reports are unique when compared with other BSA reports and therefore necessitate a unique reporting deadline. Real Estate Reports require more information than forms such as a CTR or Form 8300—both required to be filed within 15 days of a transaction— ( print page 70276) and the information may need to be gathered from a variety of sources, and not just from the single individual conducting the transaction. Relatedly, traditional SARs, which must be filed within 30 days after suspicious activity is detected, also frequently rely on information known to the filer and, critically, are filed by financial institutions required to have AML programs. FinCEN believes the final filing date will benefit both reporting persons and law enforcement by ensuring reporting persons have sufficient time to gather information, resulting in more complete and accurate reports.
FinCEN believes that a filing period longer than adopted here would adversely impact the utility of the reports for law enforcement and that the extended filing period adopted in this final rule strikes the appropriate balance between accommodating commenters' concerns and ensuring timely reporting of transfers, particularly given other modifications and clarifications in this rule. In particular, FinCEN believes that the adoption of the reasonable reliance standard will significantly reduce the time needed to file the form compared to verifying the accuracy of each piece of information. FinCEN therefore declines to adopt the longer quarterly or annual suggested filing periods.
The final rule deletes as unnecessary the reference in proposed 31 CFR 1031.320(k) to the collection and maintenance of supporting documentation. In contrast with a traditional SAR requirement, the requirement to file a Real Estate Report does not require the reporting person to maintain records documenting the reasons for filing, and therefore there is no need to consider such documentation to have been deemed filed with the Real Estate Report, or to reference such documentation when discussing what a reporting person should file.
Proposed Rule. Proposed 31 CFR 1031.320(l) set forth a requirement that reporting persons maintain a copy of any Real Estate Report filed and a copy of any beneficial ownership certification form provided to them for five years. It also proposed that all parties to any designation agreement maintain a copy of the agreement for five years.
Comments Received. Several commenters stated that retaining records for five years represents an ongoing data storage cost and increases concerns about data security. Two commenters expressed concern that collecting and retaining the information that reporting persons would need to FinCEN to report would run counter to the principles that underly certain State laws that the comments stated were designed to protect data privacy. One commenter argued that there were Fourth Amendment implications for the records retention requirement, which they viewed as requiring businesses to maintain records and produce them to law enforcement on demand. However, a transparency organization supported the proposed five-year recordkeeping requirement, noting also that FinCEN would need access to the designation agreement to determine who had responsibility for filing the report in a particular transfer.
Final Rule. The final rule retains the requirement that certain records be kept for five years but limits the requirement to a copy of any beneficial ownership certification form that was provided to the reporting person, as well as a copy of any designation agreement. As amended, the rule does not require reporting persons to retain a copy of a Real Estate Report that was submitted to FinCEN. FinCEN believes that eliminating the requirement to retain a Real Estate Report may reduce concerns related to data security and to costs associated with the retention of records. FinCEN also notes, more generally, that the BSA reporting framework has long been held to be consistent with the Fourth Amendment of the U.S. Constitution. [ 42 ]
While FinCEN considered eliminating the record retention requirement in its entirety, it believes that it is necessary to the enforceability of the rule that reporting persons retain copies of documents that will not be filed with FinCEN—namely, a copy of any beneficial ownership information certification form and any designation agreement to which a reporting person is a party. Furthermore, FinCEN has retained the requirement in the proposed rule that all parties to a designation agreement—not just the reporting person—must retain a copy of such designation agreement, also to ensure enforceability of the rule. As previously stated, records that are required to be retained must be maintained for a period of five years.
Proposed Rule. Proposed 31 CFR 1031.320(m)(1) exempted reporting persons, and any director, officer, employee, or agent of such persons, and Federal, State, local or Tribal government authorities, from the confidentiality provision in 31 U.S.C. 5318(g)(2) that prohibits the disclosure to any person involved in a suspicious transaction that the transaction has been reported or any information that would otherwise reveal that the transaction has been reported.
Proposed 31 CFR 1031.320(m)(2) confirmed that the exemption from the requirement to establish an AML program, in accordance with 31 CFR 1010.205(b)(1)(v) , would continue to apply to those businesses that may be reporting persons under the final rule. It also stated that no such exemption applies for a financial institution that is otherwise required to establish an anti-money laundering program, as provided in 31 CFR 1010.205(c) .
Comments Received. FinCEN received one comment by 25 Attorneys General that supported the exemption of Federal, State, local, or Tribal government authorities from the confidentiality provision. Additionally, one industry association supported the proposed rule's exemption for reporting persons from establishing an AML program.
Final Rule. In the final rule, FinCEN adopts 31 CFR 1031.320(m) largely as proposed, with one minor deletion for consistency. As in the NPRM, FinCEN recognizes that the confidentiality provision in 31 U.S.C. 5318(g)(2) applying to financial institutions that file SARs is not feasible with the Real Estate Report, as reporting persons needs to collect information directly from the subjects of the Report, thus revealing its existence. Moreover, all parties to a non-financed residential real estate transfer subject to this rule would already be aware that a report would be filed, given such filing is non-discretionary, rendering confidentiality unnecessary. The final rule maintains the exemption from the requirement for reporting persons to establish an AML program. However, given the change discussed earlier explicitly excluding financial institutions with AML program obligations from the definition of a reporting person, the sentence referring to such financial institutions has been deleted.
Proposed Rule. The proposed rule set forth several definitions in 31 CFR 1031.320(j) for key concepts, such as “transferee entity,” “transferee trust,” and the beneficial owners of these aforementioned entities.
Comments Received. FinCEN received comments related to the definition of “Beneficial owner,” discussed above in Section III.C.5.c; “Residential real property,” discussed above in Section ( print page 70277) III.C.2.a; “Transferee entity,” discussed above in Section III.C.2.d; and “Transferee trust,” discussed above in Section III.C.2.e. FinCEN did not receive comments on other proposed definitions.
Final Rule. For clarity, in the final rule, FinCEN moves the paragraph containing definitions to the end of the regulations, so that they appear at 31 CFR 1031.320(n) . In addition to modifications and clarifications discussed in the sections referenced above, the rule adopts the following modifications:
- The definition of “closing or settlement statement” is limited to the statement prepared for the transferee, as discussed in Section III.C.3.a;
- The rule adds a definition for “Non-financed transfer” for clarity, as discussed in Section III.C.2.b;
- The rule is meant to be applied nationwide, and therefore the definition of “Recordation office” is modified to make clear that the recordation office may be located in a territory or possession of the United States, and is not limited to State, local, or Tribal offices for the recording of reportable transfers as a matter of public record. As a result, a person may be a reporting person if they file a deed or other instrument that transfers ownership of the residential real property with a recordation office located in any state, local jurisdiction, territory of possession of the United States, or Tribe;
- For clarity, the term “Residential real property” is removed from the list of definitions found in 31 CFR 1031.320(n) and is instead defined in 31 CFR 1031.320(b) .
The remaining definitions are adopted as proposed.
Proposed Rule. The NPRM proposed that the final rule would be effective one year after the final rule is published in the Federal Register .
Comments Received. Several industry commenters agreed that a one-year delayed effective date is necessary to implement the requirements, with some indicating that one year, at a minimum, would be feasible. One commenter suggested that the final rule be implemented in phases to allow industry time to adapt to the regulation.
Final Rule. The final rule provides for an effective date of December 1, 2025, at which point reporting persons will be required to comply with all of the rule's requirements, chief among them the requirement to file Real Estate Reports with FinCEN. FinCEN believes that this effective date, which delays the effective date by slightly more than the one-year that industry commenters generally supported at a minimum, will provide additional opportunity for potential reporting persons to understand the requirements of the rule and put appropriate compliance measures into place. Furthermore, this effective date will provide FinCEN with the additional time necessary to issue the Real Estate Report, including the completion of any process required by the Paperwork Reduction Act (PRA).
However, FinCEN declines to adopt a phased approach to implementation of the rule, such as by initially limiting the reporting obligation to persons performing a limited number of functions described in the reporting cascade or phasing-in the rule geographically. FinCEN believes a phased approach would likely create unneeded complexity for industry, as industry would need to adapt processes and procedures multiple times over the implementation period. A phased implementation would also undermine the effectiveness of the rule for an extended period of time. The rule is intended to provide comprehensive reporting for a subset of high-risk residential real estate transfers; phased implementation may enable avoidance of reporting requirements by illicit actors, replicating some of the issues FinCEN has encountered under the Residential Real Estate GTOs.
If any of the provisions of this rule, or the application thereof to any person or circumstance, is held to be invalid, such invalidity shall not affect other provisions or application of such provisions to other persons or circumstances that can be given effect without the invalid provision or application.
Indeed, the provisions of this rule can function sensibly if any specific provision or application is invalidated, enjoined or stayed. For example, if a court were to hold as invalid the application of the rule with respect to any category of potential reporting persons, FinCEN would preserve the reporting cascade approach for all other persons that perform the functions set out in the cascade. In such an instance, the provisions of the rule should remain in effect, as those provisions could function sensibly with respect to other potential reporting persons. Likewise, if a court were to hold invalid the application of the rule to any category of residential real property, as defined, the other categories should still remain covered. Because these categories operate independently from each other, the remainder of the rule's provisions could continue to function sensibly: a reportable transfer would continue to be a non-financed transfer of any ownership interest in the remaining categories of residential real property when transferred to a transferee entity or transferee trust. Similarly, with respect to transferee entities and transferee trusts, if a court were to enjoin FinCEN from enforcing the rule's reporting requirements as applied to, for example, transferee trusts, the reporting of transfers to transferee entities should continue because the two types of transferees are separate and distinct from one another. Thus, even if the transferee trust provisions were severed from the rule, the remaining portions of the rule could still function sensibly. In sum, in the event that any of the provisions of this rule, or the application thereof to any person or circumstance, is held to be invalid, FinCEN has crafted this rule with the intention to preserve its provisions to the fullest extent possible and any adverse holding should not affect other provisions.
This regulatory impact analysis (RIA) evaluates the anticipated effects of the final rule in terms of its expected costs and benefits to affected parties, among other economic considerations, as required by EOs 12866, 13563, and 14094. This RIA also affirms FinCEN's original assessments of the potential economic impact on small entities pursuant to the Regulatory Flexibility Act (RFA) and presents the expected reporting and recordkeeping burdens under the Paperwork Reduction Act of 1995 (PRA). Furthermore, it sets out the analysis required under the Unfunded Mandates Reform Act of 1995 (UMRA).
As discussed in greater detail below, the rule is expected to promote national security objectives and enhance compliance with international standards by improving law enforcement's ability to identify the natural persons associated with transfers of residential real property conducted in the U.S. residential real estate sector, and thereby diminish the ability of corrupt and other illicit actors to launder their proceeds through real estate purchases in the United States. More specifically, the collection of the transfer-specific SARs—Real Estate Reports—in a repository that is readily accessible to law enforcement and that contains other BSA reports is expected to increase the efficiency with which resources can be utilized to identify such natural persons, or beneficial owners, when they have conducted non-financed purchases of residential real ( print page 70278) property using legal entities or trusts, and to cross-reference those beneficial owners and their legal entity or trust against other reported financial activities in the system.
This RIA first describes the economic analysis FinCEN undertook to inform its expectations of the rule's impact and burden. That is followed by certain pieces of additional and, in some cases, more specifically tailored analysis as required by EOs 12866, 13563, and 14094, the RFA, the UMRA, and the PRA, respectively. Responses to public comments related to the RIA—regarding specific findings, assumptions, or expectations, or with respect to the analysis in its entirety—can be found in Sections VI.A.1.b and VI.C and have been previewed and cross-referenced throughout the RIA.
This final rule has been determined to be a “significant regulatory action” under Section 3(f) of E.O. 12866 as amended by 14094. The following assessment indicates that the rule may also be considered significant under Section 3(f)(1), as the rule is expected to have an annual effect on the economy of $200 million or more. [ 43 ] Consistent with certain identified best practices in regulatory analysis, the economic analysis conducted in this section begins with a review of FinCEN's broad economic considerations, [ 44 ] identifying the relevant market failures (or fundamental economic problems) that demonstrate the need or otherwise animate the impetus for the policy intervention. [ 45 ] Next, the analysis turns to details of the current regulatory requirements and the background of market practices against which the rule will introduce changes (including incremental costs) and establishes FinCEN's estimates of the number of entities and residential real property transfers it anticipates to be affected in a given year. [ 46 ] The analysis then briefly reviews the final rule with a focus on the specifically relevant elements of the definitions and requirements that most directly inform how FinCEN contemplates compliance would be operationalized. [ 47 ] Next, the analysis proceeds to outline the estimated costs to the respective affected parties that would be associated with such operationalization. [ 48 ] Finally, the analysis concludes with a brief discussion of the regulatory alternatives FinCEN considered in the NPRM, including a discussion of the public comments received in response. [ 49 ] Throughout the analysis, FinCEN has attempted to incorporate public comments received in response to the NPRM where most relevant. Certain broad commentary themes that are pertinent to the RIA as a whole are addressed specifically in Sections VI.A.1.b and VI.C below, while the remainder are integrated into the general discussion throughout the rest of the analysis.
As FinCEN articulated in the RIA of the NPRM, two problematic phenomena animate this rulemaking. [ 50 ] The first is the use of the United States' residential real estate market to facilitate money laundering and illicit activity. The second, and related, phenomenon is the difficulty of determining who beneficially owns legal entities or trusts that may engage in non-financed transfers of residential real estate, either because this data is not available to law enforcement or access is not sufficiently centralized to be meaningfully usable for purposes of market level risk-monitoring or swift investigation and prosecution. The second phenomenon contributes to the first, making money laundering and illicit activity through residential real property more difficult to detect and prosecute, and thus can reduce the appropriate disciplinary and deterrent effects of law enforcement. FinCEN therefore expects that the reporting of non-financed residential real estate transfers required by this rule would generate benefits by mitigating those two phenomena. In other words, FinCEN expects that benefits would flow from the rule's ability to make law enforcement investigations of illicit activity and money laundering through residential real estate less costly and more effective, and it would thereby generate value by reducing the social costs associated with related illicit activity to the extent that it is more effectively disciplined or deterred.
In completing the analysis to accompany the final rule, FinCEN took all submitted public comments to the NPRM into consideration. While the NPRM received over six hundred comment letters, fewer than 25 percent of those comments presented non-duplicate content and a smaller fraction still provided comment specifically with respect to the NPRM RIA. The proportion of comment letters with non-duplicate content represents highly geographically concentrated and geographically unique feedback, which may therefore limit the generalizability of those responses regarding baseline and burden-related elements to other regions of the country and other local real estate markets that do not face the same general housing market trends or state-specific legal constraints. Where FinCEN has declined to revise its original analysis in response to certain comments, an attempt has been made to provide greater clarification of the reasons underlying FinCEN's original methodological choices and expectations.
Numerous comment letters spoke to the anticipated burden of the rule, though there was substantial variation in parties' expectations about which participant in a reportable transfer would ultimately bear the financial costs. Some commenters expressed concern that, if required to serve as the reporting person, they would not be able to absorb the related costs. The majority of these commenters, however, did not offer any explanation for why they would therefore not opt to designate to another cascade member, though presumably the assumption may have been that no other cascade member might be willing to agree. This assumption may or may not be consistent with countervailing incentives other cascade members face in facilitating reportable transfers. Other commenters suggested that certain reporting persons might be forced to absorb a large proportion of the rule's costs due simply to their considerable market share in their particular industry. Additionally, a substantial fraction of those who commented on the burden of the rule signaled their expectation that to some degree the financial costs would ultimately be passed along to the transferee, the transferee's tenants, or to all housing market clients served by that potential reporting person.
For purposes of the economic analysis, FinCEN notes that there may be a meaningful distinction between the concept of being burdened, or affected, by the rule and bearing the cost of the ( print page 70279) rule. A party may be the primary affected business in terms of needing to undertake the most new burden or incremental, novel activity to comply with the rule, but to the extent that that work is compensated, that party, for purposes of the RIA is not considered to also bear the cost of the rule. The comments FinCEN received in response to the NPRM suggest that there may be considerable variation across states in the distinction between where businesses may be primary affected businesses only and where businesses may be both those primarily affected and those that bear the majority of the rule's costs.
Separately, FinCEN notes that while the vast majority of comment letters spoke to at least one element of burden as a concern, very few provided competing estimates or alternative methods to quantify the expected burden of the proposed rule in its entirety. Many commenters, in fact, took FinCEN estimates as given when making their own arguments, suggesting that at least on some level, they found the estimates reasonably credible. In cases where commenters most strongly disagreed with the magnitude of FinCEN estimates (suggesting that FinCEN vastly underestimated the burden of the rule), it is unclear whether the same differences would persist in light of the clarifications and modifications to the proposed rule that have been made in the process of finalization. Given the divergence between what some commenters originally interpreted the rule to require of them and what the final rule would entail, a number of those concerns—including concerns related to the expected verification of information that are addressed by the reasonable reliance standard adopted in the final rule—may now be less pressing.
The primary revision that FinCEN has made to the RIA in response to commenters is with respect to wage estimates for the industry categories represented in the reporting cascade. In addition to updating wages to incorporate the BLS's most recent annual figures, FinCEN also elected to incorporate the 90th percentile wage values instead of the national average index values used in the NPRM RIA. This more conservative approach is meant to address certain commenter concerns that FinCEN's expected costs might underestimate the market wage rates reporting persons would need to pay, particularly because more reporting might occur in geographic areas where skilled labor commands higher compensation. Adopting this more conservative, higher wage rate approach does not reflect any change in FinCEN's expectations about the underlying burden of compliance with the rule.
A few comment letters suggested that FinCEN's analysis may have benefited from additional research activities, robustness tables, or analyses of distributional effects. While in principle FinCEN does not object to more, and more empirically robust, quantitative analysis of any of its policies, it is nevertheless unpersuaded that the analyses requested would have changed the conclusions those additional analytical activities would have informed. In none of the enumerated requests for additional analysis did the commenter convincingly substantiate how the findings of their requested items might have actionably changed the contours of the final policy without impairing its expected efficacy.
To assess the anticipated regulatory impact of the rule, FinCEN took several factors about the current state of the residential real estate market into consideration. This is consistent with established best practices and certain requirements [ 51 ] that the expected economic effects of a rule be measured against the status quo as a primary counterfactual. Among other factors, FinCEN's economic analysis of regulatory impact considered the rule in the context of existing regulatory requirements, relevant distinctive features of groups likely to be affected by the rule, and pertinent elements of current residential real estate market characteristics and common practices. Each of these elements, including additional details and clarifications responsive to comments received, is discussed in its respective subsection below.
While there are no specific Federal rules that would directly and fully duplicate, overlap, or conflict with the rule, there are nevertheless components of the rule that mirror, or are otherwise consistent with, reporting and procedural requirements of existing FinCEN rules and orders, as well as those of other agencies. To the extent that a person would have previous compliance experience with these elements of the regulatory baseline, FinCEN expects that some costs associated with the rule would be lower because the incremental changes in behavior from current practices would be smaller. FinCEN reviews the most proximate components from these existing rules and orders in greater detail below.
Under the Residential Real Estate GTOs, covered title insurance companies are required to report: “(i) The dollar amount of the transaction; (ii) the type of transaction; (iii) information identifying a party to the transaction, such as name, address, date of birth, and tax identification number; (iv) the role of a party in the transaction ( i.e., originator or beneficiary); and (v) the name, address, and contact information for the domestic financial institution or nonfinancial trade or business.”
As discussed above, FinCEN recognizes that the Residential Real Estate GTOs collect beneficial ownership information for certain non-financed purchases of residential real property by legal entities that meet or exceed certain dollar thresholds in select geographic areas. However, the Residential Real Estate GTOs are narrow in that they are temporary, location-specific, and limited in the transactions they cover. The rule is wider in scope of coverage and will collect additional useful and actionable information previously not available through the Residential Real Estate GTOs. As such, the nationwide reporting framework for certain residential real estate transfers will replace the current Residential Real Estate GTOs.
Some evidence suggests that, despite the restriction of reporting persons under the existing Residential Real Estate GTOs to title insurance companies only, certain additional categories of real estate professionals may already be familiar—and have experience—with gathering the currently required information. For example, FinCEN observes that in some markets presently covered by the Residential Real Estate GTOs, realtors and escrow agents often assist title insurance companies with their reporting obligations despite not being subject to any formal reporting requirements themselves. Some may even have multiple years' worth of guidance and informational support by the regional or national trade association of which they are a member in how best to facilitate and enable compliance with existing FinCEN requirements. For instance, in 2021, the National Association of Realtors advised that while “[r]eal estate professionals do ( print page 70280) not have any affirmative duties under the Residential Real Estate GTOs,” such entities should nevertheless expect that “a title insurance company may request information from real estate professionals to help maintain its compliance with the Residential Real Estate GTOs. Real estate professionals are encouraged to cooperate and provide information in their possession.” [ 52 ] Thus, the historical Residential Real Estate GTOs' attempt to limit the definition of reporting persons to title insurance companies does not seem to have completely forestalled the imposition of time, cost, and training burdens on other real estate transfer-related businesses. As such, the cascading reporting approach might not mark a complete departure from current practices and the related burdens of Residential Real Estate GTO requirements, as they may already in some ways be functionally applicable to multiple prospective reporting persons in the rule's reporting cascade.
Furthermore, following the enactment of the CTA, beneficial ownership information of certain legal entities is required to be submitted to FinCEN. However, as set out in the NPRM preamble and also discussed above, [ 53 ] the information needed to ascertain money laundering risk in the residential real estate sector differs in key aspects from what is collected under the CTA, and, accordingly, the information collected under this rule differs from that collected under the CTA.
For example, FinCEN believes that a critical part of the rule is that it will alert law enforcement to the fact that a residential real estate transfer fitting within a known money laundering typology has taken place. While beneficial ownership information collected under the CTA may be available, that information concerns the ownership composition of a given entity at a given point in time. As such reporting does not dynamically extend to include information on the market transactions of the beneficially owned legal entity, it would not alert law enforcement officials focused on reducing money laundering that any real estate transfer has been conducted, which includes those particularly vulnerable to money laundering such as non-financed transfers of residential property.
Furthermore, the scope of entities that are the focus of the real estate rule is broader than the CTA, as certain types of entities, including most trusts, are not required to report under the CTA. Because non-excepted trusts under the residential real estate rule generally do not have an obligation to report beneficial ownership under the CTA, their incremental burden of compliance with the Real Estate Report requirements may be moderately higher insofar as the activities of collecting, presenting, or certifying beneficial ownership information are less likely to have already been performed for other purposes.
The CDD Rule's [ 54 ] beneficial ownership requirement addressed a regulatory gap that enabled persons looking to hide ill-gotten proceeds to potentially access the financial system anonymously. Among other things, it required covered financial institutions to identify and verify the identity of beneficial owners of legal entity customers, subject to certain exceptions and exemptions; beneficial ownership and identification therefore became a component of AML requirements.
Financial institutions subject to the CDD Rule are required to collect some beneficial ownership information from legal entities that establish new accounts. However, this rule covers non-financed transfers of residential real estate that do not involve financial institutions covered by the CDD Rule. The rule would also collect additional information relevant to the real estate transfers that is currently not collected under the CDD Rule.
In the course of current residential real estate transfers, some parties that might be deemed “transferors” under the rule already prepare and report portions of the requisite information to other regulators. For example, the IRS collects taxpayer information through Form 1099-S on seller-side proceeds from reportable real estate transfers for a broader scope of reportable real estate transfers than this rule. [ 55 ] This information, however, is generally unavailable for one of the primary purposes of this rule, as there are significant statutory limitations on the ability of the IRS to share such information with Federal law enforcement or other Federal agencies. In addition to these statutory limitations on IRS disclosure of taxpayer information, details about the buyer's beneficial ownership (the focus of this rule) largely fall outside the scope of transaction information reported on the Form 1099-S.
However, IRS Form 1099-S is nonetheless relevant to the rule's regulatory baseline, given the process by which the Form 1099-S may be prepared and submitted to the IRS. Similar to the Real Estate Report, the person responsible for filing the IRS Form 1099-S can either be determined through a cascade of the various parties who may be involved in the closing or settlement process, or, alternatively, certain categories of the involved parties may enter into a written agreement at or before closing to designate who must file Form 1099-S for the transaction. The agreement must identify the designated person responsible for filing the form, but it is not necessary that all parties to the transaction, or that more than one party even, enter into the agreement. The agreement must: (1) identify by name and address the person designated as responsible for filing; (2) include the names and addresses of each person entering into the agreement; (3) be signed and dated by all persons entering into the agreement; (4) include the names and addresses of the transferor and transferee; and (5) include the address and any other information necessary to identify the property. The rule's designation agreement requires, and is limited to, the same five components that may be included in a designation agreement accompanying Form 1099-S. Therefore, the exercise of designation, as well as the collection of information and signatures that it involves, may already occur in connection with certain transfers of residential real property and in these cases be leveraged at minimal additional expense. ( print page 70281)
According to a recent study [ 56 ] that analyzed Ztrax data [ 57 ] covering 2,777 U.S. counties and over 39 million residential housing market transactions from 2015 to 2019, the proportion of average county-month non-financed residential real estate transactions involving purchases by legal entities was approximately 11 percent during the five-year period analyzed. When the sample is divided into counties that, by 2019, were under Residential Real Estate GTOs versus those that were never under Residential Real Estate GTOs, the proportions of average county-month non-financed sales to total purchases are approximately 13.6 percent and 11.2 percent, respectively.
Legal entities that own U.S. residential real estate vary by size and complexity of beneficial ownership structure, and by some measures, have increased market participation over time. [ 58 ] FinCEN analysis of the Department of Housing and Urban Development and Census Bureau's Rental Housing Finance Survey (RHFS) data for 2018 found that micro investors or small business landlords who owned 1-2 units owned 66 percent of all single family and multifamily structures with 2-4 units. Conversely, investors in the residential rental market who owned at least 1,000 properties owned only 2 percent of single-family homes and multi-family structures.
FinCEN did not receive any comments, studies, or data that meaningfully conflict with these estimates or the manner in which they informed the NPRM RIA's initial estimates of the number of reportable transfers per year.
The final rule requires the reporting of certain non-finance transfers of residential real property to transferee trusts. [ 59 ] Residential real property purchases by transferee trusts have not generally been reported under the Residential Real Estate GTOs and the entities themselves are typically [ 60 ] not subject to beneficial ownership reporting requirements under the CTA. Therefore, FinCEN expects that trusts would be more homogenously newly affected by the rule than legal entities, discussed above, as a cohort of affected parties.
Establishing a baseline population of potentially affected transferee trusts based on the existing population of legal trusts is challenging for several reasons. These reasons include the general lack of comprehensive and aggregated data on the number, [ 61 ] value, usage, and holdings of trusts formed in the United States, which in turn is a result of heterogeneous registration and reporting requirements, including instances where neither requirement currently exists. Because domestic trusts are created and administered under State law, and states have broad authority in how they choose to regulate trusts, there is variation in both the proportion of potential transferee trusts that are currently required to register as trusts in their respective states as well as the amount of information a given trust is required to report to its state about the nature of its assets or its structural complexity. Thus, limited comparable information may be available at a nationwide level besides what is reported for Federal tax purposes, and what is available is unlikely to represent the full population of potentially affected parties that would meet the definition of transferee trust if undertaking the non-financed transfer of residential real property.
International heterogeneity in registration and reporting requirements for foreign trusts creates similar difficulties in assessing the population of potentially affected parties that are not originally registered in the United States. Further complicating this assessment is the exogeneity and unpredictability of changes to foreign tax and other financial policies, which studies in other, related contexts have shown, generally affect foreign demand for real estate. [ 62 ]
While it is difficult to know exactly how many existing trusts there are, and within that population how many own residential real property (as a potential indicator of what proportion of new trusts might eventually be used to own residential real property), there is nevertheless a consistency in the limited existing empirical evidence that would support a conjecture that proportionally few of the expected reportable transfers would be likely to involve a transferee trust. A recent study of U.S. single-property residential purchases that occurred between 2015 and 2019 identified a trust as the buyer in 3.3 percent of observed transactions. [ 63 ] FinCEN also conducted additional analysis of publicly available data that might help to quantify the proportion of trust ownership in residential real estate and more clearly account for non-sale transfers for no consideration. Based on the RHFS, identifiable trusts accounted for approximately 2.5 percent of rental housing ownership and approximately 8.2 percent of non-natural person ownership of rental housing. [ 64 ]
To the extent that trusts' current residential real property holdings are linear in the number of housing units and current holdings is a reliable proxy for future purchasing activity, FinCEN does not expect the proportion of reportable transfers involving a transferee trust to exceed 5 percent of potentially affected transfers. No further refinements to this upper-bound-like estimate, based on the number of existing trusts that may be affected, would be feasible without a number of additional assumptions about market behavior that FinCEN declines to impose in the absence of better/more data.
While the majority of public comments pertaining to trusts suggested that the number of affected trusts would be substantially higher than the original RIA had anticipated, FinCEN is not revising or updating its baseline ( print page 70282) estimates at this stage because the final rule has adopted certain broad exceptions that materially limit the reporting of transfers to trusts.
Exceptions to the general definitions of transferee entities and transferee trusts apply to certain highly regulated entities and trusts that are subject to AML/CFT program requirements or to other significant regulatory reporting requirements.
For example, PIVs that are investment companies and registered with the SEC under section 8 of the Investment Company Act of 1940 are excepted, while unregistered PIVs engaging in reportable transfers are not. Unregistered PIVs are instead required to provide the reporting person with specified information, particularly including the required information regarding their beneficial owners. FinCEN analysis of costs below continues to assume that any such unregistered PIV stood up for a reportable transfer would generally have, or have low-cost access to, the information necessary for filing Real Estate Reports. FinCEN expects that a PIV that is not registered with the SEC—which can have at maximum four investors whose ownership percent is or exceeds 25 percent (the threshold for the ownership prong of the beneficial ownership test for entities)—would likely either (1) be an extension of that large investor, or (2) have a general partner who actively solicited known large investors. In either case, the unregistered PIV is likely to have most of the beneficial ownership information that would be required to complete the Real Estate Report and access to the beneficial owner(s) to request the additional components of required information not already at hand. FinCEN did not receive any comments indicating that these expectations are unreasonable and thus continues to operate under these assumptions with respect to baseline costs.
Operating companies subject to the Securities Exchange Act of 1934's current and periodic reporting requirements, including certain special purpose acquisition companies (SPACs) and issuers of penny-stock, are also excepted transferees under this rule. FinCEN notes that the percent ownership threshold for beneficial ownership for SEC regulatory purposes is considerably lower than as defined in the CTA and related Exchange Act beneficial ownership-related disclosure obligations usually apply to more control persons at such a registered operating company. [ 65 ] Additionally, disclosures about the acquisition of real estate, including material non-financed purchases of residential property, are already required in certain periodic reports filed with the SEC. [ 66 ] Therefore, an incremental informational benefit from not excepting SEC-registered operating companies as transferees for the purposes of this rule's reporting requirements may either not exist or, at best, be very low while the costs to operating companies of reporting and compliance with an additional Federal regulatory agency are expected to be comparatively high.
Some commenters expressed concern that it might be difficult or burdensome for reporting persons to determine if a transfer might be exempt from reporting on the basis of the transfer being made to an excepted transferee. However, the final rule adopts a reasonable reliance standard, and therefore the reporting person may reasonably rely on information provided by others as described in Section III.B.2.4, including with respect to whether the transferee is exempt. Furthermore, should a reporting person nevertheless want to verify the excepted status of a transferee, FinCEN notes that the status of transferees as excepted pursuant to being registered with the SEC should be easily verifiable by a name search in the agency's Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system, which can be queried using open access, publicly available search tools.
Because the reporting cascade is ordered by function performed, or service provided, rather than by defined occupations or categories of service providers, [ 67 ] attribution of work to the capacity in which a person is primarily employed is necessarily imprecise. To account for the need to map from services provided to entities providing such services as a prerequisite to estimating the number of potentially affected parties, FinCEN acknowledges, but abstracts from, the common observation that title agents and settlement agents are “often the same entity that performs two separate functions in a real estate transaction,” and that “the terms title agent and settlement agent are often used interchangeably.” [ 68 ] For purposes of the remaining RIA, FinCEN groups potential reporting persons by features of their primary occupation and treats them as functionally distinct members of the cascade, acknowledging that this is done more for analytical clarity than as a rigid expectation about the capacity in which an individual is employed to service a given transfer. In total, FinCEN estimates there may be up to approximately 172,753 reporting persons and 642,508 employees of those persons that could be affected by the rule. Of this total, the distribution of potential reporting persons as identified by primary occupation [ 69 ] is: settlement agents (3.6 percent of potential reporting persons, 9.8 percent of the potentially affected labor force), title insurance companies (0.5 percent, 6.6 percent), real estate escrow agencies (10.9 percent, 10.5 percent), attorneys [ 70 ] (9.3 percent, 16.7 percent), and other real estate professionals [ 71 ] (75.5 percent, 56.4 percent). For purposes of cost estimates throughout the remaining analysis, FinCEN computed the ( print page 70283) following fully loaded [ 72 ] average [ 73 ] hourly wages [ 74 ] by the respective primary occupation categories: settlement agents, $79.35; title insurers, $106.49; real estate escrow agencies, $81.74; attorneys, $153.48; and other real estate professionals, $81.74. For reference, these wages estimates represent the following updates from the NPRM RIA:
Table 1—Wage Estimate Revisions From NPRM to Final Rule RIA
The scope of residential real estate transfers that would be affected by the rule is jointly defined by the (1) the nature of the property transferred, (2) the financed nature of the transfer, and (3) the legal organization of the party to whom the property is transferred. For purposes of identification, the defining attribute for the nature of the property is that it is principally designed, or intended to become, the residence of one to four families, including cooperatives and vacant or unimproved land. Additionally, the property must be located in the United States as defined in the BSA implementing regulations.
Reportable transfers exclude all those in which the transferees receive an extension of credit from a financial institution subject to AML/CFT program and SAR Reporting requirements that is secured by the residential real property being transferred. Reportable transfers also exclude transfers associated with an easement, death, divorce, or bankruptcy or that are otherwise supervised by a court in the United States, as well as certain no consideration transfers to trusts, certain transfers related to 1031 Exchanges, and any transfer for which there is no reporting person.
On the basis of available data, studies, and qualitative evidence, subject to certain qualifying caveats about limitations in data availability, and in the absence of large, unforeseeable shocks to the U.S. residential housing market, FinCEN's NPRM analysis estimated that the number of reportable transfers would be between approximately 800,000 and 850,000 annually. FinCEN received a number of comment letters suggesting that this estimate is too low. However, because most arguments of this nature were made on the basis of an understanding that the rule would include several kinds of transfers that have since been explicitly excepted in the final rule, FinCEN is not increasing its estimates.
FinCEN took certain potentially informative aspects of the current market for residential real property into consideration when forming its expectations about the anticipated economic impact of the rule. Among other things, FinCEN considered trends in the observable rate of turnover in the stock of existing homes. Additionally, FinCEN reviewed recent studies and data from the academic literature estimating housing supply elasticities on previously developed versus newly developed land.
FinCEN also considered recent survey results of the residential real estate holdings of high-net-worth individuals and the proportion of survey respondents who self-reported the intent to purchase additional residential real estate in the coming year. Further, FinCEN reviewed studies of trends in the financing and certain distributional characteristics of shared equity housing, which includes co-operatives that will be affected by the rule.
FinCEN assessed the role of various persons in the real estate settlement and closing process to determine a quantifiable estimate of each profession or industry's overall participation in that process. Accordingly, FinCEN conducted research based on publicly available sources to assess the general participation rate of the different types of reporting persons in the rule's reporting cascade. As part of its analysis, FinCEN noted a recent blog post citing data from the American Land Title Association (ALTA) that 80 percent of homeowners purchase title insurance when buying a home. [ 75 ]
To better understand the distribution of the other types of persons providing residential real property transfer services to the transfers that are affected by the rule, FinCEN utilized county deed database records to approximate a randomly selected and representative sample of residential real estate transfers across the United States. FinCEN made efforts to collect deed data that reflected a representative, nation-wide sample, both in terms of the number and geographic dispersion of deeds, but acknowledges selection was nevertheless constrained in part by the feasibility to search by deed type, among other factors. FinCEN invited public feedback on the extent to which the same analysis would yield substantively different results if performed over a larger sample (with either more geographic locations, more ( print page 70284) observations per location, or both), but did not receive any responsive data or the results of analysis based on such data.
The final analysis included 100 deeds, of which 97 involved at least one of the following potential reporting persons: (i) Title Abstract and Settlement Offices, (ii) Direct Title Insurance Carriers, or (iii) Offices of Lawyers. A candidate reporting person was deemed to be involved with the creation of the deed if either (i) a company or firm performing one of these functions was included on the deed or (ii) an individual performing or employed by a company or firm performing one of these functions was included on the deed. FinCEN assessed the distribution of alternative entities identified on the remaining deeds, categorizing by reporting person type. Based on this qualitative analysis, FinCEN tentatively anticipates that approximately three percent of reportable transfers might have a reporting person or reporting cascade that begins with someone other than a settlement agent, title insurer, or attorney.
Currently, law enforcement searches a variety of State and commercial databases (that may or may not include beneficial ownership information), individual county record offices, and/or use subpoena authority to trace the suspected use of criminal proceeds in the non-financed transfer of residential real estate. Even after a significant investment of resources, the identities of the beneficial owners may not be readily ascertainable. This fragmented and limited approach can slow down and decrease the overall efficacy of investigations into money laundering through real estate. This was one reason that FinCEN introduced the Residential Real Estate GTOs, which law enforcement has reported have significantly expanded their ability to investigate this money laundering typology. At the same time, the Residential Real Estate GTOs have certain restrictions that limited its usefulness nationwide. This rule builds on and is intended to replace the Residential Real Estate GTO framework and creates reporting and recordkeeping requirements for specific residential real estate transfers nationwide.
The final rule requires certain persons involved in real estate closings and settlements to submit reports and keep records on identified non-financed transfers of residential real property to specified legal entities and trusts on a nationwide basis. The rule does not require transfers to be reported if the transfer is financed, meaning that the transfer involves an extension of credit to all transferees that is secured by the transferred residential real property and is extended by a financial institution that has both an obligation to maintain an AML program and an obligation to report suspicious transactions under this chapter. It also does not require reporting of: (i) a grant, transfer, or revocation of an easement; (ii) a transfer resulting from the death of an owner of residential real property; (iii) a transfer incident to divorce or dissolution of a marriage or civil union; (iv) a transfer to a bankruptcy estate; (v) a transfer supervised by a court in the United States; (vi) a transfer for no consideration made by an individual, either alone or with the individual's spouse, to a trust of which that individual, that individual's spouse, or both of them, are the settlor(s) or grantor(s); (vii) a transfer to a qualified intermediary for purposes of a 1031 Exchange; or (viii) a transfer that does not involve a reporting person. A report would also not need to be filed if the transferee is an exempt legal entity or trust, which are generally highly-regulated.
The final rule requires a reporting person, as determined by either the reporting cascade or as pursuant to a designation agreement, to complete and electronically file a Real Estate Report. The reporting person may generally obtain, and reasonably rely upon, information needed to complete the Real Estate Report from any other person. This reasonable reliance standard is more limited for purposes of obtaining the transferee's beneficial ownership information. In those situations, the reasonable reliance standard applies only to information provided by the transferee or the transferee's representative and only if the person providing the information certifies the accuracy of the information in writing to the best of their knowledge. The reporting person must file the report by the final day of the following month after which a closing took place, or 30 days after the date of the closing, whichever is later.
The final rule requires the reporting person to report to FinCEN certain information about a reportable transfer of residential real property. This includes information on the reporting person, the transferee and its beneficial owners, the transferor, the property being transferred, and certain payment information. The collected information will be maintained by FinCEN in an existing database accessible to authorized users. Some commenters' remarks suggest that certain expectations of the rule's potential effects may flow from a misunderstanding about who may access Real Estate Report data once filed and how it may be used. FinCEN is therefore reiterating that both access and use of Real Estate Report data will be subject to the same restrictions as other BSA reports, including traditional SARs.
This section describes the main, quantifiable economic effects FinCEN anticipates the various affected parties identified above may experience. Because the primary expected value of the rule is in the extent to which it is able to address or ameliorate the economic problems discussed under the RIA's broad economic considerations, which (while substantial) is generally inestimable, no attempt is made to quantify the net benefit of the rule. Instead, the remainder of this section focuses primarily on the estimates of reasonably anticipated, calculable costs to affected parties. While FinCEN continues to principally anticipate aggregate cost estimates between approximately $267.3 million and $476.2 million in the first compliance year and current dollar value of the aggregate costs in subsequent years between approximately $245.0 million and $453.9 million annually, it has provided revised estimates throughout the remaining analysis, responsive to public comments, that reflect more conservative expectations about the cost of labor. Under these assumptions, the anticipated costs of the rule would be between approximately $428.4 and $690.4 million (midpoint $559.4 million) in the first compliance year and between approximately $401.2 and $663.2 million (midpoint $532.2 million) (current dollar value) in subsequent years. These quantified costs are a pro forma accounting cost estimate only and are not expected to represent either the full economic costs of the rule nor the net cost of the rule as measured against the components of expected benefits that may become quantifiable. As previously stated, the ability to successfully detect, prosecute, and deter crimes—or other illicit activities that rely on money laundering to be ( print page 70285) profitable—is not readily translatable to dollar figures. [ 76 ] However, it might be inferred that a tacit expectation underlying this rulemaking is that the rule will generate intangible benefits worth over $500 million per year. [ 77 ]
To estimate expected training costs, FinCEN adopted a parsimonious model similar, in certain respects, to the methodology used by FinCEN when publishing the RIA for the 2016 CDD Rule (CDD Rule RIA). Taking into consideration, however, that, unlike covered financial institutions under the CDD Rule, only one group of affected reporting persons has direct pre-existing experience with other FinCEN reporting and compliance requirements, the estimates of anticipated training time here are revised upward from the CDD Rule RIA to 75 minutes for initial training and 30 minutes for annual refresher training. FinCEN's method of estimation assumes that an employee who has received initial training once will then subsequently take the annual refresher training each following year. This assumption contemplates that more than half of the original training would not be firm-specific and remains useful to the employee regardless of whether they remain with their initial employer or change jobs within the same industry. As in the CDD Rule RIA high estimate model, FinCEN estimates that two-thirds of untrained employees receive the initial (lengthier) training each year. However, because the initial training is assumed to provide transferrable human capital in this setting, turnover is not relevant to the assignment to initial training in periods following Year 1. Thus, in the revised model, FinCEN calculated annual training costs as the combination of the expected costs of providing two-thirds of the previously untrained workforce per industry with initial (lengthier) training and all previously trained employees with the refresher (shorter) training. Time costs are proxied by an industry-specific fully loaded wage rate at the 90th percentile per industry.
Estimated per person training costs | Initial training | Refresher (year 2+) | |||
---|---|---|---|---|---|
Primary business categories | Fully loaded hourly wage | Time (hours) | Total | Time (hours) | Total (unadjusted) |
Title Abstract and Settlement Offices | $79.35 | 1.25 | $99.18 | 0.5 | $39.67 |
Direct Title Insurance Carriers | 106.49 | 1.25 | 133.11 | 0.5 | 53.24 |
Other Activities Related to Real Estate | 81.74 | 1.25 | 102.17 | 0.5 | 40.87 |
Offices of Lawyers | 153.84 | 1.25 | 192.30 | 0.5 | 76.92 |
Offices of Real Estate Agents and Brokers | 81.74 | 1.25 | 102.17 | 0.5 | 40.87 |
To model industry-specific hiring inflows in periods following Year 1, FinCEN converted the Bureau of Labor Statistics (BLS) projected 10-year cumulative employment growth rates for 2022-2032 for the NAICS code mostly closely associated with a given industry available. Additionally, inflation data from the Federal Reserve Bank of St. Louis was utilized to estimate annual wage growth given the opportunity cost of training is assumed to be equivalent to the wage of employees. Utilizing these inputs, and summing costs across all industries expected to be affected, FinCEN estimates that the aggregate initial year training costs would be approximately $51.0 million dollars and the undiscounted aggregate training costs in each of the subsequent years would range between approximately $23.2 and $31.5 million.
FinCEN notes that fewer than five percent of unique comments received made specific reference to the training costs that the rule would necessitate and fewer still provided comments pertaining to the RIA estimates of training costs. While one commenter suggested that the uniformity of the rule would reduce the burden of preparing training materials relative to the current variety of Residential Real Estate GTO thresholds and applications, the majority of training cost-related comments simply noted that training costs would impose a burden and might separately lead to higher labor costs if new personnel require compensation for additional reporting compliance related subject-matter expertise. There were, however, some commenters who expressed a belief that the amount of time needed for—and frequency of—training needed to adequately prepare staff for compliance would be higher. While FinCEN is declining to responsively adjust its estimates of training-related time costs for reasons, among others, that are further discussed below, FinCEN is responsive to certain other commenters who expressed a perceived value to having a greater range of potential burden estimates to compare: had FinCEN adopted the suggested alternative training time costs, the aggregate annual training burden would have been either $81.5 million in year 1 [ 78 ] or $101.9 million [ 79 ] in year 1, or between $63.5 and $130.8 million in a given year. [ 80 ]
In its NPRM analysis, FinCEN recognized that the rule would impose certain costs on businesses positioned to provide services to non-financed transfers of residential real property even in the absence of direct participation in a specific reportable transfer, including the costs of preparing informational material and training personnel about the proposed rule generally as well as certain firm-specific policies and procedures related to reporting, complying, and documenting compliance. Because this training burden was applied uniformly across all potentially affected occupational categories represented in the reporting cascade, which is already a conservative assumption given that some cascade tiers are, in practice, more likely to become the reporting person than others, FinCEN considered time burden ( print page 70286) values (75 minutes for initial, 30 minutes for refresher) that would average across the expected variation in training by occupational category a reasonable approach. Furthermore, these training costs, as estimated in the NPRM, pertain only to those contemplated activities identified (developing general understanding of the rule and firm-specific compliance policies and procedures) and were not intended to reflect additional reporting-technology and form-specific training costs. Costs of training that are specific to the Real Estate Report will be separately estimated as a function of the RIA in the NPRM for the Real Estate Report; therefore, it would not have been appropriate to have included those training costs in the current final rule estimates as that would result in accounting for the same expense twice.
The total costs associated with reporting a given reportable transfer will likely vary with the specific facts and circumstances of the transfer. For instance, the cost of the time needed to prepare and file a report could differ depending on which party in the cascade is the reporting person, because parties receive different compensating wages. The costs associated with the time to determine who is the reporting person will also vary by the number of potential parties who may assume the role and thus might be parties to a designation agreement. Additionally, the time required to prepare a report will likely vary with the complexity of the beneficial ownership of the transferee and, for example, the level of the transferee entity's preexisting familiarity with the concepts of beneficial ownership information as defined for FinCEN purposes.
FinCEN continues to estimate an average per-party cost to determine the reporting person of 30 (15) minutes for the party that assumes the role if a designation agreement is (not) required and 15 minutes each for all non-reporting parties (assuming each tier in the cascade corresponds to one reporting person). Therefore, the range of potential time costs associated with determining the reporting person is expected to be between 15 to 90 minutes. Recently, FinCEN received updated information from parties currently reporting under the Residential Real Estate GTOs indicating that the previously estimated time cost of 20 minutes for that reporting requirement was less than half the average time expended per report in practice. Based on this feedback, the filing time burden FinCEN anticipates for the rule accordingly incorporates a 45-minute estimate for the collection and reporting of the subset of Real Estate Report required information that is similar to information in reports filed under the Residential Real Estate GTOs, although FinCEN recognizes that certain transfers may require significantly more time. Mindful of these outliers, FinCEN estimates an average 2 hour per reportable transfer time cost to collect and review transferee and transfer-specific reportable information and related documents, and an average 30 minute additional time cost to reporting.
Estimated per transaction reporting costs | Non-reporting party | Reporting party | |||||
---|---|---|---|---|---|---|---|
Primary business categories | Fully loaded hourly wage | Designation | Designation-related | Designation-independent | |||
Time (hours) | Total | Time (hours) | Total | Time (hours) | Total | ||
Title Abstract and Settlement Offices | $79.35 | 0.25 | $19.84 | 0.25 | $19.84 | 2.75 | $218.21 |
Direct Title Insurance Carriers | 106.49 | 0.25 | 26.62 | 0.25 | 26.62 | 2.75 | 292.85 |
Other Activities Related to Real Estate | 81.74 | 0.25 | 20.43 | 0.25 | 20.43 | 2.75 | 224.78 |
Offices of Lawyers | 153.84 | 0.25 | 38.46 | 0.25 | 38.46 | 2.75 | 423.07 |
Offices of Real Estate Agents and Brokers | 81.74 | 0.25 | 20.43 | 0.25 | 20.43 | 2.75 | 224.78 |
Based on the range of expected reportable transfers and the wages associated with different persons in the potential reporting cascade, FinCEN anticipates that the rule's reporting costs may be between approximately $174.6 million and $466.5 million.
In its original NPRM analysis, FinCEN stated an expectation that reporting persons would generally be able to rely on technology previously purchased and already deployed in the ordinary course of business (namely, computers and access to the internet) to comply with the proposed reporting requirements, and therefore no line item of incremental expected IT costs was ascribed to reporting. Certain commenters expressed that this expectation would be unrealistic because their current business practices rely on software for tracking and internal controls processes, for example, that would need to be updated in light of the rule's reporting requirements. However, FinCEN did not receive any comments that would enable it to quantify the expected burden associated with these software upgrades that commenters described. In the absence of readily generalizable cost estimates, it is therefore not feasible to update reporting costs responsively, though FinCEN acknowledges that, as a consequence, its aggregate burden estimates can, at best, function as a lower-bound expectation of the total costs of the rule.
FinCEN continues to expect that the rule would impose recordkeeping requirements on reporting persons as well as, in certain cases, members of a given reportable transfer's cascade that are not the reporting person. The primary variation in expected recordkeeping costs would flow from the conditions under which the reporting person has assumed their role. Additional variation in costs may result from differences in the dollar value assigned to the reporting person's time costs as a function of their primary occupation.
If the reporting person assumes that role as a function of their position in the reporting cascade, this would imply that no meaningfully distinct person involved in the transfer provided the preceding service(s). In this case, the reporting person's recordkeeping requirements would be limited to the retention of compliance documents ( i.e., a copy of the transferee's certification of beneficial ownership information) for a period of five years in a manner that preserves ready availability for inspection as authorized by law. Recordkeeping costs would therefore include those associated with creating and/or collecting the necessary documents, storing the records in an accessible format, and securely disposing of the records after the required retention period has elapsed. FinCEN anticipates that over the full recordkeeping lifecycle, each reportable ( print page 70287) transfer would, on average, require one hour of the reporting person's time, as well as a record processing and maintenance cost of ten cents. Because FinCEN expects that records will primarily be produced and recorded electronically and estimates its own processing and maintenance costs at ten cents per record, it has applied the same expected cost per reportable transfer to reporting persons. In aggregate, this would result in recordkeeping costs between approximately $63.6 million and $130.8 million associated with one year's reportable transfers.
Estimated per transaction recordkeeping costs | Non-reporting party | Reporting party | |||||
---|---|---|---|---|---|---|---|
Primary business categories | Fully loaded hourly wage | Designation-related | Designation-related | Designation-independent | |||
Time (minutes) | Total * | Time (minutes) | Total * | Time (hours) | Total * (unadjusted) | ||
Title Abstract and Settlement Offices | $79.35 | 5 | $6.71 | 5 | $6.71 | 1 | $79.45 |
Direct Title Insurance Carriers | 106.49 | 5 | 8.97 | 5 | 8.97 | 1 | 106.59 |
Other Activities Related to Real Estate | 81.74 | 5 | 6.91 | 5 | 6.91 | 1 | 81.84 |
Offices of Lawyers | 153.84 | 5 | 12.92 | 5 | 12.92 | 1 | 153.94 |
Offices of Real Estate Agents and Brokers | 81.74 | 5 | 6.91 | 5 | 6.91 | 1 | 81.84 |
* Total Recordkeeping cost estimates include both labor (wages) and technology costs ($0.10). |
If the reporting person has instead assumed that role as the result of a designation agreement, the rule would impose additional recordkeeping requirements on both the reporting person and at least one other member of the reporting cascade. This is because the existence of a designation agreement implies the existence of one or more distinct alternative parties to the reportable transfer that provided a preceding service or services as described in the cascade. While the final rule only stipulates that “all parties to a designation agreement” would also be anticipated to incur recordkeeping costs, FinCEN expects the minimum number of additional parties required to retain a readily accessible copy of the designation agreement for a five-year period would, in practice, depend on the number of alternative reporting parties servicing the transfer in a capacity that precedes the designated reporting person in the cascade, as it would otherwise be difficult to demonstrate the prerequisite sequence of conditions were met to establish the “but for” of the requirement. Conservatively assuming that each service in the cascade is provided by a separate party, this would impose an incremental recordkeeping cost on at least two parties per transfer and at most five. Because FinCEN estimates of reporting costs already assign the costs of preparing a designation agreement to the reporting person (when a transfer includes a designation agreement), the incremental recordkeeping costs it estimates here pertain solely to the electronic dissemination, signing, and storage of the agreement. This is assigned an average time cost of five minutes per signing party to read and sign the designation agreement, as well as a ten-cent record processing and maintenance cost per transfer. Thus, designation agreement-specific recordkeeping costs are expected to include a time cost of 10-50 minutes (assuming one party signing per tier of the cascade) and $0.20-$0.50 per reportable transfer that involves a designation. This corresponds to expected annual aggregate costs ranging from approximately $10.9 million to $36.1 million. FinCEN notes that it assumes that rational parties to a reportable transfer would not enter into a designation agreement if the expected cost of doing so, including compliance with the recordkeeping requirements, were not elsewhere compensated in the form of efficiency gains or other offsetting cost savings associated with other components of compliance with the rule, such as training or reporting costs. As such, the estimates provided here should only be taken to reflect a pro forma accounting cost.
Several commenters expressed concern that in addition to the technological costs associated with new or upgraded software, they would face certain non-monetary costs in the form of increased technology and cybersecurity related risk. Because FinCEN is not requiring reporting persons to retain copies of filed Real Estate Reports, it is not clear how the incremental data that would be retained ( i.e., a copy of the beneficial ownership information certification and, if one exists, a copy of the designation agreement) could be meaningfully distinguished from other records a reporting person might retain in connection with the same reportable transfer for purposes of estimating a standalone burden of increased risk.
To implement the rule, FinCEN expects to incur certain operating costs that would include approximately $8.5 million in the first year and approximately $7 million each year thereafter. These estimates include anticipated novel expenses related to technological implementation, [ 81 ] stakeholder outreach and informational support, compliance monitoring, and potential enforcement activities, as well as certain incremental increases to pre-existing administrative and logistical expenses.
While such operating costs are not typically considered part of the general economic cost of a rule, FinCEN acknowledges that this treatment implicitly assumes that resources commensurate with the novel operating costs exist. If this assumption does not hold, then operating costs associated with a rule may impose certain economic costs on the public in the form of opportunity costs from the agency's forgone alternative activities and those activities' attendant benefits. Putting that into the context of this rule, and benchmarking against FinCEN's actual appropriated budget for fiscal year 2023 ($190.2 million), [ 82 ] the corresponding opportunity cost would resemble forgoing approximately 4.5 percent of current activities annually.
In the NPRM, FinCEN analyzed the expected impact of three policy alternatives to the proposed rule and invited public comment regarding the ( print page 70288) viability and preferability of these alternatives.
First, instead of the designation option included in the proposed rule, FinCEN could have required the reporting person to be determined strictly by the reporting cascade, leaving it to the parties to a covered transfer to determine which service provider would meet the highest tier of the cascade and consequently be required to report without any option to select whichever party in the reporting cascade is best-positioned to file the report. FinCEN expects that rational parties would prefer to assign the reporting obligation to the party who can complete the report most cost-effectively. An alternative reporting structure that does not allow the parties to designate a reporting person responsible for the report would therefore be less cost-effective than the approach proposed in the NPRM, unless the reporting cascade would always assign the reporting requirement to the party with the lowest associated compliance costs. Because FinCEN expects that parties to the covered transfer may be better situated to determine which party can complete the required report in the most cost-effective manner, FinCEN declined to propose a standalone reporting cascade. FinCEN did not receive any comments indicating that it was mistaken in its assumptions, nor did it receive any comments indicating a preference for the designation option to be removed.
As a second alternative, FinCEN could have proposed to impose the full traditional SAR filing obligations and AML/CFT program requirements on the various real estate professionals included in the proposed reporting cascade instead of the narrower requirement that only one participant party would be required to file a Real Estate Report. While imposing full AML/CFT program requirements on all real estate professionals would have almost certainly served to mitigate the illicit finance risks in the residential real estate sector, FinCEN considered that the costs accompanying this alternative would be commensurately more significant and would likely disproportionately burden small businesses. Such weighting of costs towards smaller entities was expected to increase transaction costs associated with residential real property transfers both directly via program-related operational costs and indirectly via the potential anticompetitive effects of program costs and was therefore considered a less viable alternative than the streamlined reporting obligation proposed. FinCEN did not receive any comments indicating that it was mistaken in its expectations about the economic impact of this alternative or its lesser desirability.
Finally, as a third alternative, FinCEN could have required the reporting person to certify the transferee's beneficial ownership information instead of allowing them to rely upon the transferee entity or trust to certify to the reporting person that the beneficial ownership information they have provided is accurate to the best of their knowledge. FinCEN anticipated that this alternative would likely be accompanied by a number of increased costs, including a potential need for longer, more detailed compliance training; lengthier time necessary to collect and review documents supporting the reported transferee beneficial ownership information required; and increased recordkeeping costs. FinCEN also considered that there might also be costs associated with transfers that would not occur if, for example, a reporting person was unwilling or unable to certify the transferee's information. Furthermore, FinCEN was concerned about the potential anticompetitive effects that might arise if certain reporting persons are better positioned to absorb the risks associated with certifying transferee beneficial ownership information, as it was foreseeable that smaller businesses could be at a disadvantage. FinCEN did not receive any comments indicating that it was mistaken in its expectations about the economic impact of this alternative or comments from potentially affected transferees that they would prefer the reporting person to provide certification instead.
E.O. 12866 and its amendments direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, and public health and safety effects; distributive impacts; and equity). [ 83 ] E.O. 13563 emphasizes the importance of quantifying both costs and benefits, reducing costs, harmonizing rules, and promoting flexibility. E.O. 13563 also recognizes that some benefits are difficult to quantify and provides that, where appropriate and permitted by law, agencies may consider and discuss qualitatively values that are difficult or impossible to quantify. [ 84 ]
Because annual residential real estate transaction volume can vary significantly from year to year and is sensitive to a host of macroeconomic factors (some of which cannot easily be modeled with reasonable accuracy), estimates that rely on average values of current data projected over extended periods of time into the future may be of limited informational value. Nevertheless, FinCEN has prepared certain annualized cost estimates as recommended in OMB circular A-4. [ 85 ] Using the midpoint of the estimated range of expected costs in year one of compliance [ 86 ] and in subsequent years, [ 87 ] FinCEN estimates that the net present value of costs associated with a five-year time horizon is $2.21 billion ($2.46 billion) using a 7 precent (3 percent) discount rate, respectively. This equates to annualized costs of $538.4 million ($538.0 million) using the same discount rates.
This rule has been designated a “significant regulatory action;” accordingly, it has been reviewed by the Office of Management and Budget (OMB).
When an agency issues a rulemaking proposal, the RFA [ 88 ] requires the agency either to provide an initial regulatory flexibility analysis (IRFA) with a proposed rule or to certify that the proposed rule would not have a significant economic impact on a substantial number of small entities. In its NPRM, FinCEN asserted that, although the rule might apply to a substantial number of small entities, [ 89 ] it ( print page 70289) was not expected to have a significant economic impact on a substantial number of them. [ 90 ] The preliminary basis for this expectation, at that stage, included FinCEN's attempts to minimize the burden on reporting persons by streamlining the reporting requirements and providing for an option to designate the reporting obligation. Accordingly, FinCEN certified that the proposed rule would not have a significant economic impact on a substantial number of small entities. [ 91 ]
Having considered the various possible outcomes for small entities under the reporting requirements at the proposal stage [ 92 ] and having taken the public comments received in response to the NPRM into consideration, FinCEN continues to believe that the rule will not have a significant economic impact on a substantial number of small entities, [ 93 ] and therefore that certification remains appropriate and a Final Regulatory Flexibility Analysis (FRFA) is not required. Changes made from the NPRM to the final rule reinforce this conclusion. The final rule contains additional exceptions for low-risk transfers and otherwise clarifies the scope of transactions to which the rule will apply, and also adopts a reasonable reliance standard with respect to information provided to reporting persons. As a result, FinCEN expects that the final rule will result in a more narrowly scoped burden in general than the proposed rule that was certified at the NPRM stage. [ 94 ] FinCEN expects that small entities affected by the final rule would experience a proportionate share of this reduction in burden when compared to the proposed rule, resulting in a more limited burden for small entities under the final rule when compared to the proposed rule, noting again that the proposed rule was itself certified as not having a significant economic impact on a substantial number of small entities.
Nevertheless, while further steps to accommodate or discuss small entity concerns may not be a strict requirement, FinCEN is mindful of the small-business-oriented views and concerns voiced during the public comment period and has not precluded taking additional steps, as feasible, to facilitate implementation of the final rule in a manner that minimizes the perceived or realized competitive disadvantages a small business or other affected small entity may face. This includes, but may not be limited to, targeted outreach and production of training materials such as FAQs or a Small Entity Compliance Guide, in addition to the more broadly available support services as previously discussed in Section III.A and Section VI.A.iv.b.
Having considered the various possible outcomes for small entities under the reporting requirements at the proposal stage and having taken the public comments received in response to the NPRM into consideration for the final rule, FinCEN continues to certify that the rule will not have a significant economic impact on a substantial number of small entities.
Section 202 of the UMRA [ 95 ] requires that an agency prepare a statement before promulgating a rule that may result in expenditure by state, local, and Tribal governments, or the private sector, in the aggregate, of $184 million or more in any one year. [ 96 ] Section 202 of the UMRA also requires an agency to identify and consider a reasonable number of regulatory alternatives before promulgating a rule. FinCEN believes that the preceding assessment of impact [ 97 ] satisfies the UMRA's analytical requirements.
The new information collection requirements contained in this rule ( 31 CFR 1031.320 ) have been approved by OMB in accordance with the Paperwork Reduction Act of 1995 (PRA), 44 U.S.C. 3501 et seq., under control number 1506-0080. The PRA imposes certain requirements on Federal agencies in connection with their conducting or sponsoring any collection of information as defined by the PRA. Under the PRA, an agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid OMB control number. The rule includes three information collection requirements: Real Estate Reports, which will be submitted to FinCEN, and, depending on the circumstances of the transfer, a designation agreement and/or a certification form for beneficial ownership information, neither of which will be submitted to FinCEN but which must be retained for five years.
Reporting and Recordkeeping Requirements: The provisions in this rule pertaining to the collection of information can be found in paragraph (a) of 31 CFR 1031.320 . The information required to be reported by the rule will be used by the U.S. Government to monitor and investigate money laundering in the U.S. residential real estate sector. The information required to be maintained will be used by Federal agencies to verify compliance by reporting persons with the provisions of the rule. The collection of information is mandatory.
OMB Control Number: 1506-0080
Frequency: As required
Description of Affected Public: Residential Real Estate Settlement Agents, Title Insurance Carriers, Escrow Service Providers, Other Real Estate Professionals
Estimated Number of Responses: 850,000 [ 98 ]
Estimated Total Annual Reporting and Recordkeeping Burden: 4,604,167 burden hours [ 99 ]
Estimated Total Annual Reporting and Recordkeeping Cost: $630,976,662.47 [ 100 ]
OMB's Office of Information and Regulatory Affairs has designated this rule as meeting the criteria under 5 U.S.C. 804(2) for purposes of Subtitle E of the Small Business Regulatory Enforcement and Fairness Act of 1996 (also known as the Congressional Review Act or CRA). [ 101 ] Under the CRA, such rules generally may take effect no earlier than 60 days after the rule is published in the Federal Register . [ 102 ]
- Administrative practice and procedure
- Authority delegations (Government agencies)
- Banks and banking
- Buildings and facilities
- Business and industry
- Condominiums
- Cooperatives
- Citizenship and naturalization
- Electronic filing
- Fair housing
- Federal home loan banks
- Federal savings associations
- Federal-States relations
- Foreign investments in US
- Foreign persons
- Foundations
- Holding companies
- Home improvement
- Indian—law
- Indians—tribal government
- Insurance companies
- Investment advisers
- Investment companies
- Investigations
- Legal services
- Law enforcement
- Low and moderate income housing
- Money laundering
- Mortgage insurances
- Real property acquisition
- Record retention
- Reporting and recordkeeping requirements
- Small businesses
- Trusts and trustees
- US territories
For the reasons set forth in the preamble, chapter X of title 31 of the Code of Federal Regulations is amended by adding part 1031 to read as follows:
Authority: 12 U.S.C. 1829b , 1951-1959 ; 31 U.S.C. 5311-5314 , 5316-5336 ; title III, sec. 314 Pub. L. 107-56 , 115 Stat. 307; sec. 701 Pub. L. 114-74 , 129 Stat. 599; sec. 6403, Pub. L. 116-283 , 134 Stat. 3388.
(a) General. A reportable transfer as defined in paragraph (b) of this section shall be reported to FinCEN by the reporting person identified in paragraph (c) of this section. The report shall include the information described in paragraphs (d) through (i) of this section. The reporting person may reasonably rely on information collected from others under the conditions described in paragraph (j). The report required by this section shall be filed in the form and manner, and at the time, specified in paragraph (k) of this section. Records shall be retained as specified in paragraph (l) of this section. Reports required under this section and any other information that would reveal that a reportable transfer has been reported are not confidential as specified in paragraph (m) of this section. Terms not defined in this section are defined in 31 CFR 1010.100 .
(b) Reportable transfer. (1) Except as set forth in paragraph (b)(2) of this section, a reportable transfer is a non-financed transfer to a transferee entity or transferee trust of an ownership interest in residential real property. For the purposes of this section, residential real property means:
(i) Real property located in the United States containing a structure designed principally for occupancy by one to four families;
(ii) Land located in the United States on which the transferee intends to build a structure designed principally for occupancy by one to four families;
(iii) A unit designed principally for occupancy by one to four families within a structure on land located in the United States; or
(iv) Shares in a cooperative housing corporation for which the underlying property is located in the United States.
(2) A reportable transfer does not include a:
(i) Grant, transfer, or revocation of an easement;
(ii) Transfer resulting from the death of an individual, whether pursuant to the terms of a decedent's will or the terms of a trust, the operation of law, or by contractual provision;
(iii) Transfer incident to divorce or dissolution of a marriage or civil union;
(iv) Transfer to a bankruptcy estate;
(v) Transfer supervised by a court in the United States;
(vi) Transfer for no consideration made by an individual, either alone or with the individual's spouse, to a trust of which that individual, that individual's spouse, or both of them, are the settlor(s) or grantor(s);
(vii) Transfer to a qualified intermediary for purposes of 26 CFR 1.1031(k)-1 ; or
(viii) Transfer for which there is no reporting person.
(c) Determination of reporting person. (1) Except as set forth in paragraphs (c)(2), (3) and (4) of this section, the reporting person for a reportable transfer is the person engaged within the United States as a business in the provision of real estate closing and settlement services that is:
(i) The person listed as the closing or settlement agent on the closing or settlement statement for the transfer;
(ii) If no person described in paragraph (c)(1)(i) of this section is involved in the transfer, then the person that prepares the closing or settlement statement for the transfer;
(iii) If no person described in paragraph (c)(1)(i) or (ii) of this section is involved in the transfer, then the person that files with the recordation office the deed or other instrument that transfers ownership of the residential real property;
(iv) If no person described in paragraphs (c)(1)(i) through (iii) of this section is involved in the transfer, then the person that underwrites an owner's title insurance policy for the transferee with respect to the transferred residential real property, such as a title insurance company;
(v) If no person described in paragraphs (c)(1)(i) through (iv) of this section is involved in the transfer, then the person that disburses in any form, including from an escrow account, trust account, or lawyers' trust account, the greatest amount of funds in connection with the residential real property transfer;
(vi) If no person described in paragraphs (c)(1)(i) through (v) of this section is involved in the transfer, then the person that provides an evaluation of the status of the title; or ( print page 70291)
(vii) If no person described in paragraphs (c)(1)(i) through (vi) of this section is involved in the transfer, then the person that prepares the deed or, if no deed is involved, any other legal instrument that transfers ownership of the residential real property, including, with respect to shares in a cooperative housing corporation, the person who prepares the stock certificate.
(2) Employees, agents, and partners. If an employee, agent, or partner acting within the scope of such individual's employment, agency, or partnership would be the reporting person as determined in paragraph (c)(1) of this section, then the individual's employer, principal, or partnership is deemed to be the reporting person.
(3) Financial institutions. A financial institution that has an obligation to maintain an anti-money laundering program under this chapter is not a reporting person for purposes of this section.
(4) Designation agreement. (i) The reporting person described in paragraph (c)(1) of this section may enter into an agreement with any other person described in paragraph (c)(1) of this section to designate such other person as the reporting person with respect to the reportable transfer. The person designated by such agreement shall be treated as the reporting person with respect to the transfer. If reporting persons decide to use designation agreements, a separate agreement is required for each reportable transfer.
(ii) A designation agreement shall be in writing, and shall include:
(A) The date of the agreement;
(B) The name and address of the transferor;
(C) The name and address of the transferee entity or transferee trust;
(D) Information described in in paragraph (g) identifying transferred residential real property;
(E) The name and address of the person designated through the agreement as the reporting person with respect to the transfer; and
(F) The name and address of all other parties to the agreement.
(d) Information concerning the reporting person. The reporting person shall report:
(1) The full legal name of the reporting person;
(2) The category of reporting person, as determined in paragraph (c) of this section; and
(3) The street address that is the reporting person's principal place of business in the United States.
(e) Information concerning the transferee —(1) Transferee entities. For each transferee entity involved in a reportable transfer, the reporting person shall report:
(i) The following information for the transferee entity:
(A) Full legal name;
(B) Trade name or “doing business as” name, if any;
(C) Complete current address consisting of:
( 1 ) The street address that is the transferee entity's principal place of business; and
( 2 ) If such principal place of business is not in the United States, the street address of the primary location in the United States where the transferee entity conducts business, if any; and
(D) Unique identifying number, if any, consisting of:
( 1 ) The Internal Revenue Service Taxpayer Identification Number (IRS TIN) of the transferee entity;
( 2 ) If the transferee entity has not been issued an IRS TIN, a tax identification number for the transferee entity that was issued by a foreign jurisdiction and the name of such jurisdiction; or
( 3 ) If the transferee entity has not been issued an IRS TIN or a foreign tax identification number, an entity registration number issued by a foreign jurisdiction and the name of such jurisdiction;
(ii) The following information for each beneficial owner of the transferee entity:
(B) Date of birth;
(C) Complete current residential street address;
(D) Citizenship; and
(E) Unique identifying number consisting of:
( 1 ) An IRS TIN; or
( 2 ) Where an IRS TIN has not been issued:
( i ) A tax identification number issued by a foreign jurisdiction and the name of such jurisdiction; or
( ii ) The unique identifying number and the issuing jurisdiction from a non-expired passport issued by a foreign government; and
(iii) The following information for each signing individual, if any:
(D) Unique identifying number consisting of:
( ii ) The unique identifying number and the issuing jurisdiction from a non-expired passport issued by a foreign government to the individual;
(E) Description of the capacity in which the individual is authorized to act as the signing individual; and
(F) If the signing individual is acting in that capacity as an employee, agent, or partner, the name of the individual's employer, principal, or partnership.
(2) Transferee trusts. For each transferee trust in a reportable transfer, the reporting person shall report:
(i) The following information for the transferee trust:
(A) Full legal name, such as the full title of the agreement establishing the transferee trust;
(B) Date the trust instrument was executed;
(C) Unique identifying number, if any, consisting of:
( 1 ) IRS TIN; or
( 2 ) Where an IRS TIN has not been issued, a tax identification number issued by a foreign jurisdiction and the name of such jurisdiction; and
(D) Whether the transferee trust is revocable;
(ii) The following information for each trustee that is a legal entity:
( 1 ) The street address that is the trustee's principal place of business; and
( 2 ) If such principal place of business is not in the United States, the street address of the primary location in the United States where the trustee conducts business, if any; and
( 1 ) The IRS TIN of the trustee;
( 2 ) In the case that a trustee has not been issued an IRS TIN, a tax identification number issued by a foreign jurisdiction and the name of such jurisdiction; or
( 3 ) In the case that a trustee has not been issued an IRS TIN or a foreign tax identification number, an entity registration number issued by a foreign jurisdiction and the name of such jurisdiction;
(E) For purposes of this section, an individual trustee of the transferee trust is considered to be a beneficial owner of the trust. As such, information on individual trustees must be reported in accordance with the requirements set forth in paragraph (e)(2)(iii) of this section;
(iii) The following information for each beneficial owner of the transferee trust:
(A) Full legal name; ( print page 70292)
(D) Citizenship;
(F) The category of beneficial owner, as determined in paragraph (j)(1)(ii) of this section; and
(iv) The following information for each signing individual, if any:
(f) Information concerning the transferor. For each transferor involved in a reportable transfer, the reporting person shall report:
(1) The following information for a transferor who is an individual:
(i) Full legal name;
(ii) Date of birth;
(iii) Complete current residential street address; and
(iv) Unique identifying number consisting of:
(A) An IRS TIN; or
(B) Where an IRS TIN has not been issued:
( 1 ) A tax identification number issued by a foreign jurisdiction and the name of such jurisdiction; or
( 2 ) The unique identifying number and the issuing jurisdiction from a non-expired passport issued by a foreign government to the individual;
(2) The following information for a transferor that is a legal entity:
(ii) Trade name or “doing business as” name, if any;
(iii) Complete current address consisting of:
(A) The street address that is the legal entity's principal place of business; and
(B) If the principal place of business is not in the United States, the street address of the primary location in the United States where the legal entity conducts business, if any; and
(iv) Unique identifying number, if any, consisting of:
(A) An IRS TIN;
(B) In the case that the legal entity has not been issued an IRS TIN, a tax identification number issued by a foreign jurisdiction and the name of such jurisdiction; or
(C) In the case that the legal entity has not been issued an IRS TIN or a foreign tax identification number, an entity registration number issued by a foreign jurisdiction and the name of such jurisdiction; and
(3) The following information for a transferor that is a trust:
(i) Full legal name, such as the full title of the agreement establishing the trust;
(ii) Date the trust instrument was executed;
(iii) Unique identifying number, if any, consisting of:
(A) IRS TIN; or
(B) Where an IRS TIN has not been issued, a tax identification number issued by a foreign jurisdiction and the name of such jurisdiction;
(iv) For each individual who is a trustee of the trust:
(B) Current residential street address; and
(C) Unique identifying number consisting of:
(v) For each legal entity that is a trustee of the trust:
( 1 ) The street address that is the legal entity's principal place of business; and
( 2 ) If the principal place of business is not in the United States, the street address of the primary location in the United States where the legal entity conducts business, if any; and
( 1 ) An IRS TIN;
( 2 ) In the case that the legal entity has not been issued an IRS TIN, a tax identification number issued by a foreign jurisdiction and the name of such jurisdiction; or
( 3 ) In the case that the legal entity has not been issued an IRS TIN or a foreign tax identification number, an entity registration number issued by a foreign jurisdiction and the name of such jurisdiction.
(g) Information concerning the residential real property. For each residential real property that is the subject of the reportable transfer, the reporting person shall report:
(1) The street address, if any;
(2) The legal description, such as the section, lot, and block; and
(3) The date of closing.
(h) Information concerning payments. (1) The reporting person shall report the following information concerning each payment, other than a payment disbursed from an escrow or trust account held by a transferee entity or transferee trust, that is made by or on behalf of the transferee entity or transferee trust regarding a reportable transfer:
(i) The amount of the payment;
(ii) The method by which the payment was made;
(iii) If the payment was paid from an account held at a financial institution, the name of the financial institution and the account number; and
(iv) The name of the payor on any wire, check, or other type of payment if the payor is not the transferee entity or transferee trust.
(2) The reporting person shall report the total consideration paid or to be paid by the transferee entity or transferee trust regarding the reportable transfer, as well as the total consideration paid by or to be paid by all transferees regarding the reportable transfer.
(i) Information concerning hard money, private, and other similar loans. The reporting person shall report whether the reportable transfer involved credit extended by a person that is not a financial institution with an obligation to maintain an anti-money laundering program and an obligation to report suspicious transactions under this chapter.
(j) Reasonable reliance —(1) General. Except as described in paragraph (j)(2) of this section, the reporting person may rely upon information provided by other persons, absent knowledge of facts that would reasonably call into question the ( print page 70293) reliability of the information provided to the reporting person.
(2) Certification when reporting beneficial ownership information. For purposes of reporting information described in paragraphs (e)(1)(ii) and (e)(2)(iii) of this section, the reporting person may rely upon information provided by the transferee or a person representing the transferee in the reportable transfer, absent knowledge of facts that would reasonably call into question the reliability of the information provided to the reporting person, if the person providing the information certifies the accuracy of the information in writing to the best of the person's knowledge.
(k) Filing procedures —(1) What to file. A reportable transfer shall be reported by completing a Real Estate Report.
(2) Where to file. The Real Estate Report shall be filed electronically with FinCEN, as indicated in the instructions to the report.
(3) When to file. A reporting person is required to file a Real Estate Report by the later of either:
(i) the final day of the month following the month in which the date of closing occurred; or
(ii) 30 calendar days after the date of closing.
(l) Retention of records. A reporting person shall maintain a copy of any certification described in paragraph (j)(2) of this section. In addition, all parties to a designation agreement described in paragraph (c)(4) of this section shall maintain a copy of such designation agreement.
(m) Exemptions —(1) Confidentiality. Reporting persons, and any director, officer, employee, or agent of such persons, and Federal, State, local, or Tribal government authorities, are exempt from the confidentiality provision in 31 U.S.C. 5318(g)(2) that prohibits the disclosure to any person involved in a suspicious transaction that the transaction has been reported or any information that otherwise would reveal that the transaction has been reported.
(2) Anti-money laundering program. A reporting person under this section is exempt from the requirement to establish an anti-money laundering program, in accordance with 31 CFR 1010.205(b)(1)(v) .
(n) Definitions. For purposes of this section, the following terms have the following meanings.
(1) Beneficial owner —(i) Beneficial owners of transferee entities. (A) The beneficial owners of a transferee entity are the individuals who would be the beneficial owners of the transferee entity on the date of closing if the transferee entity were a reporting company under 31 CFR 1010.380(d) on the date of closing.
(B) The beneficial owners of a transferee entity that is established as a non-profit corporation or similar entity, regardless of jurisdiction of formation, are limited to individuals who exercise substantial control over the entity, as defined in 31 CFR 1010.380(d)(1) on the date of closing.
(ii) Beneficial owners of transferee trusts. The beneficial owners of a transferee trust are the individuals who fall into one or more of the following categories on the date of closing:
(A) A trustee of the transferee trust.
(B) An individual other than a trustee with the authority to dispose of transferee trust assets.
(C) A beneficiary who is the sole permissible recipient of income and principal from the transferee trust or who has the right to demand a distribution of, or withdraw, substantially all of the assets from the transferee trust.
(D) A grantor or settlor who has the right to revoke the transferee trust or otherwise withdraw the assets of the transferee trust.
(E) A beneficial owner of any legal entity that holds at least one of the positions in the transferee trust described in paragraphs (n)(1)(ii)(A) through (D) of this section, except when the legal entity meets the criteria set forth in paragraphs (n)(10)(ii)(A) through (P) of this section. Beneficial ownership of any such legal entity is determined under 31 CFR 1010.380(d) , utilizing the criteria for beneficial owners of a reporting company.
(F) A beneficial owner of any trust that holds at least one of the positions in the transferee trust described in paragraphs (n)(1)(ii)(A) through (D) of this section, except when the trust meets the criteria set forth in paragraphs (n)(11)(ii)(A) through (D). Beneficial ownership of any such trust is determined under this paragraph (n)(1)(ii), utilizing the criteria for beneficial owners of a transferee trust.
(2) Closing or settlement agent. The term “closing or settlement agent” means any person, whether or not acting as an agent for a title agent or company, a licensed attorney, real estate broker, or real estate salesperson, who for another and with or without a commission, fee, or other valuable consideration and with or without the intention or expectation of receiving a commission, fee, or other valuable consideration, directly or indirectly, provides closing or settlement services incident to the transfer of residential real property.
(3) Closing or settlement statement. The term “closing or settlement statement” means the statement of receipts and disbursements prepared for the transferee for a transfer of residential real property.
(4) Date of closing. The term “date of closing” means the date on which the transferee entity or transferee trust receives an ownership interest in residential real property.
(5) Non-financed transfer. The term “non-financed transfer” means a transfer that does not involve an extension of credit to all transferees that is:
(i) Secured by the transferred residential real property; and
(ii) Extended by a financial institution that has both an obligation to maintain an anti-money laundering program and an obligation to report suspicious transactions under this chapter.
(6) Ownership interest. The term “ownership interest” means the rights held in residential real property that are demonstrated:
(i) Through a deed, for a reportable transfer described in paragraph (b)(1)(i), (ii), or (iii) of this section; or
(ii) Through stock, shares, membership, certificate, or other contractual agreement evidencing ownership, for a reportable transfer described in paragraph (b)(1)(iv) of this section.
(7) Recordation office. The term “recordation office” means any State, local, Territory and Insular Possession, or Tribal office for the recording of reportable transfers as a matter of public record.
(8) Signing individual. The term “signing individual” means each individual who signed documents on behalf of the transferee as part of the reportable transfer. However, it does not include any individual who signed documents as part of their employment with a financial institution that has both an obligation to maintain an anti-money laundering program and an obligation to report suspicious transactions under this chapter.
(9) Statutory trust. The term “statutory trust” means any trust created or authorized under the Uniform Statutory Trust Entity Act or as enacted by a State. For the purposes of this subpart, statutory trusts are transferee entities.
(10) Transferee entity. (i) Except as set forth in paragraph (n)(10)(ii) of this section, the term “transferee entity” means any person other than a transferee trust or an individual.
(ii) A transferee entity does not include:
(A) A securities reporting issuer defined in 31 CFR 1010.380(c)(2)(i) ; ( print page 70294)
(B) A governmental authority defined in 31 CFR 1010.380(c)(2)(ii) ;
(C) A bank defined in 31 CFR 1010.380(c)(2)(iii) ;
(D) A credit union defined in 31 CFR 1010.380(c)(2)(iv) ;
(E) A depository institution holding company defined in 31 CFR 1010.380(c)(2)(v) ;
(F) A money service business defined in 31 CFR 1010.380(c)(2)(vi) ;
(G) A broker or dealer in securities defined in 31 CFR 1010.380(c)(2)(vii) ;
(H) A securities exchange or clearing agency defined in 31 CFR 1010.380(c)(2)(viii) ;
(I) Any other Exchange Act registered entity defined in 31 CFR 1010.380(c)(2)(ix) ;
(J) An insurance company defined in 31 CFR 1010.380(c)(2)(xii) ;
(K) A State-licensed insurance producer defined in 31 CFR 1010.380(c)(2)(xiii) ;
(L) A Commodity Exchange Act registered entity defined in 31 CFR 1010.380(c)(2)(xiv) ;
(M) A public utility defined in 31 CFR 1010.380(c)(2)(xvi) ;
(N) A financial market utility defined in 31 CFR 1010.380(c)(2)(xvii) ;
(O) An investment company as defined in section 3(a) of the Investment Company Act of 1940 ( 15 U.S.C. 80a-3(a) ) that is registered with the Securities and Exchange Commission under section 8 of the Investment Company Act ( 15 U.S.C. 80a-8 ); and
(P) Any legal entity controlled or wholly owned, directly or indirectly, by an entity described in paragraphs (n)(10)(ii)(A) through (O) of this section.
(11) Transferee trust. (i) Except as set forth in paragraph (n)(11)(ii) of this section, the term “transferee trust” means any legal arrangement created when a person (generally known as a grantor or settlor) places assets under the control of a trustee for the benefit of one or more persons (each generally known as a beneficiary) or for a specified purpose, as well as any legal arrangement similar in structure or function to the above, whether formed under the laws of the United States or a foreign jurisdiction. A trust is deemed to be a transferee trust regardless of whether residential real property is titled in the name of the trust itself or in the name of the trustee in the trustee's capacity as the trustee of the trust.
(ii) A transferee trust does not include:
(A) A trust that is a securities reporting issuer defined in 31 CFR 1010.380(c)(2)(i) ;
(B) A trust in which the trustee is a securities reporting issuer defined in 31 CFR 1010.380(c)(2)(i) ;
(C) A statutory trust; or
(D) An entity wholly owned by a trust described in paragraphs (n)(11)(ii)(A) through (C) of this section.
Andrea M. Gacki,
Director, Financial Crimes Enforcement Network.
1. Section 6101 of the AML Act, codified at 31 U.S.C. 5318(h) , amended the BSA's requirement that financial institutions implement AML programs to also combat terrorist financing. This rule refers to “AML/CFT program” in reference to the current obligation contained in the BSA.
2. 31 U.S.C. 5312(a)(2)(U) .
3. See 31 U.S.C. 5311 . Section 6003(1) of the Anti-Money Laundering Act of 2020 defines the BSA as section 21 of the Federal Deposit Insurance Act ( 12 U.S.C. 1829b ), Chapter 2 of Title I of Public Law 91-508 ( 12 U.S.C. 1951 et seq. ), and 31 U.S.C. chapter 53 , subchapter II. AML Act, Public Law 116-283 , Division F, section 6003(1) (Jan. 1, 2021). Under this definition, the BSA is codified at 12 U.S.C. 1829b and 1951-1960 , and 31 U.S.C. 5311-5314 and 5316-5336 , including notes thereto. Its implementing regulations are found at 31 CFR Chapter X .
4. 31 U.S.C. 5311(1) .
5. Treasury Order 180-01, Paragraph 3(a) (Jan. 14, 2020), available at https://home.treasury.gov/about/general-information/orders-and-directives/treasury-order-180-01 .
6. 31 U.S.C. 5318(h)(1)(A)-(D) .
7. 31 U.S.C. 5318(g) .
8. 31 U.S.C. 5312(a)(2)(U) .
9. 31 U.S.C. 5318(g)(1)(A) .
10. 31 U.S.C. 5318(g)(5)(B)(i)-(iii) .
11. See AML Act, section 6202 ( codified at 31 U.S.C. 5318(g)(D)(i)(1) ). Section 6102(c) of the AML Act also amended 31 U.S.C. 5318(a)(2) to give the Secretary the authority to “require a class of domestic financial institutions or nonfinancial trades or businesses to maintain appropriate procedures, including the collection and reporting of certain information as the Secretary of the Treasury may prescribe by regulation, to . . . guard against money laundering, the financing of terrorism, or other forms of illicit finance.” FinCEN believes this authority also provides an additional basis for the reporting requirement adopted in this final rule.
12. As the Financial Action Task Force (FATF) noted in July 2022, “[d]isparities with rules surrounding legal structures across countries means property can often be acquired abroad by shell companies or trusts based in secrecy jurisdictions, exacerbating the risk of money laundering.” International bodies, such as the FATF have found that “[s]uccessful AML/CFT supervision of the real estate sector must contend with the obfuscation of true ownership provided by legal entities or arrangements[.]” FATF, “Guidance for a Risk Based Approach: Real Estate Sector” (July 2022), p. 17, available at https://www.fatf-gafi.org/content/dam/fatf-gafi/guidance/RBA-Real-Estate-Sector.pdf.coredownload.pdf ; see, e.g., U.S. v. Delgado, 653 F.3d 729 (8th Cir. 2011) (drug trafficking, money laundering); U.S. v. Fernandez, 559 F.3d 303 (5th Cir. 2009) (drug trafficking, money laundering); Complaint for Forfeiture, U.S. v. All the Lot or Parcel of Land Located at 19 Duck Pond Lane Southampton, New York 11968, Case No. 1:23-cv-01545 (S.D.N.Y. Feb. 24, 2023) (sanctions evasion); Indictment and Forfeiture, U.S. v. Maikel Jose Moreno Perez, Case No. 1:23-cr-20035-RNS (S.D. Fla. Jan. 26, 2023) (bribery, money laundering, conspiracy); Motion for Preliminary Order of Forfeiture and Preliminary Order of Forfeiture, U.S. v. Colon, Case No. 1:17-cr-47-SB (D. Del. Nov. 18, 2022) (drug trafficking, money laundering); U.S. v. Andrii Derkach, 1:2022-cr-00432 (E.D.N.Y. Sept. 26, 2022) (sanctions evasion, money laundering, bank fraud); Doc. No. 10 at p. 1, U.S. vs. Ralph Steinmann and Luis Fernando Vuiz, 1:2022-cr-20306 (S.D. Fla. July 12, 2022) (bribery, money laundering); U.S. v. Jimenez, Case No. 1:18-cr-00879, 2022 U.S. Dist. LEXIS 77685, 2022 WL 1261738 (S.D.N.Y. Apr. 28, 2022) (false claim fraud, wire fraud, money laundering, identity theft); Complaint for Forfeiture, U.S. v. Real Property Located in Potomac, Maryland, Commonly Known as 9908 Bentcross Drive, Potomac, MD 20854, 8:2020-cv-02071 (D. Md. July 15, 2020) (public corruption, money laundering); Final Order of Forfeiture, U.S. v. Raul Torres, Case No. 1:19-cr-390 (N.D. Ohio Mar. 30, 2020) (operating an animal fighting venture, operating an unlicensed money services business, money laundering); U.S. v. Bradley, Case No. 3:15-cr-00037-2, 2019 U.S. Dist. LEXIS 141157, 2019 WL 3934684 (M.D. Tenn. Aug. 20, 2019) (drug trafficking, money laundering); Indictment, U.S. v. Patrick Ifediba, et al., Case No. 2:18-cr-00103-RDP-JEO, Doc. 1 (N.D. Ala. Mar. 29, 2018) (health care fraud); Redacted Indictment, U.S. v. Paul Manafort, Case 1:18-cr-00083-TSE (E.D. Va. Feb. 26, 2018) (money laundering, acting as an unregistered foreign agent); U.S. v. Miller, 295 F. Supp. 3d 690 (E.D. Va. 2018) (wire fraud); U.S. v. Coffman, 859 F. Supp. 2d 871 (E.D. Ky. 2012) (mail, wire, and securities fraud); U.S. v. 10.10 Acres Located on Squires Rd., 386 F. Supp. 2d 613 (M.D.N.C. 2005) (drug trafficking); Atty. Griev. Comm'n of Md. v. Blair, 188 A.3d 1009 (Md. Ct. App. 2018) (money laundering drug trafficking proceeds); State v. Harris, 861 A.2d 165 (NJ Super. Ct. App. Div. 2004) (money laundering, theft); U.S. Department of Justice, Press Release, “Associate of Sanctioned Oligarch Indicted for Sanctions Evasion and Money Laundering: Fugitive Vladimir Vorontchenko Aided in Concealing Luxury Real Estate Owned by Viktor Vekselberg” (Feb. 7, 2023), available at https://www.justice.gov/usao-sdny/pr/associate-sanctioned-oligarch-indicted-sanctions-evasion-and-money-laundering ; U.S. Department of Justice, Press Release, United States Reaches Settlement to Recover More Than $700 Million in Assets Allegedly Traceable to Corruption Involving Malaysian Sovereign Wealth Fund (Oct. 30, 2019), available at https://www.justice.gov/opa/pr/united-states-reaches-settlement-recover-more-700-million-assets-allegedly-traceable ; U.S. Department of Justice, Press Release, “Acting Manhattan U.S. Attorney Announces $5.9 Million Settlement of Civil Money Laundering And Forfeiture Claims Against Real Estate Corporations Alleged to Have Laundered Proceeds of Russian Tax Fraud” (May 12, 2017), available at https://www.justice.gov/usao-sdny/pr/acting-manhattan-us-attorney-announces-59-million-settlement-civil-money-laundering-and .
13. As explained in the notice of proposed rulemaking (NPRM) issued on February 16, 2024, while other investigative methods and databases may be available to law enforcement seeking information concerning persons involved in non-financed transfers of residential real property, the information obtained through such investigative methods or the databases themselves are often incomplete, unreliable, and diffuse, resulting in misalignment between those methods or sources and the potential risks posed by the transfers. For example, the non-uniformity of the title transfer processes across states and the fact that the recording of title information is largely done at the local level complicates and hinders investigative efforts. To presently verify how many non-financed purchases of residential real property a known illicit actor has made, law enforcement may have to issue subpoenas and travel to multiple jurisdictions—assuming that they are known—to obtain the relevant information. Law enforcement is also likely to experience difficulty in finding beneficial ownership information for legal entities or trusts not registered in the United States which have engaged in non-financed transfers of residential real estate. Furthermore, existing commercial databases do not collect much of the information that is the focus of this rule, such as that involving funds transfers. In these respects, a search of Real Estate Reports would be a far more efficient and complete mechanism. See FinCEN, NPRM, “Anti-Money Laundering Regulations for Residential Real Estate Transfers,” 89 FR 12424 , 12430 (Feb. 16, 2024).
14. See 31 U.S.C. 5326 ; 31 CFR 1010.370 ; Treasury Order 180-01 (Jan. 14, 2020), available at https://home.treasury.gov/about/general-information/orders-and-directives/treasury-order-180-01 . In general, a GTO is an order administered by FinCEN which, for a finite period of time, imposes additional recordkeeping or reporting requirements on domestic financial institutions or other businesses in a given geographic area, based on a finding that the additional requirements are necessary to carry out the purposes of, or to prevent evasion of, the BSA. The statutory maximum duration of a GTO is 180 days, though it may be renewed.
15. Global Financial Integrity, “Acres of Money Laundering: Why U.S. Real Estate is a Kleptocrat's Dream” (Aug. 2021), p. 26, available at https://gfintegrity.org/report/acres-of-money-laundering-why-u-s-real-estate-is-a-kleptocrats-dream/ . According to its website, Global Financial Integrity is “a Washington, DC-based think tank focused on illicit financial flows, corruption, illicit trade and money laundering.” See Global Financial Integrity, “About,” available at https://gfintegrity.org/about/ .
16. See supra note 13.
17. See FinCEN, Advance Notice of Proposed Rulemaking, “Anti-Money Laundering Regulations for Real Estate Transactions,” 86 FR 69589 (Dec. 8, 2021).
18. Through the proposed reporting cascade hierarchy, a real estate professional would be a reporting person required to file a report and keep records for a given transfer if the person performs a function described in the cascade and no other person performs a function described higher in the cascade. For example, if no person is involved in the transfer as described in the first tier of potential reporting persons, the reporting obligation would fall to the person involved in the transfer as described in the second tier of potential reporting persons, if any, and so on. The reporting cascade includes only persons engaged as a business in the provision of real estate closing and settlement services within the United States.
19. 31 U.S.C. 5312(a)(2)(U) ; see FinCEN, NPRM, “Anti-Money Laundering Regulations for Residential Real Estate Transfers,” 89 FR 12424 , 12427 (Feb. 16, 2024).
20. See 31 U.S.C. 5318(g) .
21. See California Bankers Ass'n v. Shultz, 416 U.S. 21 (1974); U.S. v. Miller, 425 U.S. 435 (1976).
22. 15 U.S.C. 6802(e)(5) .
23. See FinCEN NPRM, “Anti-Money Laundering Regulations for Residential Real Estate Transfers,” 89 FR 12424 , 12447-12448 (Feb. 16, 2024).
24. See, e.g., In re Grand Jury Subpoenas, 906 F.2d 1485, 1488 (10th Cir. 1990) (collecting cases).
25. See; U.S. v. Sindel, 53 F.3d 874, 876 (8th Cir. 1995); U.S. v. Blackman, 72 F.3d 1418, 1424-25 (9th Cir. 1995); U.S. v. Ritchie, 15 F.3d 592, 602 (6th Cir. 1994); U.S. v. Leventhal, 961 F.2d 936, 940 (11th Cir. 1992); U.S. v. Goldberger & Dubin, P.C., 935 F.2d 501, 505 (2d Cir. 1991); In re Grand Jury Subpoenas, 906 F.2d 1485, 1492 (10th Cir. 1990).
26. 31 CFR 1010.230(b)(2) .
27. Discussed below in Section III.C.2.b.
28. 31 U.S.C. 5321 .
29. 31 U.S.C. 5322 .
30. 31 U.S.C. 5321 ; 31 CFR 1010.821 .
31. See FinCEN, “Financial Crimes Enforcement Network (FinCEN) Statement on Enforcement of the Bank Secrecy Act” (Aug. 18, 2020), available at https://www.fincen.gov/sites/default/files/shared/FinCENEnforcementStatement_FINAL508.pdf .
32. The BOI Reporting Rule implements the CTA's reporting provisions. In recognition of the fact that illicit actors frequently use corporate structures to obfuscate their identities and launder ill-gotten gains, the BOI Reporting Rule requires certain legal entities to file reports with FinCEN that identify their beneficial owners. See FinCEN, “Beneficial Ownership Information Reporting Requirements,” 87 FR 59498 (Sept. 30, 2022). Access by authorized recipients to beneficial ownership information collected under the CTA are governed by other FinCEN regulations. See FinCEN, “Beneficial Ownership Information Access and Safeguards,” 88 FR 88732 (Dec. 22, 2023).
33. See FinCEN, NPRM, “Beneficial Ownership Information Reporting Requirements,” 86 FR 69920 (Dec. 8, 2021).
34. The CTA is Title LXIV of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021, Public Law 116-283 (Jan. 1, 2021) (the NDAA). Division F of the NDAA is the Anti-Money Laundering Act of 2020, which includes the CTA. Section 6403 of the CTA, among other things, amends the Bank Secrecy Act (BSA) by adding a new section 5336, Beneficial Ownership Information Reporting Requirements, to subchapter II of chapter 53 of title 31, United States Code.
35. See 31 CFR 1010.380(b)(1)(i) .
36. 31 CFR 1010.380(d)(3)(ii) .
37. In a 1031 Exchange, real property held for productive use in a trade or business or held for investment is exchanged for other business or investment property that is the same type or kind; as a result, the person conducting the exchange is not required to realize taxable gain or loss as part of the exchange. To avoid the exchange being disqualified, a qualified intermediary may be used to ensure that the exchanger avoids taking premature control of the proceeds from the sale of the relinquished property or, in a reverse 1031 Exchange in which the replacement property is identified and purchased before the original property is relinquished, ownership of the replacement property.
38. The current Residential Real Estate GTO threshold is $300,000 for all covered jurisdictions, except for in the City and County of Baltimore, where the threshold is $50,000.
39. See 29 CFR 1.6045-4 (Information reporting on real estate transactions with dates of closing on or after January 1, 1991).
40. See FinCEN, “Beneficial Ownership Information Access and Safeguards,” 88 FR 88732 (Dec. 22, 2023).
41. FinCEN, “Notice of a New System of Records,” 88 FR 62889 (Sept. 13, 2023).
42. U.S. v. Miller, 425 U.S. 435 (1976).
43. E.O. 12866 , 58 FR 51735 (Oct. 4, 1993), section 3(f)(1); E.O. 14094 , 88 FR 21879 (Apr. 11, 2023), section 1(b).
44. See Section VI.A.1.
45. Broadly, the anticipated economic value of a rule can be measured by the extent to which it might reasonably be expected to resolve or mitigate the economic problems identified by such review.
46. See Section VI.A.2.
47. See Section VI.A.3.
48. See Section VI.A.4.
49. See Section VI.A.5.
50. See FinCEN, NPRM, “Anti-Money Laundering Regulations for Residential Real Estate Transfers,” 89 FR 12424 (Feb. 16, 2024).
51. Office of Management and Budget, Circular A-4 (Nov. 9, 2023), available at https://www.whitehouse.gov/wp-content/uploads/2023/11/CircularA-4.pdf .
52. See National Association of Realtors, “Anti-Money Laundering Voluntary Guidelines for Real Estate Professionals” (Feb. 16, 2021), p. 3, available at https://www.narfocus.com/billdatabase/clientfiles/172/4/1695.pdf .
53. See Section III.C.5.c.
54. FinCEN, “Customer Due Diligence Requirements for Financial Institutions,” 81 FR 29398 (May 11, 2016).
55. Reportable real estate for purposes of IRS Form 1099-S includes, for example, commercial and industrial buildings (without a residential component) and non-contingent interests in standing timber, which are not covered under the rule.
56. See Matthew Collin, Florian Hollenbach, and David Szakonyi, “The impact of beneficial ownership transparency on illicit purchases of U.S. property,” Brookings Global Working Paper #170, (Mar. 2022), p. 14, available at https://www.brookings.edu/wp-content/uploads/2022/03/Illicit-purchases-of-US-property.pdf .
57. Zillow, Transaction and Assessment Database (ZTRAX), available at https://www.zillow.com/research/ztrax/ .
58. See Redfin, “Investors Bought 26% of the Country's Most Affordable Homes in the Fourth Quarter—the Highest Share on Record,” (Feb. 14, 2024), available at https://www.redfin.com/news/investor-home-purchases-q4-2023/ .
59. See Section III.C.2.e.
60. FinCEN notes that while most trusts are not reporting companies under the BOI Reporting Rule, a reporting company would be required to report a beneficial owner that owned or controlled the reporting company through a trust.
61. FinCEN notes that while the U.S. Census Bureau does produce annual statistics on the population of certain trusts (NAICS 525—Funds, Trusts, and Other Financial Vehicles), such trusts are unlikely to be affected by the rule and thus their population size is not informative for this analysis.
62. See, e.g., Cristian Badrinza and Tarun Ramadorai, “Home away from home? Foreign demand and London House prices,” Journal of Financial Economics 130 (3) (2018), pp. 532-555, available at https://www.sciencedirect.com/science/article/abs/pii/S0304405X18301867?via%3Dihub ; see also Caitlan S. Gorback and Benjamin J. Keys, “Global Capital and Local Assets: House Prices, Quantities, and Elasticities,” Technical Report, National Bureau of Economic Research (2020), available at https://www.nber.org/papers/w27370 .
63. See Matthew Collin, Florian Hollenbach, and David Szakonyi, “The impact of beneficial ownership transparency on illicit purchases of U.S. property,” Brookings Global Working Paper #170, (Mar. 2022), p. 14, available at https://www.brookings.edu/wp-content/uploads/2022/03/Illicit-purchases-of-US-property.pdf .
64. See U.S. Census Bureau, Rental Housing Finance Survey (2021), available at https://www.census.gov/data-tools/demo/rhfs/#/?s_year=2018&s_type=1&s_tableName=TABLE2 .
65. See U.S. Securities and Exchange Commission, “Officers, Directors, and 10% Shareholders,” available at https://www.sec.gov/education/smallbusiness/goingpublic/officersanddirectors .
66. See, e.g., U.S. Securities and Exchange Commission, Instructions to Item 2.01 on Form 8-K; see also 17 CFR 210.3-14 .
67. See supra Section III.C.3.a for a description of the reporting cascade; see also proposed 31 CFR 1031.320(c)(1) .
68. See Nam D. Pham, “The Economic Contributions of the Land Title Industry to the U.S. Economy,” ndp Consulting (Nov. 2012), p. 6, available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2921931 . This study was included as an appendix to a 2012 American Land Title Association comment letter submitted to the Consumer Financial Protection Bureau (CFPB) on the Real Estate Settlement Procedures Act (RESPA).
69. FinCEN notes that the capacity in which a reporting person facilitates a residential real property transfer may not always be in the capacity of their primary occupation. However, as analysis here relies on the U.S. Census Bureau's annual Statistics of U.S. Business Survey, which is organized by NAICS code, the following nominal primary occupations (NAICS codes) are used for grouping and counting purposes: Title Abstract and Settlement Offices (541191), Direct Title Insurance Carriers (524127), Other Activities Related to Real Estate (531390), Offices of Lawyers (541110), and Offices of Real Estate Agents and Brokers (531210). As noted in note 73, these NAICS codes are not the basis for hourly wage rate information used in this paragraph.
70. The estimate of affected attorneys is calculated as ten percent of the total SUSB population of Offices of Lawyers. This estimate is based on the average from FinCEN analysis of U.S. legal bar association membership, performed primarily at the State level, identifying the proportion of (state) bar members that are members of the organization's (state's) real estate bar association. FinCEN considers this proxy more likely to overestimate than underestimate the number of potentially affected attorneys because, while not all members of a real estate bar association actively facilitate real estate transfers each year, it was considered less likely that an attorney would, in a given year, facilitate real estate transfers in a way that would make them a candidate reporting person for purposes of the proposed rule when such an attorney had not previously indicated an interest in real estate specific practice (by electing to join a real estate bar).
71. NAICS Code 531210 (Offices of Real Estate Agents and Brokers).
72. Fully loaded wages are scaled by a benefits factor. The ratio between benefits and wages for private industry workers is (hourly benefits (11.86))/(hourly wages (28.37)) = 0.42, as of December 2023. The benefit factor is 1 plus the benefit/wages ratio, or 1.42. See U.S. Bureau of Labor Statistics, “ Employer Costs for Employee Compensation Historical Listing,” available at https://www.bls.gov/web/ecec/ececqrtn.pdf . The private industry workers series data for December 2023 is available at https://www.bls.gov/web/ecec/ececqrtn.pdf .
73. Because available wage estimates are not available for each SUSB category at the 6-digit NAICS level, FinCEN has estimated average wages over the collection of occupational subcategories likely to be affected for each corresponding category at the next most granular NAICS-level available.
74. Wage estimates presented here, and used throughout the subsequent analysis, reflect two forms of updating from the NPRM: (1) wage data has been updated to reflect the BLS publication of the May 2023 National Occupational Employment and Wage Estimates in April 2024, (2) responsive to public comments that the previous wage estimates (based on national mean wages) might contribute to an underestimate of time cost burdens, FinCEN is electing to conservatively adopt 90th-percentile values of occupational wages in place of mean hourly wage.
75. See American Land Title Association, Home Closing 101, “Why 20% of Homeowners May Not Sleep Tonight,” (June 3, 2020),available at https://www.homeclosing101.org/why-20-percent-of-homeowners-may-not-sleep-tonight/ .
76. See FinCEN, NPRM, “Anti-Money Laundering Regulations for Residential Real Estate Transfers,” 89 FR 12424 , 12446-12447 (Feb. 16, 2024).
77. Based on the observation that the midpoint values of first year ($559.4 million), subsequent year ($532.2 million), and the midpoint of the midpoint values between first and subsequent years ($545.8 million) are all approximately $500 million. See also infra Section VI.B for a discussion of annualized cost.
78. Based on a comment that the initial training should be 120 minutes (2 hours).
79. Based on a comment that the initial training should be double what FinCEN estimated (150 minutes, or 2.5 hours).
80. Based on a comment that training would take 60 minutes (1 hour) per transfer, where FinCEN applies the lowest wage rate to the lower bound estimate of total annual reportable transfers to obtain the lower bound and applies the highest wage rate to the upper bound estimate of total annual reportable transfers to obtain the upper bound.
81. Technological implementation for a new reporting form contemplates expenses related to development, operations, and maintenance of system infrastructure, including design, deployment, and support, such as a help desk. It includes an anticipated processing cost of $0.10 per submitted Real Estate Report.
82. FinCEN, “Congressional Budget Justification and Annual Performance Plan and Report FY 2024” (2023), available at https://home.treasury.gov/system/files/266/15.-FinCEN-FY-2024-CJ.pdf .
83. E.O. 14094 sets the threshold that triggers regulatory impact analytical requirements at $200 million in expected annual burden.
84. E.O. 13563 , 76 FR 3821 (Jan. 21, 2011), § 1(c) (“Where appropriate and permitted by law, each agency may consider (and discuss qualitatively) values that are difficult or impossible to quantify, including equity . . . and distributive impacts.”)
85. See Office of Management and Budget, “Circular A-4—Subject: Regulatory Analysis,” (Sept. 17, 2003), available at https://obamawhitehouse.archives.gov/omb/circulars_a004_a-4/ .
86. The midpoint value of estimated first year costs is $559.4 million; see supra note 76.
87. The midpoint value of estimated subsequent year costs is $532.2 million; see supra note 76.
88. 5 U.S.C. 601 et seq.
89. See FinCEN, NPRM, “Anti-Money Laundering Regulations for Residential Real Estate Transfers,” 89 FR 12424 , 12458 (Feb. 16, 2024) (finding that “an upper bound of potentially affected small entities includes approximately 160,800 firms (by the following primary business classifications: approximately 6,300 Title and Settlement Agents, 800 Direct Title Insurance Carriers, 18,000 persons performing Other Activities Related to Real Estate, 15,700 Offices of Lawyers, and 120,000 Offices of Real Estate Agents and Brokers),” though “the point estimates differ non-trivially by how `small' is operationally defined, and do not do so unidirectionally across methodologies and data sources”).
90. Id. at 12452.
91. See U.S. Small Business Administration, “How to Comply with the Regulatory Flexibility Act,” p.44, n.144 (Aug. 2017), available at https://advocacy.sba.gov/wp-content/uploads/2019/07/How-to-Comply-with-the-RFA-WEB.pdf (stating that “The Office of Advocacy believes that, given the emphasis in the law on public notice, the certification should also appear in the final rule even though there may have already been a certification in the proposed rule. Doing so will help demonstrate the continued validity of the certification after receipt of public comments”).
92. When certifying at the NPRM stage, FinCEN discussed the basis on which its expectations were formed by considering the spectrum of potential burdens and costs a small business might incur as a result of the rule. This included considering the outcomes on businesses that would either incur no change in burden, a partial increase in burden, or the full increase in burden contemplated by the rule. In this analysis, FinCEN estimated that the incremental burden of complying with the rule would equate to an approximately 0%, 0.2%, or 0.5% increase in the average annual payroll expense of one employee, respectively, and was therefore unlikely to be significant.
93. See supra note 91.
94. While FinCEN has raised its estimate of the maximum anticipated cost per transaction (from $363.17 to $628.39 for reporting persons and from an aggregate of $103.43 to $116.84 for the maximally inclusive number of non-reporting persons per transfer), the number of transactions to which the burden would apply (and could thereby become a transfer a small business would be required to report should it not enter into a designation agreement) is reduced.
95. See 2 U.S.C. 1532(a) .
96. The U.S. Bureau of Economic Analysis reported the annual value of the gross domestic product (GDP) deflator in 1995 (the year in which UMRA was enacted) as 66.939; and in 2023 as 123.273. See U.S. Bureau of Economic Analysis, “Table 1.1.9. Implicit Price Deflators for Gross Domestic Product” (accessed June 5, 2024). Thus, the inflation adjusted estimate for $100 million is 123.273 divided by 66.939 and then multiplied by 100, or $184.157 million.
97. See generally Section VI.A.
98. This estimate represents the upper bound estimate of reportable transfers per year as described in greater detail above in Section VI.A.2.
99. This estimate includes the upper bound estimates of the time burden of compliance, as described in greater detail above, with the reporting and recordkeeping requirements. See Section VI.A.4.ii and Section VI.A.4.iii.
100. This estimate includes the upper bound estimates of the wage and technology costs of compliance, as described in greater detail above, with the reporting and recordkeeping requirements. See Section VI.A.4.ii and Section VI.A.4.iii.
101. 5 U.S.C. 804(2) et seq.
102. 5 U.S.C. 801(a)(3) .
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Top 10 Real Estate Executive Summary Templates with Samples and Examples
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Ishan Basak
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After a two-year slump in the real estate market brought on by a pandemic, the year 2022 gave some promise as most industries recovered from the Covid lows and experienced strong year-over-year growth. Industry experts predict that this growth trend will persist in the year 2023.
The real estate market has historically been impacted by issues including inflation, increased mortgage rates, and a shortage of available housing. It is, however, believed that the sector has greatly recovered, but with different trends.
Home buyers sought out larger, sustainable spaces with value-added services and facilities as a result of pandemic-induced trends like remote and hybrid working, thereby enhancing their and their investors’ well-being.
In such a scenario, if you wish to attract a buyer and investors to your property, presenting a clear and concise summary about the features and facilities makes sense.
A real estate executive summary is a document that provides a brief overview of a specific real estate project or investment opportunity. It typically includes information on the property location, size, and type, as well as the project's financial projections and expected return on investment. The executive summary is often used to attract potential investors or lenders and to provide a high-level overview of the project's potential. It is a key document that is used to present the project to potential investors, lenders, and other stakeholders.
The goal is to persuade them to invest in the project, or to lend money to it, by highlighting the key benefits of the project, such as the potential for high returns on investment and the strategic location of the property.
Real Estate Executive Summary Templates
SlideTeam presets Top 10 Real Estate Executive Summary Templates for your next real estate business. Use these 100% editable, one-of-a-kind templates to impress potential clients and investors.
(If you want to understand ‘Real Estate Investment Management’ better, go through its highly attractive yet informative templates in this guide .)
Let’s begin formulating your perfect real estate executive summary with SlideTeam’s best-in-class PPT Templates.
Template 1: Real Estate Startup One Page Executive Summary Template
There is plenty of room in this editable PowerPoint presentation to add the name and logo of your business. By using the images of your team members together with their names and roles, you can bring a personal touch to your presentation. Showcase how you plan to use or distribute the funds raised. Emphasize the arguments that will persuade your audience to choose you above the competition. This one-page business summary includes all of the information you need to deliver to your stakeholders. Download this unique template today!
![Real estate startup one page executive summary presentation report infographic ppt pdf document Real estate startup one page executive summary presentation report infographic ppt pdf document](https://www.slideteam.net/wp/wp-content/uploads/2023/01/Real-estate-startup-one-page-executive-summary-presentation-report-infographic-ppt-pdf-document.jpg)
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Template 2: Bi-Fold Real Estate Startup Executive Summary Document
Our Bi-fold Real Estate Startup Executive Summary Template is expertly crafted to give any subject a beautiful setting. This bi-fold document contains four slides that reflect what your business stands for. This A4 size layout, which has adjustable and adaptable design features, makes an excellent visual reporting and communication tool. This design is completely compatible with Google Slides and can be used to meet any commercial need. Get this now!
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Template 3: Executive Summary Real Estate Industry PPT Template
By using this PPT Slide, you may increase audience engagement and knowledge holistically. You can deliver information in two stages using this template. Using this PPT design, you may also provide data on international real estate market analysis. This style is entirely changeable, so personalize it right away to satisfy the demands of your audience.
![Executive summary real estate industry in us ppt powerpoint presentation show icons Executive summary real estate industry in us ppt powerpoint presentation show icons](https://www.slideteam.net/wp/wp-content/uploads/2023/01/Executive-summary-real-estate-industry-in-us-ppt-powerpoint-presentation-show-icons.jpg)
Template 4: Executive Summary Real Estate Industry PPT
To raise your presentation bar, we introduce the Commercial Real Estate Executive Summary Template. This template, which includes one stage, is a perfect choice for instructing and captivating your audience. Use this template to disperse information about the executive summary. To fully gain from it, seize it right away.
![Commercial real estate executive summary ppt summary vector Commercial real estate executive summary ppt summary vector](https://www.slideteam.net/wp/wp-content/uploads/2023/01/Commercial-real-estate-executive-summary-ppt-summary-vector.jpg)
Template 5: Strategic Investment In Real Estate Executive Summary PPT
Introducing this set of PowerPoint slides with the title Strategic Investment In Real Estate Executive Summary. This slide covers the subjects of the real estate global market summary. You can download this PowerPoint presentation right away and alter it to your plan and content. Impress your audience by downloading this template now!
![Strategic investment in real estate executive summary ppt powerpoint presentation diagram Strategic investment in real estate executive summary ppt powerpoint presentation diagram](https://www.slideteam.net/wp/wp-content/uploads/2023/01/Strategic-investment-in-real-estate-executive-summary-ppt-powerpoint-presentation-diagram.jpg)
Template 6: Executive Summary Sales Real Estate Detailed Analysis PPT
This design, that lets you explain the information in a precise format, is a perfect choice for instructing and captivating your audience. Use this simple template to disperse information about the executive summary in a foolproof manner. To fully gain from it, use it to its full potential. It provides ample space to spice it up with your compelling business ideas. The icons used here enhances its overall appearance.
![Executive summary sales real estate detailed analysis ppt powerpoint pictures Executive summary sales real estate detailed analysis ppt powerpoint pictures](https://www.slideteam.net/wp/wp-content/uploads/2023/01/Executive-summary-sales-real-estate-detailed-analysis-ppt-powerpoint-pictures.jpg)
Template 7: Executive Summary Commercial Real Estate Property Management PPT
To raise the bar of your presentations, introduce Executive Summary Commercial Real Estate Property Management Styles Maker. This design, which has two stages, is a perfect choice for informing and captivating your audience. Use this template to disperse information about the executive summary. To fully gain from it, seize it right away.
![Executive summary commercial real estate property management ppt styles maker Executive summary commercial real estate property management ppt styles maker](https://www.slideteam.net/wp/wp-content/uploads/2023/01/Executive-summary-commercial-real-estate-property-management-ppt-styles-maker.jpg)
Template 8: Executive Summary Real Estate Management And Development PPT
With the help of this Executive Summary Real Estate Management And Development Portrait, elaborate on the subject. Utilize it as a conversation and navigational tool for the executive summary. You are allowed to modify this template as per your business needs. Download it right away.
![Executive summary real estate management and development ppt portrait Executive summary real estate management and development ppt portrait](https://www.slideteam.net/wp/wp-content/uploads/2023/01/Executive-summary-real-estate-management-and-development-ppt-portrait.jpg)
Template 9: Executive Summary For Real Estate Property PPT
This presentation shows data on the financial ratios and acquisition cost of a real estate propert. Use this slide to present real estate property infographics and to go into more depth about the subject. Use it as a conversation tool and navigational aid for principal payment, cash on cash return, and financial ratios. Download it now to present your plan in well-organized manner.
![Executive summary for real estate property ppt infographics Executive summary for real estate property ppt infographics](https://www.slideteam.net/wp/wp-content/uploads/2023/01/Executive-summary-for-real-estate-property-ppt-infographics.jpg)
Template 10: Real Estate Construction Company Profile Executive Summary PPT
This slide presents the executive summary, which includes a description of the construction company, our services, statistical data, and accomplishments like the number of clients served, the number of projects completed annually, etc. Use the slides to provide facts and give a full overview of your services, your achievements, and your executive summary. Grab it now!
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The Closing Link
An investment that really pays off is a real estate business concept. You will quickly become an expert if you use the top 10 templates listed above according to the needs of your company. You will gain an understanding of the real estate industry, your competitors, and your clients by using these templates. You can learn more about the processes required to start and expand your real estate business from these programs.
PS: If you are looking for a real estate development cover letter template, here’s a handy guide with amazing samples and examples.
What is an example of an executive summary?
Businesses frequently use the executive summary to obtain conventional finance from banks and other lenders. Effective executive summaries can persuade and rapidly explain the possible advantages of investment and aid in raising money.
The business plan's executive summary is a crucial and necessary component. It tries to grab the attention of the intended stakeholders by giving them a brief, succinct, and upbeat overview of the firm as well as a thoughtful insight into the essence of business. It should outline your company, the issue it addresses, its target audience, and key financial figures.
What are 6 things you should include in an executive summary?
- Give a high-level summary of the real estate sector.
- The title, address, and goals of your real estate business
- An overview of your real estate company, containing information about the management team, advisors, and history
- Describe the kind of real estate business you run. Give a brief description of your target market, and explain how your business is unique compared to others in the sector.
- Make a marketing plan that details the sales, partnering, and marketing tactics for your business.
- And describe your financial strategy in general.
What are the three most important things in real estate?
The three most crucial things in real estate, that contribute to decision-making are:
Property Location
The maxim "location, location, location" is still true and is still the most crucial element in real estate investing success. Residential property assessments heavily consider the status of the community, green space, scenic vistas, and proximity to amenities. When valuing commercial real estate, accessibility to markets, warehouses, transportation hubs, motorways, and tax-exempt regions is crucial.
Valuation of the Property
Real estate valuation is crucial for financing the purchase as well as listing price, investment research, insurance, and taxation—all of which rely on it.
Investment Purpose and Investment Horizon
Lack of clarity regarding aim may result in unanticipated outcomes, including financial distress—especially if the investment is mortgaged—given the low liquidity and high value of real estate.
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Blog Business 5 Real Estate Business Plan Examples & How to Create One?
5 Real Estate Business Plan Examples & How to Create One?
Written by: Danesh Ramuthi Nov 28, 2023
![sample executive summary real estate business plan Real Estate Business Plan Examples](https://venngage-wordpress.s3.amazonaws.com/uploads/2023/11/Copy_-_Blog_5_Real_Estate_Business_Plan_Examples__How_to_Create_One.png)
Crafting a business plan is essential for any business and the real estate sector is no exception. In real estate, a comprehensive business plan serves as a roadmap, delineating a clear path towards business growth.
It guides owners, agents and brokers through various critical aspects such as identifying target markets, devising effective marketing strategies, planning finances and managing client relationships.
For real estate businesses, a well-written plan is crucial in attracting potential investors, showcasing the company’s mission statement, business model and long-term income goals.
So, how can you write one?
Leveraging tools like Venngage Business Plan Make r with their Business Plan Templates to create your own real estate business plan can be transformative.
They offer a lot of real estate business plan examples and templates, streamlining the process of crafting a comprehensive plan.
Click to jump ahead:
- 5 real estate business plan examples
How to write a real estate business plan?
- Wrapping Up
5 Real estate business plan examples
As I have said before, a well-crafted business plan is a key to success. Whether you’re a seasoned agent or just starting out, examples of effective real estate business plans can offer invaluable insights. Along with a solid business plan, incorporating innovative real estate marketing ideas is crucial for standing out in this competitive market.
These examples showcase a range of strategies and approaches tailored to various aspects of the real estate market. They serve as guides to structuring a plan that addresses key components like market analysis, marketing strategies, financial planning and client management, ensuring a solid foundation for any real estate venture.
Real estate business plan example
There are various elements in a real estate business plan that must be integrated. Incorporating these elements into a real estate business plan ensures a comprehensive approach to launching and growing a successful real estate business.
![sample executive summary real estate business plan Real Estate Business Plan Template](https://venngage-wordpress.s3.amazonaws.com/uploads/2023/11/image-56.png)
What are they?
- Executive summary: The executive summary is a concise overview of the real estate business plan. It highlights the mission statement, outlines the business goals and provides a snapshot of the overall strategy.
- Company overview: An overview on the history and structure of the real estate business. It includes the company’s mission and vision statements, information about the founding team and the legal structure of the business.
- Service: Here, the business plan details the specific services offered by the real estate agency. This could range from residential property sales and leasing to commercial real estate services. The section should clearly articulate how these services meet the needs of the target client and how they stand out from competitors.
- Strategies: A very crucial part of the plan outlines the strategies for achieving business goals. It covers marketing strategies to generate leads, pricing strategies for services, and tactics for effective client relationship management. Strategies for navigating market shifts, identifying key market trends and leveraging online resources for property listings and real estate listing presentations to help with lead generation are also included.
- Financial plan: The financial plan is a comprehensive section detailing the financial projections of the business. It includes income statements, cash flow statements , break-even analysis and financial goals. Besides, a financial plan section also outlines how resources will be allocated to different areas of the business and the approach to managing the financial aspects of the real estate market, such as average sales price and housing market trends.
![sample executive summary real estate business plan Real Estate Marketing Plan Template](https://venngage-wordpress.s3.amazonaws.com/uploads/2023/11/image-57.png)
Read Also: 7 Best Business Plan Software for 2023
Real estate investment business plan example
A real estate investment business plan is a comprehensive blueprint that outlines the goals and strategies of a real estate investment venture. It serves as a roadmap, ensuring that all facets of real estate investment are meticulously considered.
![sample executive summary real estate business plan Real Estate Investment Business Plan Template](https://venngage-wordpress.s3.amazonaws.com/uploads/2023/11/image-58.png)
Creating a business plan for real estate investment is a critical step for any investor, regardless of their experience level Typically, these plans span one to five years, offering a detailed strategy for future company objectives and the steps required to achieve them.
Key components:
- Executive summary: Snapshot of the business, outlining its mission statement, target market, and core strategies. It should be compelling enough to attract potential investors and partners.
- Market analysis: A thorough analysis of the real estate market, including current trends, average sales prices and potential market shifts.
- Financial projections: Detailed financial plans, including income statements, cash flow analysis, and break-even analysis.
- Strategy & implementation: Outlines how the business plans to achieve its goals. This includes marketing efforts to generate leads, pricing strategies and client relationship management techniques.
- Legal structure & resource allocation: Details the legal structure of the business and how resources will be allocated across various operations, including property acquisitions, renovations and management.
Real estate agent business plan example
A real estate agent business plan is a strategic document that outlines the operations and goals of a real estate agent or agency. It is a crucial tool for communicating with potential lenders, partners or shareholders about the nature of the business and its potential for profitability.
![sample executive summary real estate business plan Real Estate Agent Business Plan Templa](https://venngage-wordpress.s3.amazonaws.com/uploads/2023/11/image-59.png)
A well-crafted real estate agent business plan will include
- Where you are today: A clear understanding of your current position in the market, including strengths, weaknesses and market standing.
- Where you aim to be: Sets specific, measurable goals for future growth, whether it’s expanding the client base, entering new markets or increasing sales.
- How can you get there: Outlines the strategies and action plans to achieve these goals, including marketing campaigns, client acquisition strategies and business development initiatives.
- Measuring your performance: Defines the key performance indicators (KPIs) and metrics to assess progress towards the set goals, such as sales figures, client satisfaction rates and market share.
- Course correction: Establishes a process for regular review and adjustment of the plan, ensuring flexibility to adapt to market changes, shifts in client needs and other external factors.
For real estate agents, a comprehensive business plan is not just a roadmap to success; it is a dynamic tool that keeps them accountable and adaptable to market changes.
Realtor business plan example
A realtor business plan is a comprehensive document that outlines the strategic direction and goals of a real estate business. It’s an essential tool for realtors looking to either launch or expand their business in the competitive real estate market. The plan typically includes details about the company’s mission, objectives, target market and strategies for achieving its goals.
![sample executive summary real estate business plan Realtor Business Plan Template](https://venngage-wordpress.s3.amazonaws.com/uploads/2023/11/image-60-624x1024.png)
Benefits of a realtor business plan and applications:
- For launching or expanding businesses: The plan helps real estate agents to structure their approach to entering new markets or growing in existing ones, providing a clear path to follow.
- Securing loans and investments: A well-drafted business plan is crucial for securing financing for real estate projects, such as purchasing new properties or renovating existing ones.
- Guideline for goal achievement: The plan serves as a guideline to stay on track with sales and profitability goals, allowing realtors to make informed decisions and adjust strategies as needed.
- Valuable for real estate investors: Investors can use the template to evaluate potential real estate businesses and properties for purchase, ensuring they align with their investment goals.
- Improving business performance: By filling out a realtor business plan template , realtors can gain insights into the strengths and weaknesses of their business, using this information to enhance profitability and operational efficiency.
A realtor business plan is more than just a document; it’s a roadmap for success in the real estate industry.
Writing a real estate business plan is a comprehensive process that involves several key steps. Here’s a detailed guide to help you craft an effective business plan :
- Tell your story : Start with a self-evaluation. Define who you are as a real estate agent, why you are in this business and what you do. Develop your mission statement, vision statement and an executive summary.
- Analyze your target real estate market : Focus on local market trends rather than national or state-wide levels. Examine general trends, market opportunities, saturations, and local competition. This step requires thorough research into the real estate market you plan to operate in.
- Identify your target client : After understanding your market, identify the niche you aim to serve and the type of clients you want to target. Create a client persona that reflects their specific needs and concerns.
- Conduct a SWOT analysis : Analyze your business’s Strengths, Weaknesses, Opportunities and Threats. This should reflect a combination of personal attributes and external market conditions.
- Establish your SMART goals : Set specific, measurable, attainable, realistic and timely goals. These goals could be financial, expansion-related or based on other business metrics.
- Create your financial plan : Account for all operating expenses, including marketing and lead generation costs. Calculate the number of transactions needed to meet your financial goals. Remember to separate personal and business finances.
- Revisit your business plan to monitor & evaluate : Treat your business plan as a living document. Plan periodic reviews (quarterly, semi-annually or annually) to check if your strategies are advancing you toward your goals.
- Defining your mission & vision : Include a clear mission and vision statement. Describe your business type, location, founding principles and what sets you apart from competitors.
- Creating a marketing plan : Develop a marketing plan that addresses the product, price, place and promotion of your services. Determine your pricing strategy, promotional methods and marketing channels. If you’re unsure what marketing activities to choose, consider this guide on how to market yourself as a realtor .
- Forming a team : Ensure the cooperation of colleagues, supervisors and supervisees involved in your plan. Clarify their roles and how their participation will be evaluated.
Related: 15+ Business Plan Examples to Win Your Next Round of Funding
Wrapping up
The journey to a successful real estate venture is intricately linked to the quality and depth of your business plan. From understanding the nuances of the real estate market to setting strategic goals, a well-crafted business plan acts as the backbone of any thriving real estate business. Whether you’re developing a general real estate business plan, focusing on investment, working as an agent, or operating as a realtor, each plan type serves its unique purpose and addresses specific aspects of the real estate world.
The examples and insights provided in this article serve as a guide to help you navigate the complexities of the real estate industry. Remember, a real estate business plan is not a static document but a dynamic blueprint that evolves with your business and the ever-changing market trends.
Crafting a strategic real estate business plan is a crucial step towards achieving your business goals. So, start shaping your vision today with Venngage.
Explore venngage business plan maker & our business plan templates and begin your journey to a successful real estate business now!
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Real Estate Agency Business Plan Template & PDF Example
![sample executive summary real estate business plan Avatar photo](https://sharpsheets.io/wp-content/uploads/2023/12/cropped-62888a9e6efe4469735e89db_Joel-Mason-Career-Expert-70x70.png)
- August 26, 2024
- Business Plan
![sample executive summary real estate business plan the business plan template for a real estate agency business](https://sharpsheets.io/wp-content/uploads/2023/11/Business-Plan_Real-Estate-Agent_COVER.png.webp)
Creating a comprehensive business plan is crucial for launching and running a successful real estate agency. This plan serves as your roadmap, detailing your vision, operational strategies, and financial plan. It helps establish your real estate agency’s identity, navigate the competitive market, and secure funding for growth.
This article not only breaks down the critical components of a real estate agency business plan, but also provides an example of a business plan to help you craft your own.
Whether you’re an experienced entrepreneur or new to the real estate industry, this guide, complete with a business plan example, lays the groundwork for turning your real estate agency concept into reality. Let’s dive in!
Our real estate agency business plan covers all essential aspects necessary for a comprehensive strategy. It details operations, marketing strategy , market environment, competitors, management team, and financial forecasts.
- Executive Summary : Provides an overview of the real estate agency’s business concept, market analysis , management, and financial strategy.
- Real Estate Brokerage Services & Fees: Describes the brokerage services including property sales and acquisitions, along with a fee structure.
- Property Management Services & Fees: Outlines property management services offered and their respective fees.
- Key Stats : Offers data on industry size , growth trends, and market positioning.
- Key Trends: Highlights significant trends impacting the industry, such as digital transformation and changing buyer preferences.
- Key Competitors: Analyzes primary competitors and differentiates the agency from these competitors.
- SWOT : Analyzes strengths, weaknesses, opportunities, and threats.
- Marketing Plan : Outlines tactics for attracting new clients and maintaining relationships.
- Timeline : Sets out key milestones from inception through the first year of operations.
- Management: Information on the management team and their roles within the agency.
- Financial Plan: Projects the agency’s financial performance over the next five years, detailing revenue, profits, and anticipated expenses.
![sample executive summary real estate business plan](https://sharpsheets.io/wp-content/uploads/2024/05/Business-Plan_Real-Estate-Agency-1024x576.png.webp)
Real Estate Agency Business Plan
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Fully editable 30+ slides Powerpoint presentation business plan template.
Download an expert-built 30+ slides Powerpoint business plan template
Executive Summary
The Executive Summary introduces your real estate agency’s business plan, offering a concise overview of your agency and its services. This section outlines your market positioning, the variety of real estate services offered—including property sales, rentals, and property management—its location, size, and a description of day-to-day operations.
This section should also discuss how your real estate agency will integrate into the local market, including the number of direct competitors within the area, identifying who they are, along with your agency’s unique selling points that differentiate it from these competitors.
Additionally, you should include information about the management and co-founding team, detailing their roles and contributions to the agency’s success. Furthermore, a summary of your financial projections, including revenue and profits over the next five years, should be presented here to provide a clear picture of your agency’s financial plan.
Real Estate Agency Business Plan Executive Summary Example
![sample executive summary real estate business plan Real Estate Agency Business Plan exec summary1](https://sharpsheets.io/wp-content/uploads/2024/05/EXECUTIVE-SUMMMARY-1-2-1024x576.png.webp)
Business Overview
In this section, introduce your real estate agency with essential details such as its name, location, and core services. Highlighting your agency’s unique selling proposition ( USP ) distinguishes it amidst a competitive landscape. Whether it’s a focus on personalized client experiences, specialized market segments, or innovative technology integration, your USP should shine through.
Example: For instance, “Prime Properties Realty,” headquartered in bustling downtown Manhattan, boasts a dedicated team of tenacious real estate professionals. Our agency specializes in comprehensive property management solutions and bespoke brokerage services, priding ourselves on a client-centric approach that blends cutting-edge technology with old-fashioned integrity.
Market Overview
This section delves into the broader real estate market, providing insights into its size, growth trends, and current dynamics. Utilize relevant data to underscore the potential of the market and articulate how your agency navigates within it. Discussing emerging trends and competitive analysis offers valuable context for your agency’s positioning and growth strategy.
Example: Consider Prime Properties Realty within the U.S. real estate market, valued at a staggering $243 billion in 2023. With a steady annual growth rate of 3.94%, the industry presents ample opportunities for strategic expansion. Trends such as the increasing demand for virtual tours and smart home solutions underscore the importance of technological innovation, while a competitive landscape comprising local agencies and national firms necessitates a differentiated approach.
Management Team
Highlighting the expertise and experience of your management team instills confidence in potential investors and partners. Showcase key qualifications and achievements, emphasizing how each member contributes to the agency’s success. Whether it’s decades of industry experience, specialized knowledge in niche markets, or a track record of driving growth, the management team serves as a cornerstone of credibility.
Example: At Prime Properties Realty, founders Emily Johnson and Michael Chen lead the charge with a combined 30 years of real estate expertise. Emily’s background in corporate strategy and market analysis complements Michael’s proficiency in negotiations and client relations, ensuring a dynamic leadership that drives innovation and excellence.
Financial Plan
Concluding the executive summary, provide a concise overview of your agency’s financial goals and projections. Outline revenue targets, profit margins, and key strategies for achieving sustainable growth. By articulating a clear financial trajectory, you demonstrate your agency’s viability and potential for long-term success.
Example: Prime Properties Realty aims to achieve $2.4 million in annual revenue with a solid 16% profit margin ( EBITDA ) by 2028. This ambitious yet attainable goal is supported by strategic investments in technology infrastructure, aggressive marketing initiatives , and ongoing professional development for our team members. With a prudent financial strategy and a relentless pursuit of excellence, we are poised to emerge as a market leader in the dynamic real estate landscape.
For a Real Estate Agency, the Business Overview section can be concisely divided into 2 main slides:
Real Estate Brokerage Services & Fees
Briefly describe the agency’s professional and welcoming office environment and its conveniently located premises near major residential and commercial areas, which enhances accessibility and client traffic. Detail the range of real estate brokerage services including buying, selling, and leasing properties, and discuss the agency’s fee structure, which is typically based on a percentage of the property sale or lease price, reflecting the high quality of service and market alignment.
Property Management Services & Fees
Describe the comprehensive property management services offered that cover tenant screening, rent collection, maintenance, and financial reporting. The pricing for these services is usually based on a percentage of monthly rental income or a flat monthly fee, with potential additional charges for special services like emergency maintenance or tenant placement, ensuring landlords a hassle-free ownership experience.
![sample executive summary real estate business plan](https://sharpsheets.io/wp-content/uploads/2024/02/Business-Plan_Hair-Salon-Salon-1024x576.jpg.webp)
Industry Size & Growth
In the Market Overview of your real estate agency business plan, start by examining the size of the real estate industry and its growth potential. This analysis is crucial for understanding the market’s scope and identifying expansion opportunities.
Key Market Trends
Proceed to discuss recent market trends , such as the increasing consumer interest in sustainable and eco-friendly properties, the growing demand for smart homes equipped with the latest technology, and the rising popularity of urban living spaces among millennials and young professionals. For example, highlight the demand for properties that cater to specific lifestyle needs, alongside the rising preference for locations with comprehensive amenities and green spaces.
Competitive Landscape
A competitive analysis is not just a tool for gauging the position of your real estate agency in the market and its key competitors; it’s also a fundamental component of your business plan.
This analysis helps in identifying your real estate agency’s unique selling points, essential for differentiating your business in a competitive market.
In addition, the competitive analysis is integral in laying a solid foundation for your business plan. By examining various operational aspects of your competitors, you gain valuable information that ensures your business plan is robust, informed, and tailored to succeed in the current market environment.
Identifying Your Competitors in the Real Estate Industry
The first step in conducting a competitive analysis for a real estate agency is identifying key competitors. These competitors may include other local real estate agencies, independent agents, and even online platforms that facilitate property transactions.
Utilize online tools such as real estate listing websites, social media platforms, and search engines to identify competitors operating in your target market . Pay attention to their areas of specialization, market presence, and client demographics.
![sample executive summary real estate business plan Real Estate Agency Business Plan key competitors](https://sharpsheets.io/wp-content/uploads/2024/05/KEY-COMPETITORS-2-1024x576.png.webp)
Real Estate Agency Competitors’ Strategies
Once competitors have been identified, delve into analyzing their strategies across various dimensions:
- Service Offerings: Evaluate the range of services offered by competitors. Some agencies may specialize in residential properties, while others may focus on commercial real estate or niche markets like luxury properties or vacation rentals.
- Marketing Tactics: Assess competitors’ marketing tactics and channels. Do they invest heavily in digital marketing, traditional advertising, or networking events? Analyze the effectiveness of their marketing efforts in reaching and engaging potential clients.
- Pricing Structure : Compare the pricing structure of competing agencies. Consider factors such as commission rates, service fees, and any additional charges. Determine whether competitors position themselves as budget-friendly options or premium service providers.
- Technology Adoption: Examine competitors’ use of technology in their operations. This includes the adoption of customer relationship management (CRM) software, virtual reality tours, and online property listings. Evaluate how technology integration enhances the customer experience and streamlines internal processes.
- Client Relationships: In vestigate how competitors nurture client relationships and provide value-added services. This may include personalized property recommendations, market insights, and assistance throughout the buying or selling process.
What’s Your Agency’s Value Proposition?
Armed with insights from the competitive analysis, it’s essential to define your real estate agency’s unique value proposition . When crafting your agency’s value proposition, consider factors such as specialization, service differentiation, technology integration, and a client-centric approach.
Highlight any areas of specialization or expertise that set your agency apart from competitors. This could include expertise in a particular neighborhood, property type, or client demographic.
Identify ways to differentiate your agency based on the quality and range of services offered. Whether it’s providing personalized property tours, comprehensive market analysis , or innovative marketing strategies , emphasize how your agency goes above and beyond to meet client needs.
Showcase your agency’s commitment to leveraging technology to enhance the real estate experience. Whether it’s offering virtual property tours, implementing advanced analytics tools, or providing an intuitive online platform for property search, emphasize how technology drives efficiency and convenience for clients.
Emphasize your agency’s dedication to delivering exceptional customer service and building long-term relationships with clients. Highlight testimonials, case studies, and success stories to illustrate your agency’s track record of client satisfaction and success.
![sample executive summary real estate business plan Real Estate Agency Business Plan strategy](https://sharpsheets.io/wp-content/uploads/2024/05/STRATEGY-2-1024x576.png.webp)
First, conduct a SWOT analysis for the real estate agency , highlighting Strengths (such as experienced realtors and a diverse property portfolio), Weaknesses (including high agent turnover or reliance on local market conditions), Opportunities (for example, the growing demand for rental properties or the potential for tapping into luxury real estate markets), and Threats (such as fluctuations in real estate prices or new housing regulations that may impact operations).
![sample executive summary real estate business plan Real Estate Agency Business Plan swot](https://sharpsheets.io/wp-content/uploads/2024/05/SWOT-2-1024x576.png.webp)
Marketing Plan
Next, develop a marketing strategy that outlines how to attract and retain clients through targeted advertising, promotional events like open houses, an engaging online presence, and community involvement. This strategy should also incorporate using social media platforms to showcase properties and share customer testimonials, enhancing the agency’s visibility and client engagement.
Marketing Channels
Utilize various channels to connect with potential clients and reinforce your brand.
Digital Marketing
- Website and SEO: A well-optimized website serves as the centerpiece of your digital presence. Beyond listing properties, a website should offer valuable resources, agent profiles, blog content on market trends , and FAQs to address client queries. Local Search Engine Optimization (SEO) techniques are crucial to ensure visibility in local property searches.
- Social Media: Leveraging social media platforms is indispensable in today’s marketing landscape. LinkedIn is ideal for professional networking and B2B connections, while platforms like Instagram and Facebook offer opportunities for visual storytelling through property highlights, client testimonials, and engaging content. YouTube can be utilized for virtual property tours, educational videos, and neighborhood insights.
- Email Marketing: Email marketing remains a powerful tool to nurture client relationships. Crafting targeted email campaigns that include property updates, market trends, success stories, and personalized messages enhances engagement and reinforces your agency’s expertise and credibility.
Local Advertising
- Networking Events: Attend local real estate networking events, chamber of commerce meetings, and industry conferences to foster connections and generate leads.
- Local Sponsorship: Support community events or charities to increase brand visibility. Consider sponsoring neighborhood newsletters or local podcasts.
Promotional Activities
Entice potential clients with appealing offers and incentives.
- Open House Events: Hosting exclusive open houses is an effective way to showcase properties and create a welcoming environment for prospective buyers. Offering refreshments, interactive property tours, and informational sessions about the local area or housing market trends can elevate the open house experience.
- Referral Programs: Encouraging satisfied clients to refer others can be a powerful marketing tool. Implementing referral programs that reward clients with incentives, such as discounts on future transactions or gift vouchers, motivates them to advocate for your agency among their networks. Acknowledging and appreciating referrals strengthen the bond between your agency and existing clients while expanding your client base.
![sample executive summary real estate business plan Real Estate Agency Business Plan marketing plan](https://sharpsheets.io/wp-content/uploads/2024/05/MARKETING-PLAN-2-1024x576.png.webp)
Sales Channels
Maximizing sales strategies and providing comprehensive services contribute significantly to successful transactions and satisfied clients.
Agent Upselling
- Additional Services: Offer clients comprehensive services beyond property listings, such as staging advice, home valuation consultations, or connections to reliable contractors. This comprehensive approach not only assists clients through the transaction process but also establishes your agency as a trusted resource in real estate matters.
- Value-added Services: Provide resources like relocation guides, mortgage assistance, or legal advisory services.
Online Sales and Booking
- Property Listing Platforms: Ensuring an efficient online presence on real estate listing platforms is essential. Active and engaging listings with high-quality visuals, detailed descriptions, and accurate information attract potential buyers and sellers
- Online Transactions: Streamlining the transaction process through secure online platforms for inquiries, appointments, and documentation fosters convenience and expediency, catering to the preferences of modern clients.
Client Relationship Management
- Follow-up Procedures: Implement effective follow-up protocols after property viewings or transactions to maintain communication and address client queries.
- CRM Software : Utilize customer relationship management software to organize client information, track interactions, and personalize future engagements.
Strategy Timeline
Finally, create a detailed timeline that outlines critical milestones for the real estate agency’s launch, marketing initiatives, client acquisition, and expansion goals. This timeline should ensure that the business moves forward with clear direction and purpose, setting specific objectives for brand establishment, market penetration, and long-term growth.
![sample executive summary real estate business plan Business Plan Gym Timeline](https://sharpsheets.io/wp-content/uploads/2024/02/Business-Plan_Gym-Timeline-1024x576.jpg.webp)
The Management section focuses on the real estate agency’s management and their direct roles in daily operations and strategic direction. This part is crucial for understanding who is responsible for making key decisions and driving the real estate agency toward its financial and operational goals.
For your real estate agency business plan, list the core team members, their specific responsibilities, and how their expertise supports the business.
![sample executive summary real estate business plan Real Estate Agency Business Plan management](https://sharpsheets.io/wp-content/uploads/2024/05/MANAGEMENT-PLAN-2-1024x576.png.webp)
The Financial Plan section is a comprehensive analysis of your financial projections for revenue, expenses, and profitability. It lays out your real estate agency’s approach to securing funding, managing cash flow, and achieving breakeven.
This section typically includes detailed forecasts for the first 5 years of operation, highlighting expected revenue, operating costs and capital expenditures.
For your real estate agency business plan, provide a snapshot of your financial statement (profit and loss, balance sheet, cash flow statement), as well as your key assumptions (e.g. number of customers and prices, expenses, etc.).
Make sure to cover here _ Profit and Loss _ Cash Flow Statement _ Balance Sheet _ Use of Funds
![sample executive summary real estate business plan Real Estate Agency Business Plan financial plan](https://sharpsheets.io/wp-content/uploads/2024/05/FINANCIAL-PLAN-2-1024x576.png.webp)
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Premier Agent Toolkit
How to create a real estate agent business plan.
In this article:
Why agents need a real estate business plan
How to write a real estate business plan, free real estate business plan template.
Every agent needs a plan to succeed. A real estate business plan keeps you accountable and on track. An optimal business plan for real estate agents includes firm goals, but it’s also fluid — you’ll want to update your real estate business plan as you grow and the market evolves.
A real estate business plan allows you to stay current with market trends and ahead of the competition. It also helps you track results over time, test lead generation strategies and develop new marketing approaches. Zillow’s Bret Calltharp, a former training leader for a large brokerage group, saw his agents’ business increase by an average of 27% when implementing a business plan for the first time.
Here’s what a good real estate agent business plan will show you:
- Where you are today
- Where you want to be
- How you’ll get there
- How to measure your performance
- When and where to make a course correction
The benefits are clear, and you’re convinced — but where do you start? Here are our recommended steps for creating a business plan for real estate agents:
Write an executive summary
Real estate business planning should always start with a summary of who you are, what services you offer, where you operate and who you serve.
Define your mission statement
Your mission statement is the foundation that supports your entire real estate business plan. It should clearly state your guiding principles and goals.
Create a team management summary
If you’re working with a team, include all members who contribute to your success and how they help. Create a table that shows their roles, responsibilities and time frames for specific tasks.
![sample executive summary real estate business plan A team management summary table for your real estate business plan.](https://www.zillowstatic.com/bedrock/app/uploads/sites/33/real-estate-business-plan-team-management-summary-87c5b3.png)
Know your target client
Determine who your target client is and figure out their story. The more personal you can get, the better you’ll serve your clients.
Who, specifically, is your target client? This could be a first-time home buyer, a home seller, a renter — or a more specific subset like retirees or investors.
What is your target client’s story? Ask your clients specific questions and create a strategy based on their answers. Where do they want to live? What is their annual household income? What do they want from their home?
![sample executive summary real estate business plan A table of your target client's story for your real estate business plan.](https://wp-tid.zillowstatic.com/8/real-estate-business-plan-target-client-story-970764.png)
Outline SMART business goals
Your goals should be specific, measurable, attainable, realistic and timely — in other words, SMART . Once your real estate business goals are SMART, break down each goal into objectives. These should be the specific tasks and activities required to accomplish the goal.
Map out your keys to success
Every real estate agent business plan template should include a table that lists the top three ways to achieve business success — and more importantly, the actions required to fulfill them.
![sample executive summary real estate business plan A table mapping out the keys to success for your real estate agent business plan.](https://wp-tid.zillowstatic.com/8/real-estate-business-plan-keys-to-success-b7ade4.png)
Breakeven analysis
A critical part of real estate business planning is determining your breakeven point. What average commission rate do you need to achieve per unit to break even each month? How many homes must you sell at your average commission rate to break even by your target goal?
Understand your market
It’s crucial to stay on top of your target client’s market. A successful agent will know how the market has behaved in the past few years, as well as where it’s headed (and why).
Segment your market
Let’s look at a target client in a sample real estate business plan.
Suppose the target client is a first-time home buyer. How can we segment that market further to include even more detailed and relevant information? Here are two potential market segments for our first-time home buyer:
- First-time home buyers, single family
- First-time home buyers, multigenerational
Plan for market growth
Map out how much growth you anticipate in your market, and use it to forecast the number of potential clients over the next few years.
Track market trends in your real estate business plan with a table listing possible outcomes on the right and trends on the left.
![sample executive summary real estate business plan A table showing the anticipated market growth for your real estate business plan.](https://wp-tid.zillowstatic.com/8/real-estate-business-plan-market-growth-b07f58.png)
Track market trends
What market trends do you foresee impacting your business and market segments? Here’s a real estate business plan sample that projects a possible outcome for a rise in multigenerational living:
![sample executive summary real estate business plan A real estate business plan table for tracking market trends.](https://wp-tid.zillowstatic.com/8/real-estate-business-plan-market-trends-8ba483.png)
Develop a SWOT analysis
Every business plan needs a SWOT analysis: strengths, weaknesses, opportunities and threats. Some sample real estate business plan SWOT questions include:
- What sets me apart from my competition?
- What skills need improving?
- Are there any opportunities I’m overlooking?
![sample executive summary real estate business plan A real estate business plan table for tracking strengths, weaknesses, opportunities and threats.](https://wp-tid.zillowstatic.com/8/real-estate-business-swot-analysis-5c3cb0.png)
Recognize your competition
Who’s your primary competition in your target market, and what makes them your primary competition? How will you outperform them?
![sample executive summary real estate business plan A table showing primary competitors included in your real estate business plan template.](https://wp-tid.zillowstatic.com/8/real-estate-business-plan-competitor-table-c54fbb.png)
Create a marketing strategy
Every real estate business plan template needs a marketing strategy table. Highlight your resources and key features, like this sample:
![sample executive summary real estate business plan A table of resources and key features included in your real estate business plan marketing strategy.](https://wp-tid.zillowstatic.com/8/real-estate-business-plan-marketing-strategy-760191.png)
List ways to generate leads
Always keep a list of effective methods to generate leads , and always update the list when new strategies come up. The lead generation list in your real estate development business plan is as simple as this:
![sample executive summary real estate business plan A lead generation table for tracking leads in your real estate business plan.](https://wp-tid.zillowstatic.com/8/real-estate-business-plan-lead-generation-table-94bc00.png)
Project yearly sales forecast
Use market growth, trends and other real estate marketing strategies to predict your annual sales for the next three years. Here’s an example table from our real estate business plan PDF:
![sample executive summary real estate business plan A real estate business plan table for projecting yearly sales over the next three years.](https://wp-tid.zillowstatic.com/8/real-estate-business-plan-yearly-sales-forecast-34211f.png)
Outline your personnel expenses
Knowing what you’ll spend in a year will help you determine your breakeven point and set reasonable expectations for growth. A simple expense table, like this one from our free real estate business plan, allows you to project your personnel expenses through the next three years:
![sample executive summary real estate business plan A table outlining personnel expenses for your real estate business plan.](https://wp-tid.zillowstatic.com/8/real-estate-business-plan-personnel-expenses-table-ba350e.png)
Measure client experience
Keep track of all the services you offer — and measure how quickly you deliver them. This is crucial in any real estate business planning document, as it helps you build a strong client relationship and track the results over time. Here’s an example for measuring response time:
![sample executive summary real estate business plan A table that measures client experience to include in your real estate business plan.](https://wp-tid.zillowstatic.com/8/real-estate-business-plan-client-experience-table-8d01dc.png)
Use a client relationship management (CRM) tool
There are many CRM tools out there, so it’s easy to find one that fits your needs. Do you want to track analytics? Use it for email marketing? Keep track of property and listing details? Automate your marketing efforts?
As a Zillow Premier Agent , you can use a CRM to manage all your leads and connections, along with their progress through the real estate journey. You can prioritize leads who are actively looking, submitting offers and under contract. Jot down other tools you’re using, especially transaction management tools and their specific functions.
Calculate your business plan performance
The final step in your real estate business plan template is measuring the plan’s performance. Track performance-related questions and how you’ll measure them. Here’s a sample question and measurement example that many agents use for real estate business planning:
![sample executive summary real estate business plan A table that calculates your real estate business plan performance.](https://wp-tid.zillowstatic.com/8/real-estate-business-plan-performance-table-6ae13d.png)
Our customizable template helps you create a real estate business plan that outlines what success looks like — for you and your clients — so you can have your best year yet. This sample real estate business plan gives clear examples and allows for complete customization to your personal goals and your real estate market. Jot down your real estate business goals, clarify the state of your finances, profile your target customers and track other data that’s vital to successful real estate business planning.
Best of all — you can get started today! Just download our free real estate business plan template and add your own goals, projections, expenses and data. Don’t forget to update it regularly to accurately track your progress, evolve with the market and stay current with your target client’s needs.
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Real Estate Business Plan
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People would always need to find places. Be it for offices, homes, and whatnot.
Finding the ideal place irrespective of your needs and requirements is never a cakewalk, to begin with.
You can go through a number of real estates business plan templates before you write your plan.
Industry Overview
The market size, measured by revenue, of the Real Estate Sales and brokerage industry, is $156.2bn in 2021, and the industry is expected to increase by 0.4% in 2021.
Also, the market is changing at a rapid rate and the way people use spaces is changing at a rapid rate too.
Hence, to get on or stay on the higher end of the spectrum you’ll need to upskill and change the way you do business constantly.
But that is a fair trade for the amount of growth and profitability this industry has to offer.
Say goodbye to boring templates
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Things to Consider Before Writing a Real Estate Business Plan
Be specific.
The real estate industry is broad when it comes to work and what you can do. It can either be a source of primary or passive income. At the same time, you might be involved in the industry as an investor, agent, or builder. Decide what you want to do and plan on that basis.
Do your research
The trends of the real estate business change constantly, hence doing your research and updating it constantly is a crucial part of your profession.
As your knowledge and expertise is your greatest asset in this industry, keep expanding it to stay at the top of things.
Build a team of skilled professionals
Having a team you can build your real estate business with is essential.
Select a group of individuals with a diverse set of talents ranging from good communication skills to brilliant analytical skills. Given the dynamics of the real estate business, you never know what skills might come in handy in your business journey.
Be ready for change
As we have constantly discussed, real estate is a dynamic industry. Change is the only constant you’ll have in this business.
Thus, it is important for everything from your plan and way of doing business to be change-friendly.
Sources of Funding for a Real Estate Business
Gaining funds is one of the major reasons for writing a business plan. And here are a few good funding options for your real estate business:
A traditional loan is one of the most basic options for getting funded. You can opt for this if you have a good credit score.
Non-bank mortgage lending
This is a good option if you don’t want to go through a lot of paperwork.
The asset-based mortgage
For this, the lenders look at the rental value of your property and provide a loan on that basis. It is a good option if you don’t want or can’t get a loan based on your personal assets or income.
Above all, it is essential to plan your business to figure out your funding requirements and the right way to fulfill the same.
Write Your Business Plan
If you have enough connections, and the ability to find places for people that have attributes they want and need then a real estate business can be a profitable one for you.
A business plan helps you get funded, explain your ideas to the stakeholders of your business, and make better decisions.
Hence, planning is an important aspect of starting or growing your business.
It has been created using Upmetrics online business plan software that helps you create dynamic and customizable plans anywhere and at any time.
Our sample real estate business plan can help you with writing a well-rounded business plan for your business. It can act as a guide and prevent you from getting stuck in a certain section for too long.
Real Estate Business Plan Outline
This is the standard real estate business plan outline which will cover all important sections that you should include in your business plan.
- Market Opportunity
- Demand for Housing
- Financing & Investment Forecast
- Introducing Kegan
- Business Model
- Short Term Goals
- Long Term Strategies
- Keys to Success
- Contemporary Living for the 21″ Century
- The Complete Package
- Pricing Strategy
- Implementation Strategy – Action Plan
- Target Market Overview
- Housing Shortage Overview in Saudi Arabia
- Housing Shortage Overview in Riyadh
- Housing Prices
- Kegan Home Prices
- Market Positioning & Brand
- Marketing Strategies
- Sales Strategies
- Sales Process
- Competitive Landscape
- Competitive Advantages
- Rashid Bin Said
- Director of Construction
- Member name
- Chief Accountant
- Director of Marketing & Sales
- Other Staff
- Independent Directors
- Solid Balance Sheet
- Impressive Cashflow
- Financial Summary
- Financial Assumptions
- Income Statement (Five-Year Projections)
- Balance Sheet (Five-Year Projections)
- Cash Flow Statement (Five-Year Projection)
After getting started with Upmetrics , you can copy this sample real estate business plan into your business plan and modify the required information and download your real estate business plan pdf or doc file.
It’s the fastest and easiest way to start writing your business plan.
The Quickest Way to turn a Business Idea into a Business Plan
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Download a sample real estate business plan
Need help writing your business plan from scratch? Here you go; download our free real estate business plan pdf to start.
It’s a modern business plan template specifically designed for your real estate business. Use the example business plan as a guide for writing your own.
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Upmetrics is the #1 business planning software that helps entrepreneurs and business owners create investment-ready business plans using AI. We regularly share business planning insights on our blog. Check out the Upmetrics blog for such interesting reads. Read more
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Business Plan Executive Summary Example & Template
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Updated: Jun 3, 2024, 1:03pm
![sample executive summary real estate business plan Business Plan Executive Summary Example & Template](https://thumbor.forbes.com/thumbor/fit-in/900x510/https://www.forbes.com/advisor/wp-content/uploads/2022/10/Executive_Summary_Example_-_article_image.jpg)
Table of Contents
Components of an executive summary, how to write an executive summary, example of an executive summary, frequently asked questions.
A business plan is a document that you create that outlines your company’s objectives and how you plan to meet those objectives. Every business plan has key sections such as management and marketing. It should also have an executive summary, which is a synopsis of each of the plan sections in a one- to two-page overview. This guide will help you create an executive summary for your business plan that is comprehensive while being concise.
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The executive summary should mimic the sections found in the business plan . It is just a more concise way of stating what’s in the plan so that a reader can get a broad overview of what to expect.
State the company’s mission statement and provide a few sentences on what the company’s purpose is.
Company History and Management
This section describes the basics of where the company is located, how long it has been in operation, who is running it and what their level of experience is. Remember that this is a summary and that you’ll expand on management experience within the business plan itself. But the reader should know the basics of the company structure and who is running the company from this section.
Products or Services
This section tells the reader what the product or service of the company is. Every company does something. This is where you outline exactly what you do and how you solve a problem for the consumer.
This is an important section that summarizes how large the market is for the product or service. In the business plan, you’ll do a complete market analysis. Here, you will write the key takeaways that show that you have the potential to grow the business because there are consumers in the market for it.
Competitive Advantages
This is where you will summarize what makes you better than the competitors. Identify key strengths that will be reasons why consumers will choose you over another company.
Financial Projections
This is where you estimate the sales projections for the first years in business. At a minimum, you should have at least one year’s projections, but it may be better to have three to five years if you can project that far ahead.
Startup Financing Requirements
This states what it will cost to get the company launched and running. You may tackle this as a first-year requirement or if you have made further projections, look at two to three years of cost needs.
The executive summary is found at the start of the business plan, even though it is a summary of the plan. However, you should write the executive summary last. Writing the summary once you have done the work and written the business plan will be easier. After all, it is a summary of what is in the plan. Keep the executive summary limited to two pages so that it doesn’t take someone a long time to peruse what the summary says.
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It might be easier to write an executive summary if you know what to expect. Here is an example of an executive summary that you can use as a template.
![sample executive summary real estate business plan](https://thumbor.forbes.com/thumbor/fit-in/x/https://www.forbes.com/advisor/wp-content/uploads/2022/10/Example_of_an_Executive_Summary.png)
Bottom Line
Writing an executive summary doesn’t need to be difficult if you’ve already done the work of writing the business plan itself. Take the elements from the plan and summarize each section. Point out key details that will make the reader want to learn more about the company and its financing needs.
How long is an executive summary?
An executive summary should be one to two pages and no more. This is just enough information to help the reader determine their overall interest in the company.
Does an executive summary have keywords?
The executive summary uses keywords to help sell the idea of the business. As such, there may be enumeration, causation and contrasting words.
How do I write a business plan?
If you have business partners, make sure to collaborate with them to ensure that the plan accurately reflects the goals of all parties involved. You can use our simple business plan template to get started.
What basic items should be included in a business plan?
When writing out a business plan, you want to make sure that you cover everything related to your concept for the business, an analysis of the industry―including potential customers and an overview of the market for your goods or services―how you plan to execute your vision for the business, how you plan to grow the business if it becomes successful and all financial data around the business, including current cash on hand, potential investors and budget plans for the next few years.
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Cassie is a deputy editor collaborating with teams around the world while living in the beautiful hills of Kentucky. Focusing on bringing growth to small businesses, she is passionate about economic development and has held positions on the boards of directors of two non-profit organizations seeking to revitalize her former railroad town. Prior to joining the team at Forbes Advisor, Cassie was a content operations manager and copywriting manager.
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Real Estate Business Plan Template [Updated 2024]
Real Estate Business Plan & Example
If you want to start a real estate business or expand your existing real estate business, you need a business plan.
The following real estate business plan template and example give you the key elements to include in a winning real estate business plan or a real estate agent business plan. In addition, a business plan template for real estate businesses lays out your goals, challenges, and plans for meeting your goals.
You can download our Real Estate Business Plan Template (including a full, customizable financial model) to your computer here.
Real Estate Business Plan Example
Below are links to each of the key sections of a sample real estate business plan (if you’d like a real estate investment business plan template , go here.)
- Executive Summary – The executive summary is the first section of your real estate business plan and should give a brief overview of your business plan. It should include your company’s mission statement, a brief description of your products or services, your target market, and how you plan to succeed.
- Company Overview – The company overview section of your business plan should include a brief description of your company, your legal structure, your business model, your products or services, and your mission statement.
- Industry Analysis – The industry analysis section of your business plan should give a brief overview of the real estate industry, including statistics on the size of the industry, growth trends, and major players.
- Customer Analysis – The customer analysis section of your business plan should give a brief overview of your target market, including statistics on the size of the market, growth trends, and major segments.
- Competitive Analysis – The competitive analysis section of your business plan should give a brief overview of your competitors, including their products or services, their market share, and their marketing efforts.
- Marketing Plan – The marketing plan section of your business plan should give a brief overview of your marketing strategies to generate leads, including your property listings and services, your pricing strategy, your distribution channels, and your marketing budget.
- Operations Plan – The operations plan section of your business plan should give a brief overview of your agency’s day-to-day operations, including your office procedures, your on-site procedures, and your customer service procedures.
- Management Team – The management team section of your business plan should give a brief overview of your team, including their experience, their qualifications, and their roles in your agency.
- Financial Plan – The financial plan section of your business plan should give a brief overview of your financial projections, including your income statement, balance sheet, and cash flow statement.
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Home > Business Plan Templates > 9-Step Real Estate Business Plan Template With Examples
9-Step Real Estate Business Plan Template With Examples
Apr 25, 2024 | Business Plan Templates
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Our comprehensive Real Estate business plan template acts as an ideal guide to structuring your own detailed and efficient business plan. With its easy-to-follow sections, it requires you to think critically about all aspects of your real estate business, from the Executive Summary to Market Analysis and Financial Projections.
Each section of this template is designed to clearly present your business’s crucial elements to potential investors, lenders, and other interested parties and can be effortlessly tailored to suit your specific business characteristics.
By following these nine steps, you can create a solid business plan that will impress!
Table of Contents
1. Executive Summary
The executive summary is a concise introduction to your real estate business. It should provide an overview to investors and other readers. Although it’s the first section, you might find it helpful to complete it after all other sections have been detailed.
Introduction
Start by introducing your real estate business. What is its name? What exactly does your company do? Are you a residential, commercial, or investment property firm?
Example: XYZ Properties is a real estate company specialising in acquiring, refurbishing, and renting residential properties in Greater Dublin.
Business Overview
Give a high-level review of your real estate business. Explain your business’s core activities and the properties you deal with.
Example: Our primary business revolves around purchasing underperforming or outdated residential properties, revitalising them, and then marketing them for rent to young professionals and small families.
Mission and Vision Statement
Describe your real estate company’s mission statement and vision statement. This should define your business’s purpose, long-term goals, and strategies.
Example: Our full mission statement is to enhance the local residential market by transforming neglected homes into quality rental properties. Our vision is to contribute to community development and provide affordable, high-quality homes for the local populace.
Geographic Reach
Explain where your real estate business operates, your target areas, and your influence on the local real estate market in these regions.
Example: XYZ Properties currently focuses on the Greater Dublin area, specifically markets that show high rental demand yet lack updated, affordable housing options.
Service Type
Describe the type of property services you offer – buying, selling, renting, renovation, etc.
Example: We primarily purchase, renovate, and rent residential properties. We provide end-to-end property management services for our tenants.
Major Goals and Objectives
Outline your business’s short-term and long-term goals. These very smart goals should be SMART (Specific, Measurable, Achievable, Realistic, and Time-bound) goals.
Example: Our short-term goal is to acquire and refurbish five additional properties within the next fiscal year. In the long term, we aim to expand our operations to cover additional geographical areas within the next five years.
2. Business Description and Value Proposition
This section provides an in-depth understanding of your real estate business, including its structure, operating principles, and how it stands out from the competition.
Nature of the Business
Describe in detail the makeup of your successful real estate business and its key operations. From property sourcing to renovation, leasing, maintenance, and eventual sale, explain your real estate business’s overall process and stages.
Example: XYZ Properties is a full-service real estate investment and property management company. We identify undervalued properties, purchase and renovate them, find suitable tenants and manage the property to provide high-quality living while ensuring a steady return on the investments.
Customer Problems and Solutions
Identify the major challenges that your potential customers face and how your business solves those problems.
Example: Many younger professionals and families struggle to find well-maintained, affordable rental homes in good neighbourhoods. We bridge this gap by providing fully renovated, comfortable homes at a budget-friendly price in appealing locations.
Uniqueness and Competitive Edge
Describe what differentiates your real estate business from competitors. This could be your business model, unmatched customer service, proprietary technology, strategic partnerships, etc.
Example: XYZ Properties distinguishes itself by offering an entirely hassle-free rental experience. Our dedicated property management team handles any maintenance issues promptly, and our online portal lets tenants pay rent, submit service requests, and communicate with our team with just a few clicks.
3. Market Analysis
This part helps to understand the environment in which your real estate business operates. It includes an analysis of the overall industry, target market, and competition.
Industry Description and Outlook
Give an overview of the real estate industry in the area you serve. Discuss aspects like growth trends, factors affecting the industry, opportunities, and challenges.
Example: The Dublin residential rental market has grown steadily over the past few years, with a growing population and demand for quality housing. With limited new constructions and current housing stock ageing, property refurbishment presents a favourable opportunity.
Target Market Analysis
Define your next target client or market in terms of demographics, geographic location, socioeconomic status, etc., and explain why this segment is ideal for your business.
Example: Our primary target market is young professionals and small families from middle-income brackets looking for rental homes. This group values quality living spaces in convenient locations and is willing to pay a premium for renovated well-maintained homes.
Competitive Analysis
Identify your main competitors in your area. Analyse their strategies, strengths, and weaknesses. Show how you’ll position your business to stand out.
Example: While several property management firms and individual landlords operate in our region, their primary focus seems to be maintaining the status quo rather than upgrading properties to cater to tenants’ rising expectations. XYZ Properties stands out by focusing on delivering quality, updated accommodation that appeals to our target market.
4. Business Structure and Management
This section discusses the legal and organisational structure that your real estate business adheres to and presents information about the management team.
Legal Description and Ownership Structure
Provide the legal structure of your real estate business. Are you a sole proprietor, partnership, or corporation? Clarify this and explain why such a structure was chosen.
Example: XYZ Properties is a Private Limited Company (PLC). This structure allows us to operate as an independent legal entity, which attracts investors, limits personal liability, and enhances business credibility.
Management Team
Present details about your key management team members, roles, industry experience, and qualifications.
Example: Our management team includes a CEO with a background in property management, a CFO with extensive financing experience, and a Property Manager who brings years of maintenance expertise. Their collective knowledge provides a comprehensive skill set to manage all aspects of our real estate business effectively.
5. Marketing and Sales Strategy
This part of your business plan needs to articulate how the real estate business anticipates marketing efforts attracting its target market.
Marketing Plan
Describe your real estate marketing strategy. Are you going to use real estate listing websites, social media, local advertising, network events, or perhaps a combination of the above? Explain each channel and its importance.
Example: We use a mix of online and offline marketing strategies. Our properties are listed on major real estate websites, and we leverage social media to showcase our refurbished units. We also have property listings and actively network with local businesses and community events to promote our quality rental homes.
Sales Strategy
Explain your sales strategy. This would include how you negotiate contracts, pricing strategy, sales forecast, etc.
Example: Our sales strategy is to price our rental units competitively, offering top-of-the-market amenities to justify the pricing. We leverage property viewings to highlight the benefits of our homes, focusing on the quality of refurbishments, location, and our dedicated property management services.
Growth Strategy
Discuss any plans to expand your real estate business – for instance, moving to new locations, adding new property types, or scaling your business model.
Example: In the long term, we aim to expand our portfolio to include commercial property and possibly venture into real estate development. In the medium term, our growth strategy involves expanding to newer suburbs in the Dublin region.
6. Operations
This part outlines the operational aspects of your real estate business, including location, facilities, equipment, and technology needs.
Geographic Location
Provide details on where your own real estate agent or business is based and where it operates. Discuss why these locations have been chosen.
Example: XYZ Properties is headquartered in downtown Dublin and operates across the Greater Dublin area. This region has been strategically chosen for its high rental demand and robust transportation network.
Facilities and Equipment
If applicable, describe the facilities needed to support your business, including office space, renovation equipment, etc.
Example: Our business operates from a compact office in downtown Dublin, where our administrative functions originate. All property renovation is performed with high-quality equipment and materials to ensure the delivery of superior residential properties.
Technology Needs
Describe the technology your real estate business uses. This could include software for property management, digital marketing tools, and customer relationship management (CRM) software.
Example: XYZ Properties uses cutting-edge property management software that streamlines most functions, such as rent collection, tenant communication, and maintenance requests. We also employ digital marketing tools to promote our business and properties.
7. Implementation Strategy
In this section, outline how your real estate business plan will implement your business strategies and define milestones and timelines based on your objectives and goals.
Role and Responsibilities of Team Members
Detail the roles and responsibilities of each team member. This should relate to the operational strategies you outlined earlier.
Example: Our CEO oversees strategic decision-making and investment sourcing. Our CFO is responsible for financial management and budgeting. The Property Manager handles all operational aspects related to properties, from overseeing renovations to interacting with tenants and addressing their needs.
Milestones and Timelines
Outline your business plan into a series of measurable and achievable milestones. Provide a timeline for when each milestone will be achieved. This gives your team a roadmap to follow and helps investors understand your approach.
Example: The immediate milestone is acquiring and refurbishing three additional properties within six months. We aim to lease those properties within a subsequent three-month period. Our longer-term milestones are focused on portfolio expansion and diversification, measured by adding an average of six new properties per year for the next five years.
8. Financial Plan and Projections
This section outlines your financial goals, sources of revenue, and detailed financial projections.
Start-up/Financial Summary
Describe the financial overview of your company. If it’s an existing business, provide your actual financial data, including revenue, costs, a cash flow statement, etc. For start-ups, describe the initial capital involved and how expenses would be financed.
Example: XYZ Properties, being a well-established company, operates on its steady revenues generated through rentals. Our revenues cover property acquisition, renovation costs, and operating expenses. A reserve fund is maintained for unexpected contingencies.
Revenue and Pricing Model
Discuss your source of revenue and your pricing strategy. In real estate, this typically involves property rent or sale prices, management or service fees, etc.
Example: Our primary revenue stream is rental income derived from our properties. We set rent prices based on the quality of the property, location, and market conditions while ensuring a healthy return on our investments.
Forecasted Profit and Loss
Provide a profit and loss statement forecast. This should include your average sales price forecast, expected expenses, and profits for at least three years into the future.
Example: Based on our current property portfolio and expansion plans, we project an annual rental income growth of 7% for the next three years. After accounting for all operating expenses and necessary investments in new properties, we expect a net profit margin of about 15% consistently over this time frame.
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Projected Cash Flow
Offer your cash flow projection. This shows that your business is solvent and can successfully pay its debts and operational expenses.
Example: Our cash flow projections display the influx of income from rentals and the outlay for property acquisitions, renovations, maintenance, and administrative costs. We foresee a consistent positive cash flow, keeping our business financially healthy.
Project Financial Assumptions
Detail any assumptions made while creating your financial outlook.
Example: Our projections presume a steady rental demand and property market stability. We’ve also assumed steady cost escalations of around 3% per annum for property upkeep and other variable expenses. Our major capital expenses are assumed to be funded through internal accruals and bank loans.
9. Appendices
This section should include any additional documents or support for your business plan.
Organisational Chart
Attach a chart showing your real estate business’s organisational structure. This will help investors understand the hierarchy and functions within your company.
Example: Our organisational chart clearly represents the hierarchical construction of XYZ Properties. It indicates the roles of the CEO, CFO, Property Manager, and support staff, providing our investors with a clear view of our company structure.
Resume of Key Team Members
Attach the resumes of your key team members to give investors a better understanding of their skills, experience, and how they contribute to the success of your business.
Example: Attached are the profiles of our CEO, who has over 15 years of real estate investment and management experience, and our CFO and Property Manager, who have combined experience of 20 years in their respective fields.
Detailed Budget
Include a detailed account of your budget, showing everything from initial investment to projected income versus expenses.
Example: Attached is a detailed budget document that outlines our projected revenues and expenses for the next fiscal year, including acquisition costs, renovation expenses, operational costs, and anticipated rental income.
Market Research
Provide some market research to validate your business assumptions.
Example: Enclosed is a recent real estate market report for the Greater Dublin area. It highlights key trends in the rental market. It demonstrates the significant demand for quality rental homes among the young professionals and family demographic.
Which Real Estate Business Is Most Profitable?
The profitability of a real estate business largely depends on factors such as location, market conditions, investment strategies, and operational proficiency. That being said, Real Estate Investment Trusts (REITs) are often highly profitable, primarily because they allow investors to buy shares in commercial real estate portfolios that generate income. Rental property businesses, especially in high-demand areas, can offer consistent cash flow as well.
Flipping properties – buying homes, renovating them, and quickly reselling them for a profit – can be lucrative, too. However, it involves higher risk and depends on market trends. Commercial real estate, dealing with properties like offices, retail space, or warehouses , often fetches substantial returns but requires significant capital.
Ultimately, the key lies in understanding the market, assessing risk effectively, and managing investments wisely to ensure profitability in any real estate business.
Get Started In Real Estate
Remember that a high-quality, well-researched real estate business plan could be instrumental in your real estate business’s success and growth. It will guide your decisions, attract investors, and help keep your real estate business on the right track towards achieving its goals.
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Elon Glucklich
8 min. read
Updated February 19, 2024
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Download a free one-page real estate investment sample business plan
With the worst of recent inflation in the rear-view mirror and interest rates projected to start falling in 2024, real estate investors see signs of optimism.
New apartment construction is rising sharply . These new properties coming onto the market and the prospect of lower borrowing costs point to plenty of long-term opportunities for investors.
However, investing in real estate requires a sharp eye for market trends, as well as significant upfront resources. Investors need to understand the different strategies for securing financing, and how to manage their properties to increase their value before reselling.
A business plan reduces your likelihood of making a bad investment, because it gets you in the habit of organizing your market research, and updating it as conditions evolve. The plan ultimately helps align your investment strategies with your opportunities.
| Looking for a fix and flip , home inspection , or other type of plan? Browse the Bplans library of sample real estate business plans |
- What should you include in a real estate investment business plan?
Here are the most common sections any real estate investor should consider including in their plan:
- Executive summary
- Company overview
- Investment strategy
- Market analysis
- SWOT analysis
- Financial plan and forecasts
- Exit strategy
The length and depth of your business plan will vary depending on your business. For instance, a real estate investment firm with a national portfolio of office and apartment buildings is bound to have a more complex set of financial projections and supporting documents than an investor with single-family houses in a few markets.
Here’s an example of a real estate investment business plan outline.
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- The 8 elements of an effective real estate investment business plan
1. Executive summary
Most business plans start with an executive summary outlining the business opportunity and the core strategies of your business.
It’s the first section that most readers (including loan officers) will read. You’ll want to highlight any unique value or competitive edge you have, such as a track record of generating positive returns, or knowledge of a specific market.
You should also give a high-level overview of your financial projections and anticipated returns, which you’ll go into greater detail on in the plan’s financial section. If you’re writing a business plan because you’re seeking bank financing or an investment, this is a good section to state your funding request and how you’ll use those funds.
2. Company overview
The company overview describes your company’s operational and legal structure .
List whether you have any partners, and detail your team’s experience, expertise, and roles within the company. Also, outline your portfolio, such as investing in residential properties, commercial buildings, or new development projects.
3. Investment strategy
There are many ways to invest in real estate — buying homes to rent out, fixing and flipping houses, pooling your resources with partners into a real estate investment group, investing in real estate investment trusts, and more. Describe your strategy and why it will generate the highest returns.You should also describe your criteria for choosing properties to invest in, and whether your primary focus is to invest in a certain geographic region or a type of property, such as apartments or fixer-upper homes.
4. Market analysis
If you have any experience in investment real estate, you know how important market research is. Imagine paying $1 million for an apartment building and adding $100,000 on renovations, only to realize you can’t find tenants to pay the higher rents you want to charge.
That’s where a thorough market analysis comes in. It helps you understand the landscape you’re operating in.
Use resources like the U.S. Census Bureau to research your target market’s age, income, and population trends. Look online for local data about real estate prices and how they’ve changed over time, or reach out to local realtors to get a feel for the market.
You should also try to determine how much investment activity is taking place in the market and who you’re competing with for opportunities.
Many cities and larger towns with development departments make their building permit databases available online, since permits are typically public records. Reviewing permit records can show you how much development activity is already occurring where you plan to invest.
5. SWOT analysis
Because of the risks involved in real estate investment, a SWOT analysis can be a helpful exercise. It’s a strategic way of evaluating your company’s internal and external environment (think about your company’s financial health as an internal factor, and interest rates as an external factor).
The SWOT analysis gets you thinking about your company’s:
Strengths: What you do well , and what unique resources you have.
Weaknesses: What you need to improve on, what resources you lack, or what your competitors do better than you.
Opportunities: What are the current opportunities you want to take advantage of?
Threats: What factors could expose your company to risk, or what might competitors do to harm your position?
6. Financial plan and forecasts
Your financial plan should provide a detailed view of the expected financial performance of your real estate investments. Include income statements , cash flow forecasts , and balance sheets projecting the next 3-5 years.
List the assumptions you used in your projections, such as rental income changes from rent increases or unrealized revenue due to certain amounts of vacant commercial space.
You should also include a break-even analysis. This calculates when you expect a property’s operating income to exceed the debt taken to buy and maintain it.
7. Exit strategy
If you’re writing your business plan for investors, detailing your exit strategy will clarify their pathways for realizing their returns. It also trains you to think about the long-term timeline for your investments and how to maximize their value.
Consider strategies that will help you maximize your profits, like refinancing your properties or looking into potential tax-deferral opportunities like a 1031 exchange.
8. Appendix
The appendix is an optional section at the end of your business plan. It’s where you include additional documents that support your business plan but don’t fit in the plan. This might include your detailed market research data, financial tables not covered in the main sections of the plan, legal documents, or permit records.
- Key considerations for writing a real estate investment business plan
To write a business plan that you can use as a guide for your decision making, consider places in the plan to emphasize these key points.
1. Develop a niche
If you’re a small investor or just starting, focus on carving out a specific niche for your investment strategy instead of trying to compete in multiple real estate segments. This could mean concentrating on a particular property type, such as multi-family homes, commercial real estate, or foreclosure properties, and diversifying your portfolio only after you’ve developed some traction. Or, you may decide to focus only on the segment you have the greatest advantage in.
2. Understand your risks
Real estate investment is inherently risky.
Market dynamics, regulatory changes, and economic fluctuations can all impact the performance of your investments.
As you compile research for your market analysis, dedicate time to conduct a detailed risk analysis to understand these factors and their potential impact on your investments. This includes assessing location-specific risks, economic cycles, and tenant or occupancy issues.
Writing these out before they happen will help you think of strategies to mitigate these risks if they actually occur.
3. Network and develop market knowledge
Building a strong network with other real estate professionals, such as brokers and contractors, can provide valuable insights into the markets you hope to operate in. Document in your business plan how you will cultivate these relationships — you can include timelines for developing contacts in the milestones section of your plan.
Also, try to keep up to date on current events in the area, especially news about the regional economy. Look into the tax climate in the area, as well. All of this helps you build a deeper understanding of your market dynamics, and helps validate your investment strategy — or gives you reasons to reconsider.
4. Consider help with your financials
Even if you have the financial background to write financial forecasts, you may want to leave room in your budget for accounting support.
If you’re starting or investing in an unfamiliar market, a CPA will help you navigate tricky tax issues that could throw off your projections.
Include the expense of hiring an accountant in your plan if you decide to bring one on, and describe their role, whether it’s helping with budgeting, tax planning, or financial analysis.
- Download your free real estate investment one page sample business plan
Download your free real estate investment sample business plan right now, or explore the Bplans gallery of over 550 sample business plans if you want to see plans for other industries.
You can also see how other real estate businesses have written their plans by checking out our free library of real estate business plans .
There are many reasons why real estate investors should write a business plan . Not only does it demonstrate credibility to the banks or investors you want to fund your acquisitions — it also increases your chances for growth , and gives you a strategy to manage your finances for the long term.
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Elon is a marketing specialist at Palo Alto Software, working with consultants, accountants, business instructors and others who use LivePlan at scale. He has a bachelor's degree in journalism and an MBA from the University of Oregon.
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BUSINESS STRATEGIES
How to create a real estate business plan
- Nirit Braun
- 10 min read
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A real estate business plan is a strategic document that outlines the objectives, strategies and tactics a person or a team will employ when starting a business in the real estate industry. This comprehensive and clear plan not only defines the business' mission, vision and goals but also delineates the steps necessary to achieve them.
When starting a business, especially in a dynamic and competitive sector like real estate, a well-crafted business plan becomes an indispensable tool for success. Beyond helping business in their first steps to understanding how to start a service business , a business plan provides a structured framework that helps entrepreneurs make informed decisions, allocate resources effectively and stay focused on their objectives. By articulating the business' value proposition, rental business ideas , target market, competitive landscape and revenue streams, the plan offers a holistic understanding of the venture's potential and challenges.
Looking to kick off your real estate business? Create a business website today with Wix. These real estate agent websites can help you get started.
In this section, we'll break down the key components involved in crafting a successful real estate business plan in six steps.
Executive summary
Company and domain name
Market analysis and research
Operations plan
Marketing and advertising plan
Financial plan
01. Executive summary
An executive summary is a concise overview of your entire real estate business plan. It serves as a snapshot that captures the essence of your venture, highlighting its key components and objectives. A well-crafted executive summary should provide a clear understanding of your real estate business' purpose, market opportunity, strategies and potential for success. It's typically the first section of the business plan and should be written after the rest of the plan has been completed.
To write a clear executive summary for a real estate business, follow these steps:
Start with a brief introduction: Describe your business’ mission, vision and the services you intend to offer. Highlight what sets your business apart in the competitive real estate landscape.
Summarize the market demand: Explain what kind of opportunity you aim to address with this type of business . Mention key trends in the real estate industry that support the viability of your venture.
Identify your target audience: Whether it's first-time homebuyers, property investors or commercial clients, briefly describe their demographics and needs.
State the unique value you offer to clients: This could be exceptional customer service, a specialized focus or innovative technology solutions.
Outline your key real estate marketing strategies : Highlight how you plan to reach and engage your target market.
Provide a high-level overview of your projected financials: Include revenue projections, startup costs and funding requirements.
Introduce the key members of your team: Highlight how their skills contribute to the success of the real estate business.
Example of an executive summary for a real estate business: “ABC Realty is a dynamic real estate agency that specializes in helping first-time homebuyers navigate the complex property market. With a strong commitment to providing personalized guidance and support, we aim to simplify the buying process and empower our clients to make informed decisions. Our target market consists of young professionals and families looking for their dream homes in urban areas. Leveraging the latest technology and data analytics, we offer a seamless search experience that matches buyers with their ideal properties. Our marketing strategy involves a mix of social media engagement, local partnerships and educational workshops to establish our brand as a trusted resource in the real estate industry. Backed by a team of experienced agents and industry professionals, we are well-positioned to make homeownership dreams a reality while achieving sustainable growth and profitability. Our projected financials indicate a steady upward trajectory, with a goal of reaching profitability within the first two years.”
02. Company and domain name
Knowing how to name a business is crucial for a real estate venture and a key step before you register your business . It shapes your brand identity, influences client perceptions and establishes trust.
Additionally, selecting a suitable domain name for your real estate website is crucial for online visibility and accessibility. Your online presence should be in top form taking into account that 97% of homebuyers search for their homes online. Here's how to approach these decisions:
Company name
Should reflect your business' values and services
Keep it concise, memorable and easy to spell
Check for trademark conflicts to avoid legal issues
Consider using the free business name generator from Wix for inspiration
Be inspired by these real estate business name lists.
Domain name
Align it closely with your company name if possible
Choose a domain extension (.com, .net, .org) that's commonly recognized
Keep it short and free of complex words or hyphens
Ensure it's easy to pronounce and type
Learn more: How to make a website
03. Market analysis and research
Incorporating comprehensive market analysis and research into your business plan is essential for understanding the competitive landscape and formulating an effective business strategy. Conduct market research to identify trends, competitors and potential gaps in the market. Analyze your target audience's preferences, behaviors and pain points to tailor your services and marketing efforts accordingly.
Understanding the market dynamics allows you to position your real estate business strategically and offer unique value propositions that resonate with clients.
04. Operations plan
An operations plan outlines the logistical aspects of your real estate business, ensuring its smooth day-to-day functioning. This section should cover:
The physical location of your business office or headquarters
The size and layout of your office space
The equipment and technology required to run your real estate business
The roles, responsibilities and qualifications of your team members
05. Marketing and advertising plan
In the competitive real estate industry, a robust marketing and advertising plan is vital for attracting clients and establishing your brand presence. Your plan should encompass various marketing strategies , including:
Social media marketing, search engine optimization (SEO) and online advertising
Creating valuable content like blog posts, videos and guides
Establishing partnerships with local businesses and industry associations
Hosting events and workshops that educate clients about real estate trends
You’ll also need to develop a suite of brand assets to use in your marketing efforts, starting with a company logo and real estate slogan . You can use a free logo maker or real estate logo maker to get a professional design in minutes. Learn how to make a real estate logo that suits your brand.
06. Financial plan
The average cost to start a real estate brokerage can range from $10,000 to $200,000 , so odds are you will need to secure financing. The financial plan outlines your real estate business' financial projections, funding requirements and path to profitability. It should include all your startup costs including starting an LLC , licensing, office setup, marketing materials and technology needs.
Next, estimate income based on property sales, commissions and other revenue sources. Alongside this outline ongoing operational costs, such as rent, salaries, marketing and utilities. Then take the time to specify how your business will be funded initially, whether through personal savings, loans or investor contributions. Finally, predict when your real estate business is expected to reach profitability based on your revenue and expense projections. You can include within this the exact ways to make money as a real estate agent .
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Real estate business plan examples
Here are two templates for hypothetical real estate businesses, each including the main parts discussed in our how-to steps.
Real estate business plan template 1: ABC Realty
ABC Realty is a forward-thinking real estate brokerage focused on serving residential clients in urban areas. With a mission to simplify the home buying process for first-time buyers, we aim to provide personalized guidance and a seamless search experience. Our market research indicates a rising demand for affordable housing solutions and our team's expertise positions us well to address this need. Leveraging digital platforms and local partnerships, we're dedicated to establishing a brand known for trust, transparency and professionalism. Our financial projections show steady growth, with profitability projected within 18 months.
Company name: UrbanNest Realty
Domain name: www.urbannestrealty.com
Market analysis: Our research reveals a growing trend of Millennials seeking starter homes in urban areas.
Competitive landscape: Competitor analysis highlights the need for tailored customer service and simplified processes. We will tap into this by offering comprehensive support and leveraging technology to streamline transactions.
Location: A prime urban location with easy accessibility.
Premises: A modern office space designed for client consultations and agent collaboration.
Equipment: State-of-the-art computers, customer relationship management (CRM) software and virtual tour technology.
Staffing: Agents, property management experts and administrative staff.
Digital marketing: Social media campaigns, targeted online ads and search engine optimization.
Content marketing: Regular blog posts on home-buying tips, neighborhood insights and market trends.
Networking: Partnerships with local lenders, moving companies and interior designers to provide added value.
Events and workshops: Monthly homebuyer seminars and virtual property tours.
Startup costs: $60,000 (licenses, office setup, marketing materials)
Revenue projections (first year): $300,000
Revenue projections (section year): $500,000
Expenses: Monthly rent, salaries, marketing expenses and administrative costs
Funding: Personal savings and a small business loan
Profitability timeline: Projected within 18 months
Real estate business plan template 2: Empire Investments
Empire Investments is a dynamic real estate investment firm specializing in commercial properties. With an aim to provide high-value investment opportunities, we focus on acquiring and enhancing properties with substantial growth potential. Our strategy involves leveraging market trends, identifying undervalued assets and optimizing their value through strategic renovations and management. Our team of seasoned professionals ensures a comprehensive approach to portfolio management, driving investor returns. Our financial outlook is promising, with steady revenue growth projected over the next five years.
Company name: Empire Investments
Domain name: www.empireinvestmentsre.com
Market analysis: Our research highlights an increasing demand for mixed-use properties in urban areas.
Competitive landscape: Competitor analysis reveals a gap in the market for value-add properties. We'll focus on acquiring underperforming assets with the potential for repositioning and strong cash flow.
Location: Central business district for easy access to commercial properties.
Premises: A professional office space for meetings and deal analysis.
Equipment: Advanced financial analysis tools and property management software.
Staffing: Investment analysts, property managers, legal experts and administrative support.
Networking: Building relationships with commercial brokers, property managers and industry experts.
Content marketing: Thought leadership articles, market reports and investment guides.
Webinars and seminars: Monthly webinars on commercial real estate investment strategies.
Direct marketing: Targeted outreach to potential investors based on investment preferences.
Startup costs: $150,000 (licenses, office setup, due diligence expenses)
Revenue projections (first year): $1,000,000
Revenue projections (second year): $2,000,000
Expenses: Office overhead, salaries, marketing campaigns and property management costs
Funding: Combination of private equity, investor capital and personal investments
Profitability timeline: Positive cash flow projected within the first year, substantial returns expected over five years
Top benefits of writing a real estate business plan
Starting a business in real estate requires careful planning and a well-structured business plan offers a multitude of benefits that contribute to the venture's success. A business plan helps you in the following ways:
Attracting investors and funding: A well-developed business plan serves as a persuasive tool to attract potential investors and secure funding. It outlines the business's unique value proposition, market opportunities and growth strategies. By clearly articulating the revenue model and projected financials, entrepreneurs demonstrate their preparedness and potential returns, increasing the likelihood of obtaining an investment and raising money for a business .
Resource assessment: Writing a business plan helps entrepreneurs understand the resources, supplies and staff required to launch and operate the real estate business. This comprehensive assessment ensures that nothing is overlooked, from property acquisition and renovation costs to marketing expenses and administrative needs. By listing these requirements, entrepreneurs can plan for adequate funding and efficient resource allocation.
Strategic direction: A business plan outlines the business's short-term and long-term goals, providing a strategic direction for the real estate business. Entrepreneurs can define their target market, geographic focus and property types, enabling them to make informed decisions aligned with their objectives. This clarity prevents aimless pursuits and helps maintain focus on strategies that align with the business' vision.
Risk mitigation: A well-structured business plan anticipates potential challenges and outlines strategies to mitigate risks. Entrepreneurs can identify industry-specific challenges, such as market fluctuations or regulatory hurdles and devise contingency plans. By acknowledging these risks upfront, entrepreneurs can proactively address them and adapt their strategies as needed.
Operational efficiency: The business plan details the organizational structure, roles and responsibilities required to run the real estate business smoothly. Defining these elements helps entrepreneurs allocate tasks effectively and ensure that the right people are in place to execute the business strategies. This clarity enhances operational efficiency and minimizes the potential for confusion or overlaps.
Measurable progress: A business plan sets clear milestones and metrics to measure the real estate business' progress. Entrepreneurs can track key performance indicators (KPIs) against the projected goals, enabling them to assess their success and identify areas for improvement.
Real estate business plan FAQ
What is a business plan in real estate.
A real estate business plan is a document that outlines your goals and strategies for starting or growing a real estate business. It should include a market analysis, a business model, an operational plan and a financial plan.
Which real estate business is most profitable?
Can you become a millionaire from owning real estate, is it a good idea to start a real estate business, how do i organize my real estate business, want to create another type of business plan.
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Ultimate Guide: 11 Points to Writing a Real Estate Business Plan
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Failing to plan is planning to fail. Your business plan is the GPS for success. Instead of wandering, push towards your goals and objectives with clear direction. Developing a real estate business plan is critical to forming a healthy and sustainable business.
A real estate business plan is an important step for any real estate agent looking to build a successful career in the industry. While there is no one-size-fits-all approach, there are certain key elements that should be included in any plan. First and foremost, it is essential to set clear goals and objectives.
A study of 2,877 business owners found that companies are twice as likely to secure loans and funding if they have a business plan and 75% more likely to grow. Another study showed that 64% of companies who created a plan increased their businesses, compared to 43% of companies that hadn't yet finished a plan.
Your own business plan is an essential tool for any business, small or large. Real estate agents use business plans to map their marketing strategies, target their advertising, and track their progress. A business plan helps agents set goals and stay on track throughout the year. It is also a valuable reference point when meeting with clients and potential investors.
While there are many different ways to create a real estate business plan, certain elements should be included in every scenario. These elements include an overview of the business, the company's goals and objectives, a marketing strategy, and a financial analysis. By having these key components, companies can ensure that their real estate business plan is comprehensive and will help them achieve their desired results.
Harvard Business Review (HBR) stated that the chances of success rose by 12% for those that spent no longer than three months on their plan . With any longer proving futile. So, how do you write a business plan for your real estate business without getting bogged down in the details? In this post, we'll look at actionable steps agents and brokers can take to outline, execute and measure the performance of a business plan.
As a real estate agent, you know that the housing market can be unpredictable. You need to be prepared for the ups and downs of the market, and one way to do that is to have a business plan. Your business plan will help you set goals and track your progress. It will also force you to think about the costs of running your business and how you will generate leads. There are many online resources that can help you write a business plan, but the most important thing is to get started. By taking the time to write a plan, you will ensure that your business is ready for whatever the housing market throws your way.
What is a real estate business plan?
A business plan is a written document that captures the future of your business. It details what you plan and how you plan to do it.
Real estate business plans are essential for two reasons. First, they provide a road map for agents to follow as they work to build their businesses. Second, they force agents to think through all the crucial aspects of their business, such as their marketing efforts, target market, and financial goals.
By taking the time to write a Real Estate Business Plan, agents can ensure that they are taking all the necessary steps to build a successful business.
A Real Estate Business Plan is an essential tool for any business, whether you are just starting or have been in business for years. There are many benefits to creating a Real Estate Business Plan, including:
- Having a Real Estate Business Plan forces you to take a step back and assess your business as a whole. It allows you to see where your business stands, and identify any areas that need improvement.
- A Real Estate Business Plan provides a roadmap for your business. It can help you to set goals and track your progress over time.
- A Real Estate Business Plan can help secure your business funding. If you seek investment from Venture Capitalists or Banks, they will often require a copy of your business plan before considering your request.
- A Real Estate Business Plan can help you to attract and retain top talent. If you are looking to hire employees or contractors, having a well-crafted business plan can be a significant selling point.
- A Real Estate Business Plan can be a valuable tool for managing day-to-day operations. A clear and concise plan can help you better decide where to allocate resources and how to utilize your team's time and talents best.
- A Real Estate Business Plan can help you to measure and track your marketing efforts. By setting specific goals and objectives, you can more effectively gauge the success of your marketing campaigns and make necessary adjustments along the way.
- A Real Estate Business Plan can serve as a valuable sales tool. A professional business plan can give you a significant competitive advantage if you are looking to sell properties or convert leads into clients.
- A Real Estate Business Plan helps to keep you organized and on track. Trying to run a successful real estate business without a plan is like trying to drive from New York to Los Angeles without a map - chances are, you'll get lost along the way!
Having a Real Estate Business Plan gives you credibility in the eyes of others. If you are working with other professionals such as lenders, appraisers, or title companies, having a well-developed business plan shows that you are serious about your business and increases the likelihood that they will want to work with you in the future.
Last but not least, creating a Real Estate Business Plan is empowering! Taking the time to develop a comprehensive plan shows that you believe in yourself and your business and sets the foundation for long-term success.
Precisely, it conveys your business goals, the strategies and tactics you'll use to achieve them, potential problems you may run into along the way and how to overcome them, roles and responsibilities, SWOT analysis, and measurement strategies.
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What should a real estate business plan include?
Real estate business plans are different from traditional business plans.
Real estate agents need to focus on their target market, their uniqueness, and how they will succeed against the competition. Real estate business plans should also include an analysis of the current market conditions and the potential for growth in the future. In addition, real estate agents should outline their marketing strategy and have a budget for advertising and promotions. By taking the time to create a comprehensive business plan, real estate agents can increase their chances of success in this competitive industry.
Real estate business plans vary in length and complexity, but all should include the following elements:
- An overview of the real estate market
- A description of the agent's target market
- A marketing plan
- A financial plan
- A discussion of the agent's competitive advantages
Real estate business plans provide a roadmap for agents to achieve their goals. They should include specific strategies for generating leads, marketing properties, and closing deals. The business plan should also outline the agent's budget and target income. Additionally, the real estate business plan should set forth a schedule for prospecting, listing appointments, and open houses. By following a real estate business plan, agents can increase their chances of success in real estate.
How do you assemble a real estate business plan?
A business plan is essential for any real estate business, whether you're just starting out or have been in the industry for years. It provides a roadmap for your business, laying out your goals and strategies for achieving them. But how do you go about assembling a business plan?
First, you'll need to identify your target market. Who are you trying to reach with your real estate business? Once you know your target market, you can start developing your marketing strategy. What methods will you use to get potential clients? How will you differentiate yourself from other real estate businesses in your area?
Next, you'll need to put together a financial plan. What are your revenue sources? How much money do you expect to bring in each month? What are your expenses? How much do you need to save for a rainy day? A clear financial picture will help you make sound decisions for your business.
Lastly, don't forget to include a personal development plan. What skills do you need to improve to succeed in the real estate business? What classes or training programs can you take to close more deals and earn more commissions? A well-rounded business plan will help ensure your real estate business is booming.
Writing a Real Estate Business Plan in 11 Easy Steps
1. write a detailed business description.
There's a story and context behind your business, and the business description is where that should shine. Write a brief overview of your Real Estate business. Include your business goals and how you plan on achieving them. Then create a description of your company, including its history, structure, and other relevant information.
The mission statement is part of the business description — which helps keep the rest on the track. Many mission statements follow a familiar format, like:
"To be the best, full-service Real Estate company in the Triangle and to enhance our quality of life through active community involvement.".
In a microstudy of 200 mission statements, it was found that mission statements most often talk about the company's dedication to customers (85%), shareholders (37%), employees (21%), and society (3%).
As well as a defined mission statement, make sure to include:
- When you were founded
- Where you are located
- Who the leaders are
- Special advantages/partnerships
- Market opportunities
- Legal structure
A very brief real estate business description example is:
"Norris & Company Real Estate is Vero Beach's premier upscale real estate firm. They specialize in luxury waterfront homes and condominiums, particularly in Vero Beach and Indian River County, FL."
2. Market Analysis
Research the Real Estate market in your area and identify any trends or opportunities. Include this information in your business plan.
Real estate agents must constantly be aware of the market conditions in their area to serve their clients best. Agents can provide expert guidance and advice by understanding the trends and opportunities.
When writing your Real Estate business plan, including a comprehensive analysis of the market conditions in your area. It will help you better understand your client's needs and identify potential opportunities.
Your market analysis should include:
- An overview of the Real Estate market in your area
- Identification of any trends or opportunities
- An explanation of how you will address these trends or options in your business plan
By including this information in your Real Estate business plan, you will be able to show potential clients that you are knowledgeable and prepared to help them navigate the Real Estate market.
3. Perform a SWOT Analysis
A SWOT analysis is a technique used to identify and define several key characteristics that will impact your business: Strengths, Weaknesses, Opportunities, and Threats.
Think of it this way:
Strengths and Weaknesses are internal. Threats and Opportunities are external.
An analysis can be as simple as making lists of items under each category.
For example, a strength could be a solid and experienced sales team, while a weakness might be that your business is expensive to run because you haven't nurtured supplier relations.
It could be as simple as filling four sheets of paper with descriptions of the strengths, weaknesses, opportunities, and threats — collaboratively or alone. To make the answers clearer and the exercise more manageable, you can use questions like:
- What do our competitors do better than us? Threat .
- What's our unique selling point? Strength .
- Why have customers churned in the past? Weakness .
- Which markets are underserved in your territory? Opportunities .
4. List Your #1 SMART Goal
It's great to be ambitious, but focusing on one goal makes it easier to stay motivated, track progress, and see the measurable effect of achieving it. Even better if that goal is a SMART Specific, Measurable, Attainable, Realistic, and Timed – goal.
Examples of SMART goals you might set for your growing real estate business are:
- Build a new real estate website in the next three months
- Hire and onboard three new SDRs in the next six months
- Increase monthly leads by 50% by next year
- Sell ten houses in the Dallas metro area in the next 30 days.
Pick one at a time and focus on it! Sticking to an achievable goal with a time limit makes it more likely to come to fruition. And, even just writing it down makes you 42% more likely to attain it.
5. Identify Your Market Niche
Before setting out your facts and figures, it's essential to spotlight your target market and how you'll serve this niche. It helps you decide what's realistic and feasible to achieve in your business plan.
Determining your market niche is a fancier way of saying: Who are your services best suited to? While honing in on a narrow target seems a little exclusionary, niche marketing can save you time, effort, and money on marketing.
One tool to help you define your market is a buyer persona. A persona is a fictional typification of your ideal customer, with information that enables you to steer your sales and marketing in the right direction.
It's essential to assess your niche and ensure it is consistent with the market in your area.
For example, if you've decided to focus on first-time buyers, do some research to look at relevant stats and figures:
- What percentage of sales in your market were to first-time buyers in the last 12–14 months?
- What was the average sales price to first-time buyers?
Also, assess how competitive this market is:
- Are you the only agent catering to the young first-timer?
- Are you competing with well-known heavy hitters?
A competitive SEO audit can be a helpful starting point in finding your competitors in the online space, where almost all leads will turn at some point in the buying process.
6. Implementation Plan
Before you can begin implementing your real estate business plan, you must clearly understand your goals and objectives. What are you trying to achieve with your business? Are you looking to buy and hold properties for long-term appreciation, or are you more interested in flipping houses for a quick profit?
Once you have a good idea of your goals, you can start to put together a plan for how to achieve them. For example, if you're interested in buying and holding properties, you'll need to generate enough income from rentals to cover the mortgage and other expenses. If you're more interested in flipping properties, you'll need to find motivated sellers and then negotiate deals that provide you with a healthy profit margin.
Regardless of your goals, careful planning is essential for success in the real estate business.
Breaking your goals into action steps makes them more tangible and ensures you're making strides to fulfill them. Here are some keys to converting your real estate business plan into actual business practices.
7. Monitoring & Evaluation
Successful real estate businesses have a plan to monitor and evaluate their progress. This plan includes setting clear goals, measuring progress against those goals, and making adjustments as needed. Without this proactive approach, it can be challenging to identify areas of improvement or stagnation.
Additionally, a well-executed monitoring and evaluation plan can help to keep employees focused and on track. By regularly assessing performance and goal progress, businesses can ensure that they are making the most of their resources and achieving their desired results. Ultimately, a sound monitoring and evaluation plan are crucial for any real estate business that wants to stay ahead of the competition.
8. Risk Management
Real estate investing comes with a certain amount of risk. But with a well-thought-out risk management strategy, you can minimize the potential for loss and maximize your chances for success.
One of the most critical aspects of risk management is diversification. Investing in various property types in different markets spreads your risk and increases your chances of finding a profitable investment.
Another critical element of risk management has a solid business plan. Thoughtfully consider each step of the real estate investing process, from finding deals to financing them to managing the properties. Have a clear exit strategy for each investment to know when to sell or refinance. And always remember to stay within your comfort level; don't let greed or fear make decisions for you.
With careful planning and discipline, you can create a real estate investment portfolio that withstands market fluctuations and generates long-term wealth.
9. Financial Plan
Having a sound financial plan for your business is essential. To assist you, we've created spreadsheets you can use to estimate goals, income, and expenses. You will find specific instructions in the spreadsheets, but here are some guidelines for creating a financial plan:
To create your plan, determine what your expenses will be.
Here are three main areas your expenses may fall into:
- Licensing: These expenses will include training, state exam fees, etc.
- Personal: This can consist of your wardrobe, technology fees (like computer and phone), and car fees.
- Business: Business expenses include broker fees, website and MLS fees, marketing, advertising, etc.
Our template divides these expenses into the startup and yearly costs to help you discern which payments will recur and which are one-time-only. Here's an example of what your startup expenses might look like.
Yearly expenses might include recurring costs like office rent, electricity bills, and annual license fees.
Estimating income is the biggest concern for most new agents. To do this, you must decide how much money you need to make in your first year and how much you would like that figure to grow. You will also need to research some basic statistics for your market, like the average sale price for homes.
Use our business plan template to help calculate these numbers.
Transactions and Leads
To meet your income goals and cover expenses, you'll need to conduct a certain number of transactions. And, to complete a certain number of transactions, you'll need to work a set number of leads. There's no need to work this figure out by hand.
Our template will automatically calculate the number of transactions and leads you will probably need to meet your goals. Still, you will have to assess these figures to decide whether they are reasonable. For example, if you plan to work part-time as an agent in your first year but need to close 20 transactions to meet your goals, you are unlikely to have enough time.
10. Create a Personal Development Plan
A personal development plan is an essential tool for any real estate business. By taking the time to assess your strengths and weaknesses, set goals, and create a roadmap for success, you can ensure that your business is on track to reach its full potential. While it may seem daunting, creating a personal development plan is simple.
Start by taking stock of your current situation. What are your strengths and weaknesses? What are your goals for the future? Once you clearly understand where you are starting, you can begin to map out a plan of action. Set realistic goals and create a timeline for achieving them. Put together a resources list and ensure you have everything you need to reach your goals. Finally, implement your plan and monitor your progress along the way.
Remember, your development plan should be flexible and adapt as your needs change over time. With some planning and effort, you can create a roadmap for success that will help you achieve your long-term goals in the real estate business.
11. Write an Executive Summary that Captures the Vision
Your executive summary is an anchor point you can use to understand the overall goals, cement the parameters of your target market, and make decisions aligned with your plan. It's also a way to get inspired by your original vision.
For real estate, it would include points on:
- Target neighborhoods and price ranges
- Target clients and a brief description of the persona
- Brief marketing plan overview
- Market threats and opportunities
Think of the executive summary as the section of your business plan you would explain to a friend a football game when asked how you plan to make money as an agent or broker in your local town/ city or state.
Note: due to the specific details in the executive summary, this part of the business is typically one of the last completed items.
Real Estate Business Plan Template
If you're considering starting a real estate business, you'll need to create a business plan template. Here's a basic template that you can use to get started. Remember that your business plan should be tailored to your specific business and industry.
- Executive Summary
The executive summary is a brief overview of your business plan. It should include your company's mission statement and an overview of your products or services, target market, and growth strategy.
- Company Description
This section will provide an overview of your company, including its history, structure, and team. Be sure to include information on your company culture and values.
- Mission statement
In this section, you will summarize the reason for being and the guiding principles of your organization. For example: "We are a nonprofit that provides free legal aid to those in need." You can also provide a brief overview of what we want them (the users) to come into contact with.
Why should they care about our mission or message by telling them why it is vital to their lives now and later down the line?
- Company goals
This section will provide a high-level overview of your company's top business goals for its first years in operation.
- Market Analysis
In this section, you will need to analyze your target market thoroughly. It should include information on your customers, your competition, and the overall industry.
- Product or Service
In this section, you will need to describe your product or service. Be sure to include information on your pricing strategy and any unique features or benefits your product or service offers.
- Marketing and Sales Strategy
In this section, you will need to outline your marketing and sales strategy. It should include information on how you plan to generate leads and convert them into customers.
- Operational Plan
This section will need to provide an overview of your business operations. It should include your production process and distribution and fulfillment strategy.
This section will briefly describe what your company offers to customers.
- Target customer
To effectively reach the people we want as customers, you must provide a clear overview of who they are and how your product or service can benefit them. In this section, I'll go over some questions worth asking yourself when determining who your potential clients may be.
- Best Practices
Write out your ideal practices for how you'll deal with qualified leads versus unqualified leads, how quickly you'll follow up with interested parties, your methods for helping a leader throughout the final steps of the sales process, and how you'll stay in touch with customers after papers have been signed.
- Financial Plan
In this section, you will need to provide detailed financial information for your business. It should include your income, balance, and cash flow statements. The following will include startup expenses, assets, liabilities, capital, break-even analysis, and loan repayment.
- Exit Strategy
This section will need to provide an overview of your exit strategy. It should include information on how you plan to sell or exit your business in the future.
Individual Agent Real Estate Business Plan
Real estate agents need a business plan like any other entrepreneur. A real estate business plan outlines your goals, strategies, and how you plan on achieving them. It is essential to have a business plan because it will help you stay focused and on track. Real estate is a competitive industry, so you need to be able to stand out from the rest.
A business plan will also be helpful if you ever need to seek funding for your business. Investors and lenders will want to see that you have a well-thought-out plan before they give you money.
Creating a Real Estate Business Plan is essential if you want to build a successful career in real estate. With our easy-to-use template, you can get started today and be on your way to achieving your long-term goals.
There are many benefits to creating a Real Estate Business Plan, including:
- Clarifying your goals and strategies
- Mapping out a clear road map for your business
- Identifying potential obstacles and solutions
- Helping you stay organized and on track
- Increasing your chances of success
So, if you are considering starting a real estate business, sit down and write a business plan. It will be worth it in the long run!
Real Estate Team Business Plan
Before you start your real estate team, it's essential to have a business plan in place. It will help you define your goals, map your strategies, and track your progress over time. While there is no one-size-fits-all approach to creating a business plan, certain key elements should be included. Here are a few of the most important things to keep in mind:
- Your team's mission statement: What sets your team apart from the competition? Why do you exist?
- Your target market: Who are you trying to reach with your services? What needs do they have that you can address?
- Your marketing strategy: How will you get your target market and communicate the benefits of working with your team?
- Your financial goals: How much revenue do you hope to generate? What are your expenses? How will you fund your business?
By thoughtfully developing your real estate team business plan, you'll increase your chances of success in an increasingly competitive industry.
Real Estate Brokerage Business Plan
A real estate brokerage business plan is a document that outlines the goals, strategies, and financial projections of a real estate brokerage business . It should include an executive summary, market analysis, business model, operational plan, and financial plan. The executive summary should briefly describe the company, its target market, and its competitive advantages. The market analysis should assess the size and growth potential of the target market.
The business model should describe how the real estate brokerage plans to generate revenue. The operational plan should outline the business's day-to-day operations, including staffing and marketing initiatives. Finally, the financial plan should provide detailed information on the anticipated costs and revenues of the company. A well-crafted real estate brokerage business plan can be valuable for attracting investors and achieving long-term success.
Remember that your business plan is a living document that should be updated as your company grows and evolves. Regularly reviewing and revising your business plan ensures that your real estate brokerage is always moving in the right direction.
Ready. Set. Plan
Whether you've got a ready-to-execute business plan or it's still being drafted, the most important thing is to start now — and fast.
At its core, a real estate business plan should outline the steps necessary to achieve specific goals, such as increasing sales or expanding into new markets. It should also identify potential obstacles preventing the business from achieving its objectives. By taking the time to create a comprehensive business plan, real estate businesses can increase their chances of weathering storms and coming out on top in the long run.
A business plan puts you on a clear track that makes your business 75% more likely to grow.
By following the above points, you'll be well on writing a comprehensive Real Estate Business Plan.
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Real Estate Business Plan Template
Download our template and create a business plan for your real estate business!
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Updated September 22, 2023 Written by Josh Sainsbury | Reviewed by Brooke Davis
A real estate business plan is as essential as a business plan for any new or existing business. This step-by-step guide will explain how to make a real estate business plan, provide a real estate business plan template for you to work with, and explain how and why each step is necessary for your business plan to be effective.
We also provide links to downloadable templates to help you create your real estate business plan and sample plans to show you the best ways to tailor your plan for any number of real estate business needs.
Whether you seek investors to grow your business or want to track your goals from year to year as your business develops, a carefully crafted plan will help you.
Why You Need a Business Plan for Your Real Estate Business
How to write a business plan for real estate, real estate business plan sample.
The real estate business plan fills several needs. It gives you an outline of your business goals and the direction you want your business to take. It keeps you in line with industry trends. It lets you monitor your annual performance and change your goals as the market changes.
An effective real estate business plan also acts as a financial summary of your business, showing how it stands about your competition and the industry. The business plan acts as a road map for you and a snapshot of your business for any investors or bankers who want to understand your business.
A real estate business plan will help you spot risks and weaknesses early in your business development and help you set realistic goals for your business.
These are known as SMART goals: Specific, Measurable, Achievable, Relevant, and Time-based goals.
Creating a business plan without goals is like starting a journey without a destination. Having a destination without a map means going down many blind alleys, taking unnecessary detours, and wasting time as you frequently need to return and start again.
Your business plan will help you avoid these pitfalls and adjust your course while you travel towards your final goal — a successful real estate business.
You must cover critical topics and include the correct information to ensure your business plan is as effective as possible. Follow our guide to writing a well-formed real estate business plan below.
1. Executive Summary
The executive summary contains an overall review of the rest of the business plan. It should include an outline of your history, your mission statement, and an overview of the rest of the report.
This section will include things like:
- Target clients with a fictional “ideal buyer” persona;
- Target neighborhoods, price ranges, and listings;
- Market overviews and potential threats and opportunities;
- A marketing plan outline.
- Your mission statement. This should include where and how your agency was founded, discuss the legal and financial structure, and stress your dedication to your customers and any special advantages you provide to your target clients.
2. Management Team
If you have a management team or a group that has contributed to the business’s success, summarize their names and contributions.
This section highlights everyone who has been involved in your business.
- Owners, founders, and original managers;
- New management, assigned duties and areas, and specific clients;
- Planned management expansion and anticipated managerial goals.
- Include all information about your managers, names, positions and duties, education and work history, past business successes, and other relevant details. Think of this section as your management team’s biography.
As the business expands, your management team section will be one section that needs constant improvement and updating.
3. Products and Services
Your products and services should be phrased to make you unique in the industry and highlight how you stand out from your competitors. As a real estate business, what do you provide for your clients that others do not? How do your agents compare with your competition?
In real estate, your product is your listing and your brand. What is it that makes your company the one that your target buyer wants to use? In this section, you will highlight the following:
- Your niche market and how you acquire specific listings in your area;
- Your lead generation model and the way you obtain leads that differentiate you from your competitors;
- Your branding. A defining brand can be nebulous, and many firms resort to hiring a brand agent to help them customize and market their brand. You may be a family-friendly agent or specialize in the young professionals market. Determining how you present yourself is critical to your service profile.
4. Customers and Marketing
The customers and marketing section lets you identify your niche within the real estate business and how you intend to reach them.
You defined your ideal customer in your executive summary; now is where you expand on your perfect customer “persona.” A “persona” is the industry name for the imaginary person you sell to.
- Their demographics, age, gender, job, family preference, and income.
- Deal-breakers. What do they have to have in a home? What can they do without?
- Amenities, recreation, entertainment. Does your ideal buyer need dog parks nearby or bike paths? Do they want access to the water or the theater district?
- What type of neighborhood is your ideal buyer looking for? Do they need a school district or prefer to be far from children?
After establishing your ideal customer, you can select the viability of your marketing niche. For instance, is your buyer likely to be a first-time buyer? If so, what percentage of first-time sales were made in your chosen area in the last two years?
The more detailed you can make your Customers and Marketing section, the more you know how your business will likely thrive in your chosen area.
5. SWOT Analysis
Strengths, weaknesses, opportunities, and threats are necessary for every business analysis. In what areas are you and your business strongest, and where do you need improvement?
Investors appreciate a business owner who can accurately pinpoint their good and bad points and demonstrate how to improve.
This analysis should be fact-based, not opinion-based. You should be able to provide statistics and metrics for your and your competitors’ business research. Some things to consider are:
- In what areas of your business plan are you strongest? Are they similar or dissimilar to your nearest competitor’s strengths?
- In what areas are you weakest? Are you weak where your competitors are strongest?
- What opportunities can you exploit in the next six to 12 months? Are these opportunities unavailable to your competitors?
- What threats are you facing in the next year? How can you avoid these threats or turn them into advantages?
By analyzing your business objectively and reviewing all the facts and numbers, you can determine how you will be placed in the next year.
6. Financials
The meat of your business plan is the financials. This includes your expenses, annual income forecast (sales, commissions, or other income), cash flow, and costs. As your business grows, your business plan will include previous years’ financials to track the growth.
Your financials should include, at a minimum:
- Expenses. These include operating expenses, whether you have a physical location or are still in the virtual stage of operations, licensing and permitting, fees and filing costs, and other operating expenses. If you have employees, it will also include payroll.
- The past income portion will track how much you have already made. You should be able to show how many leads you have generated, how many transactions you made, and your income from those efforts.
- Future income is how much you would like to make going forward. You can estimate how many leads are needed per transaction and how many transactions per sale from your past efforts.
- Goals. With this information, you should include your projections for the next year and five-year periods. Presumably, you wish to increase profit over the next five years. You can demonstrate how to achieve these goals using income tracking and market research.
7. Operations
Operations contain the moving parts of your financial projections. This section describes how you intend to reach your business goals in the upcoming year. This section might also include upcoming personnel changes, office expansions, etc.
Real Estate operations can include your projected hours of operation, your action plan for achieving your goals, and your marketing and advertising plan. Initially, this may be somewhat fluid if you do not plan to have set hours of operation or a brick-and-mortar office.
Later, as your business increases, this section will include business hours, open house times, etc.
8. Appendix
If your real estate business plan includes any ancillary documents, such as your Articles of Incorporation or a Business Purchase Agreement , they would be included in the Appendix.
After your first real estate business plan, your previous years’ plans will go into the Appendix so they can be reviewed by potential investors or by your board. You can also include your quarterly statements and other financial documents.
Your Appendix is the section for any documents you want to have that are not essential for your readers’ overall understanding.
Now that you know what goes into your real estate business plan, all that is left for you to do is click on the business plan creation template and begin. Ensure you have all your documentation and research-ready in advance, and the template will provide you with cues as to what information needs to go into which spaces.
After filling in all the blanks, the template will generate a real estate business plan to your specifications.
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Real Estate Executive Summary Template
- Great for beginners
- Ready-to-use, fully customizable Doc
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When it comes to real estate investments, having a compelling executive summary is crucial for capturing the attention of potential investors and partners. That's where ClickUp's Real Estate Executive Summary Template comes in handy!
With ClickUp's template, real estate executives can:
- Present a comprehensive overview of their project, including key details like location, financial projections, and market analysis
- Streamline the decision-making process by providing all the necessary information in a concise and organized format
- Attract potential investors or partners by highlighting the investment objectives and showcasing the potential ROI
Whether you're looking to secure funding for a new development or expand your real estate portfolio, ClickUp's Real Estate Executive Summary Template has got you covered. Start impressing potential investors today!
Benefits of Real Estate Executive Summary Template
When it comes to real estate projects and investment opportunities, having a comprehensive executive summary is crucial. With ClickUp's Real Estate Executive Summary Template, you can:
- Present a clear and concise overview of your real estate project or investment opportunity
- Highlight key details such as location, financial projections, market analysis, and investment objectives
- Facilitate decision-making by providing all the necessary information in one place
- Attract potential investors or partners with a professional and well-organized executive summary
Main Elements of Real Estate Executive Summary Template
Create professional and comprehensive real estate executive summaries with ClickUp's Real Estate Executive Summary Template. This Doc template includes:
- Custom Statuses: Track the progress of your real estate projects with custom statuses such as In Progress, Completed, and Pending Approval.
- Custom Fields: Capture essential information about properties, including property type, location, size, and price, using custom fields. Easily update and visualize property data in the document.
- Different Views: Access the executive summary in different views to suit your needs. Use the Document Outline view for a structured overview, the Side-by-Side view for easy comparison, and the Full-Screen view for distraction-free editing.
- Collaboration Features: Collaborate with team members and stakeholders in real-time. Leave comments, make suggestions, and track changes to ensure everyone is on the same page.
- Integrations: Connect ClickUp with other real estate tools, such as CRM systems and property management software, to streamline your workflow and enhance productivity.
How to Use Executive Summary for Real Estate
If you're in the real estate industry and need to create an executive summary, follow these steps to effectively use the Real Estate Executive Summary Template in ClickUp:
1. Gather essential information
Before you start creating your executive summary, gather all the relevant information about the property or project. This includes details such as location, property type, size, amenities, financial projections, and any unique selling points. Having all the necessary information at hand will ensure that your executive summary is comprehensive and informative.
Use custom fields in ClickUp to organize and track all the essential details for your real estate project.
2. Provide an overview of the property
Begin your executive summary by providing a brief overview of the property or project. Highlight key features, such as its location, size, and any distinctive characteristics that make it stand out. This section should give the reader a clear understanding of what the property offers and its potential value.
Use a Doc in ClickUp to draft a compelling overview section that captures the essence of the property.
3. Include financial projections
One of the most critical aspects of a real estate executive summary is the financial projections. Present data such as estimated property value, rental income, anticipated expenses, and potential return on investment. Including these projections will help potential investors or stakeholders assess the financial viability of the project.
Utilize the Table view in ClickUp to create a financial table or spreadsheet that clearly presents your projections.
4. Highlight market analysis
To provide a comprehensive view of the property's potential, it's essential to include a market analysis section. This should include information about the local real estate market, current trends, demand and supply dynamics, and any competitive advantages the property may have. A well-researched market analysis will demonstrate your knowledge and expertise in the industry.
Use the Calendar view in ClickUp to schedule and track market research activities and deadlines for gathering relevant data.
By following these steps and using the Real Estate Executive Summary Template in ClickUp, you can create a professional and informative executive summary that effectively showcases the value and potential of your real estate project.
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Get Started with ClickUp’s Real Estate Executive Summary Template
Real estate executives can use the Real Estate Executive Summary Template to create a comprehensive overview of a real estate project or investment opportunity, ensuring that all important details are included.
To get started:
Hit "Add Template" to sign up for ClickUp and add the template to your Workspace. Make sure you designate which Space or location in your Workspace you'd like this template applied.
Next, invite relevant members or guests to your Workspace to start collaborating.
Now you can take advantage of the full potential of this template to create an impactful executive summary:
- Use the Financials View to outline the financial projections and investment returns for the project.
- The Market Analysis View will help you analyze the local market conditions, including demographics, competition, and trends.
- Utilize the Maps View to pinpoint the location of the property and provide a visual representation for potential investors.
- Use the Project Timeline View to outline the key milestones and timelines for the project.
- Organize tasks into different statuses, such as Researching, Drafting, Reviewing, and Finalizing, to keep track of progress.
- Update statuses as you progress through each stage to keep stakeholders informed of the project's development.
- Regularly review and analyze the executive summary to ensure it aligns with the investment objectives and effectively communicates the value proposition.
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How to Write a Solid Real Estate Business Plan in 2024
March 13, 2024
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If you want to grow your real estate business , then you’ll need to get clear on where you want to go and how you can get there.
Research from the Harvard Business Review indicates that entrepreneurs who create formal business plans are 16% more likely to achieve viability than those who don’t. Further studies also demonstrate that business planning can accelerate a firm’s growth by 30% , and the time invested in writing a business plan can significantly enhance the likelihood of success .
In this article, we’ll guide you through the critical elements of a strong real estate business plan, helping you create a unique strategy aligned with your company goals.
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Why every agent and broker should have a real estate business plan
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A real estate business plan acts as a strategic blueprint for an agent, team, or brokerage, mapping out key facets, critical milestones, company goals, and the business’s overall financial health. A plan needs a clear vision and roadmap for how the company will achieve its goals and grow within its specific market.
Additionally, general business plans are pivotal in securing capital and compelling potential investors or partners. A great business plan can attract skilled employees and top-level talent, leading to further expansion and growth.
For an agent or a broker, a real estate business plan is essential for determining your identity in the luxury market and what you can offer clients. It helps you hone in on your ideal customer and allows you to assess the financial viability of your business easily.
Your real estate business plan is a guide to your goals and a clear-cut strategy for how you can stand out from the competition, grow your business, and fulfill your overarching mission.
Real estate business plans: the basics
When constructing your real estate business plan, it’s best to keep things simple, manageable, and achievable. Focus on where you are now, where you want to go, and how you can reasonably get there.
Here are six critical elements of a straightforward real estate business plan:
- Executive summary: The executive summary serves as a brief overview of who you are, your purpose, and your goals.
- Overview and objectives: The overview and objectives section can vary somewhat based on your individual needs, but they should include your mission statement, your history, and your objectives.
- Market opportunities and competitive analysis: Your business plan should outline where market conditions are ideal for the rapid growth of a business and what your competition is already doing in that space.
- SWOT analysis: SWOT stands for Strengths, Weaknesses, Opportunities, and Threats and is a useful analytical tool for determining your strategic position.
- Marketing plan: The marketing plan identifies and details how you will reach and attract your target audience.
- Financial plan: A financial plan is a fairly straightforward snapshot of the economic health of your business.
Most business plans adhere to a timeframe of three to five years, though some are as short as one year, others as long as seven. Although everything in this article provides recommendations for a three to five-year plan, it’s worth looking beyond five years for future growth opportunities.
Creating your own real estate business plan
Now that you know the main sections of your real estate business plan, let’s dive into exactly what goes into each element.
Executive summary
A good summary is typically one to two pages (although one is optimal) and should include the following:
- Description of services
- Summary of objectives
- Brief market and competition snapshot (you’ll dive deeper into this later in your business plan)
- Capital or partnership requirements, if applicable
Your executive summary is the one part of your business plan you can recite from memory. There’s no fluff. Consider this your elevator pitch to sell your vision and convince others to join you on your mission.
Overview and objectives
Mission statement.
Your mission statement is why you do what you do—the guiding principles for your business.
For example, here are two excellent real estate company mission statements:
- Compass : Our mission is to help everyone find their place in the world. Compass is building the first modern real estate platform, pairing the industry’s top talent with technology to make the search and sell experience intelligent and seamless.
- Sotheby’s Realty : Built on centuries of tradition and dedicated to innovation, the Sotheby’s International Realty brand artfully unites connoisseurs of life with their aspirations through a deeply connected global network of exceptional people.
Your history is just that—when you started, location, leadership, milestones, and notable services or specializations.
Objectives are your primary goals. A common technique for establishing your goals is through the “SMART” method, ensuring your goals are Specific, Measurable, Achievable, Relevant, and Time-bound.
Objectives that might cover the course of a five-year plan include:
- Rebrand the company website in 30 days.
- Establish a social media presence in 90 days.
- Close five transactions per month in year one and double transaction volume by year three.
- Double the size of the firm by year five.
Ensure your goals are targeted and realistic within your set time frame.
More likely than not, your business will have multiple objectives simultaneously. Group them based on category and designate a team member who will be responsible for managing achievements, setting milestones, and assessing progress.
Market opportunities and competitive analysis
Understanding your market and your competition involves taking stock of the landscape’s size, demographics, demands, and trends.
Market opportunities
When determining your market opportunities in your business plan, consider the following questions:
- What is the size and stability of the market?
- Is the market currently on an upward or downward trajectory?
- What are the current demographics of the market?
- What segment of the market do I want to target?
- Is there a demand for a particular type of housing?
- Are there more sellers than buyers, or vice versa?
Also, pinpoint specific market circumstances that could significantly impact your business, like interest rate trends or local economic development. Be sure to document these insights in your plan as well.
Competitive analysis
In many business plans, competitive analysis is worthy of its own standalone section. Regardless of how you present it, devote some space to your competition and thoroughly research what they currently do in the real estate market.
Include both immediate and secondary competitors, and note if the market is primed for new competitors in the future. Also, identify the risks and opportunities when comparing your niche market and services versus others vying for similar business.
Remember to ask yourself:
- What do I offer clients that the competition does not?
- Can I stand out in this market and generate revenue?
- How can I advertise myself to showcase these differences?
SWOT analysis
Through its matrix-like formatting, you can use data-backed facts to analyze your team’s strengths, weaknesses, opportunities, and threats in a visual way. Here are some questions you can ask yourself for each section:
- Is your brand recognizable?
- Do you have an in-house expert for each specialization within residential or commercial real estate (or both)?
- Do you have an active pipeline of new leads ?
- What is your unique selling proposition (USP)?
- Do you lack consistent social media or online content?
- Is your brand relatively new or unrecognizable ?
- Are you missing out on lead-generation opportunities?
- Is your website engagement lacking?
Opportunities
- Has your team just branched out to a new area of real estate?
- Is market demand growing in your area?
- Have you uncovered a new source of referrals ?
- Are there any new teams in your niche that offer a USP similar to yours?
- Are mortgage rates rising enough to slow down demand?
By uncovering factors in each grid of the SWOT analysis matrix, you can identify areas that need immediate attention or capitalize on specific strengths.
Marketing plan
Creating a marketing plan is an exercise in understanding your ideal client and then molding a campaign that ensures you can target those customers. Here are a few key points to outline in your marketing plan:
Demographics
- Consider your ideal client persona, including age, location, income, and profession.
- Consider what attracts this ideal client. What are they looking for in properties? What are they avoiding?
- What type of neighborhoods, amenities, or lifestyle are they seeking?
Marketing channels
- Which platforms are your ideal clients engaging with the most? Which ones do your competitors frequently utilize?
Along with these aspects, consider how to position yourself better than your competitors to attract this client. Think about the benefits you can offer and how you can showcase this with a smart real estate marketing campaign .
Financial plan
A financial framework is a crucial aspect of your real estate business plan since it provides insight into the economic health of your business. It gives you a better idea of the valuation of your business, acts as a guide for your budget, and helps you set more realistic financial goals.
Here are the elements of a financial plan that should be included:
Profit and loss statement
- This is also called an income statement or pro forma. This shows a company’s profitability (or loss) over a certain length of time.
Cash flow statement
- This statement provides an overview of your actual cash position.
Balance sheet
- A balance sheet shows where you stand regarding assets, liabilities, and equity at a specific point in time.
Operating budget
- An operating budget is a detailed view of your income and expenses, usually over 12 months.
Break-even analysis
- This outlines the revenues necessary to cover all costs and your business’s potential to be profitable.
Depending on your real estate business position or if you’re an individual broker or agent, you can simplify this area with just an operating budget and break-even analysis.
4 common mistakes agents make when creating a real estate business plan
1. thinking the business plan needs to be perfect.
Your real estate business plan will not be built overnight. You can still run a successful company while your business plan is being created. Instead of waiting to make a “perfect” business plan, follow our step-by-step guide to get started. Then, you can modify as you learn more about your client, your competition, and the trends in the market.
2. Not having someone else review your business plan
Like any other business document, having a second pair of eyes review your real estate business plan is always helpful for typos or mistakes and for any glaring questions or inconsistencies. Be open to feedback from people, both in the industry and outside it—if someone is confused by an aspect of your plan, chances are they won’t be the only one.
3. Not using the business plan to gain more clients
While your plan is useful for an overview of your business and its goals, don’t forget to use it as a guiding tool. For example, once you make your marketing plan, you’ll have a stronger idea of your ideal customer. So, be sure to use that information to create more targeted outreach efforts. This includes:
- Adjusting your marketing and advertising budget
- Creating a more targeted marketing campaign, including website, social media, and email
- Determining how to nurture non-specific outreach efforts such as referrals , SEO , and open houses
- Developing a data analytic strategy—how will you measure your marketing success and make changes if necessary?
4. Not coming back to the business plan
Your real estate business plan is not a one-and-done proposition or something to be written, tossed in a drawer, and forgotten.
Make time to periodically reevaluate your progress and see where you stand in reaching your goals. Once every 90 days is a good rule of thumb, but review more or less frequently as you see fit. And if you start hitting those goals early, take the time to make new ones.
Lastly, don’t be afraid to pivot if something isn’t working. Goals can change, so return to your business plan and modify it as your company ebbs and flows.
Luxury Presence: your real estate business plan partner
With beautifully crafted websites, SEO strategists, and top marketing expertise, Luxury Presence is here to help you define your business and grow in the real estate market. Contact our team of experts today to refine your online presence and stand out from the competition.
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Executive Summary Examples for Business Plans, Project Plans, and Research Projects
By Kate Eby | February 8, 2024
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Executive summaries allow decision-makers to quickly grasp the key points of important documents and make decisions. We’ve collected a variety of executive summary examples and templates that you can use as models for your executive summaries.
Included in this article, you’ll find a business plan executive summary example , a project proposal executive summary example , a research report executive summary example , and more. Plus, learn how to fix common executive summary mistakes .
What Are the Main Components of an Executive Summary?
An executive summary is a concise overview of a larger document, report, or proposal. It gives high-level executives or decision-makers a quick understanding of the main points of a longer document without requiring them to read the whole text.
These are the components you might include in an executive summary:
- Problem Statement: Clearly state the problem or challenge the company, product, or project addresses.
- Key Proposition: Outline the proposed solution or key value proposition.
- Market Analysis: Summarize findings about the market, customer needs, or competition.
- Key Features and Benefits: Highlight the main features or benefits of the proposed solution or strategy.
- Financial Summary: Provide a snapshot of financial aspects, such as cost, revenue projections, or return on investment (ROI).
- Next Steps: Briefly describe the next steps or strategy for implementation.
Simple Executive Summary Example
The following simple executive summary presents a concise statement of key findings and links them directly to a strategic recommendation. It provides a clear snapshot of the situation and the proposed action, which is essential for an executive summary.
Problem Statement
Many small businesses struggle with inefficient inventory management, leading to lost sales and increased operational costs.
Key Proposition
Our company proposes an AI-driven inventory management system that automates tracking and forecasting, tailored for small businesses.
Market Analysis
Research shows a 40 percent increase in demand for automated inventory solutions in the small business sector, with a significant gap in affordable, user-friendly options.
Key Features and Benefits
The system offers real-time inventory tracking, predictive restocking alerts, and an intuitive interface, reducing inventory errors by an estimated 50 percent.
Financial Summary
Our projected development cost is five hundred thousand dollars with a break-even point in 18 months. The expected ROI is 200 percent in three years, tapping into a market with a potential revenue of five million dollars annually.
Development will commence in Q1 2024, with a pilot launch in Q3. Full market release is scheduled for Q1 2025, followed by targeted marketing campaigns and customer feedback integration for further enhancements.
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Available in blank and example versions, this executive summary template guides you in succinctly presenting key information about your business plan or project to stakeholders. Simply fill in each section with relevant details to create a concise overview that highlights problems, solutions, market potential, product features, financials, and next steps.
Business Plan Executive Summary Example
Review the following example for a business plan executive summary of an eco-friendly transportation company. This example provides a clear, brief overview that is essential when you want to engage stakeholders and set the stage for more detailed discussions.
In urban areas, the lack of convenient, eco-friendly transportation options leads to increased traffic congestion and pollution.
GreenGo Mobility Solutions proposes a network of e-bike sharing stations, offering an affordable, sustainable, and flexible transportation alternative.
There is a growing trend toward eco-friendly transport in cities, with a 60 percent increase in e-bike usage. Surveys show high interest among urban commuters for more accessible e-bike options.
Key Features and Benefits
Our e-bikes are equipped with GPS tracking and easy-to-use interfaces. The bikes are designed for urban environments, offering a convenient and environmentally friendly commuting option.
The project requires an initial investment of two million dollars, with projected annual revenue of five million dollars by the third year. We anticipate a break-even point within two years, based on subscription and pay-per-use models.
Marketing Plan Executive Summary Example
In the following example, an executive summary outlines a marketing initiative within a company, detailing both the challenge and the strategic response. It provides a clear overview of the marketing plan’s objectives, actions, and expected outcomes.
We have seen a decline in new user adoption of our company's flagship software product over the past year.
Initiate a Revitalize and Engage campaign, focusing on updating the product’s user interface and enhancing customer engagement through social media and community building.
Competitor analysis and customer feedback indicate a need for more intuitive design and stronger community presence to attract and retain users.
The campaign will introduce a sleek, user-friendly interface and a robust online community platform, aiming to increase user engagement and satisfaction.
The campaign requires a budget of five hundred thousand dollars, with an expected increase in user adoption rates by 20 percent within the first year post-implementation.
Begin a UI redesign in Q2 2024, launch a social media engagement strategy in Q3, and roll out the updated product with community features in Q4.
Project Proposal Executive Summary Example
The example executive summary below demonstrates a well-structured project proposal that succinctly identifies a specific challenge and proposes an actionable solution. It provides a comprehensive snapshot of the project, including its rationale, expected benefits, financial implications, and implementation timeline.
Our current customer relationship management (CRM) system is outdated, leading to inefficiencies in sales tracking and client management.
We propose the development and implementation of a new, custom-built CRM system to streamline sales processes and enhance customer engagement.
Internal analysis indicates a 35 percent increase in process efficiency with a modern CRM system, while competitor benchmarking shows significant advantages in customer retention.
The new CRM will offer real-time sales tracking, automated client communication tools, and advanced analytics features, improving sales efficiency and customer satisfaction.
The estimated project cost is two million dollars, with a projected increase in sales efficiency by 50 percent and customer retention by 20 percent within two years.
Initiate the project in Q2 2024, with phase-wise implementation and employee training, aiming for full deployment by the end of Q4 2024.
Startup Executive Summary Example
Startups need to communicate their vision to potential investors and key stakeholders. In this example, an executive summary helps convey the startup’s vision with a concise summary of the business opportunity, unique selling proposition, market potential, and action plan.
There is a growing demand for sustainable and eco-friendly home cleaning products, but the market lacks options that are both effective and affordable.
EcoClean Innovations is a startup offering a line of environmentally friendly, biodegradable cleaning products made from natural ingredients, catering to eco-conscious consumers.
Market trends show a 50 percent increase in consumer preference for green homecare products, with a significant gap in cost-effective options.
Our products are non-toxic and competitively priced, and they have a minimal environmental footprint, addressing the need for effective and sustainable cleaning solutions.
We require an initial investment of one million dollars, projecting a 30 percent market penetration in the eco-friendly segment within the first two years.
Launch with an initial range of products by Q3 2024, followed by marketing campaigns targeting eco-conscious communities and online marketplaces.
Real Estate Development Executive Summary Example
In the following executive summary example for a construction project, the author outlines their vision for the Greenway Residential Complex. This summary captures the essence of the construction project proposal, presenting key information in a concise and structured format.
The growing urban population in Metro City has led to a shortage of affordable, eco-friendly housing options, resulting in increased living costs and environmental concerns. Key Proposition
Our project proposes the development of the Greenway Residential Complex, a sustainable and affordable housing solution. Utilizing innovative construction methods and eco-friendly materials, the complex aims to provide a balanced urban living experience that is both cost-effective and environmentally responsible.
Research indicates a high demand for eco-conscious housing in Metro City, with a market gap in affordable segments. Surveys show that young families and professionals are actively seeking sustainable living options that align with their environmental values and budget constraints.
- Sustainable design incorporating solar panels, rainwater harvesting, and green spaces
- Affordable pricing, targeting middle-income families and young professionals
- Proximity to public transportation and city centers, reducing commute times and the carbon footprint
- High-quality, energy-efficient building materials, ensuring lower utility costs and a smaller environmental impact
- Estimated project cost: Fifty million dollars
- Anticipated revenue from sales: Seventy million dollars, with a projected ROI of 40 percent over five years
- Funding secured from green building grants and private investors
- Finalize construction permits and approvals by Q2 2024.
- Begin construction in Q3 2024, with a projected completion date in Q4 2026.
- Launch a marketing campaign targeting eco-conscious families and professionals. Tip: In this example, notice how helpful it is to use bullet points to convey certain information. Using bulleted lists is a great way to organize and present information in an executive summary.
Construction Project Executive Summary Example
Construction projects have many moving parts, which means executive summaries need to capture a lot of information in a small space. Consider a construction-specific executive summary template to ensure that stakeholders are keyed into the most vital project information.
![sample executive summary real estate business plan Construction Project Executive Summary Example Template](https://www.smartsheet.com/sites/default/files/2024-02/IC-Construction-Project-Executive-Summary-Template-EXAMPLE.png)
Download a Blank Construction Project Executive Summary Template for
Microsoft Word | Adobe PDF | Google Docs
Download an Example Construction Project Executive Summary Template for
Microsoft Word | Adobe PDF | Google Docs
This construction project executive summary template allows users to give a high-level overview of the key aspects of a project, such as status, risks, issues, and changes. Available in both blank and sample versions, this editable template condenses complex project information into an easily digestible format. To use it, simply fill in each section with relevant, concise information about the current state and progress of your construction project, ensuring it remains updated and reflective of any changes or developments.
Renewable Energy Initiative Executive Summary Example
A renewable energy initiative executive summary should highlight the project’s objectives, strategies, and potential impact, as well as its contribution to environmental sustainability. In the following example, the summary articulates the project’s vision and its alignment with global environmental goals.
The urgent need to address environmental challenges and the increasing global demand for energy underscore the importance of transitioning to renewable energy sources. The reliance on traditional fossil fuels is unsustainable and contributes significantly to climate change.
The SunWind Project is a pioneering initiative combining solar and wind power to create a robust and sustainable energy solution. This project aims to leverage the strengths of both solar and wind energy, ensuring a continuous and reliable power supply while significantly reducing carbon emissions.
The renewable energy sector is experiencing rapid growth, fueled by global environmental policies and a rising consumer preference for sustainable energy. This shift presents an opportunity for the SunWind Project.
The project is unique in its integration of solar panels and wind turbines, ensuring consistent energy production under varying weather conditions. This scalable approach is designed to adapt to increasing energy demands. By significantly reducing the carbon footprint, the project supports global environmental sustainability goals and has the potential to power thousands of homes and businesses.
The SunWind Project has an estimated cost of two hundred million dollars, with projected revenues from energy sales anticipated to be around three hundred million dollars over the next 10 years. This represents a potential ROI of 50 percent. The project is poised to benefit from green energy grants, government subsidies, and private investments.
Immediate steps include securing the necessary environmental permits and clearances. The construction phase, slated to begin in the second quarter of 2024, will focus on installing solar panels and wind turbines, with a goal to commence energy production by the end of 2025.
One-Paragraph Healthcare Executive Summary Example
An executive summary of a healthcare initiative needs to do the following: concisely identify a pressing healthcare issue, present a tailored solution with its benefits, summarize market needs and competition, and outline the financial viability and next steps.
In the following example, notice how an executive summary can capture all key elements in a single paragraph:
The HealthFirst Community Wellness Initiative addresses the critical problem of rising chronic illness rates in urban areas, focusing on diabetes and heart disease. Our comprehensive solution involves launching community health centers that provide preventive care, lifestyle education, and regular health screenings, as well as cater to the specific needs of urban populations. Market analysis indicates a significant demand for accessible healthcare services in these areas, with a lack of preventive and educational resources being a key gap. The initiative’s main features include state-of-the-art diagnostic tools, personalized health plans, and collaboration with local fitness and nutrition experts, offering benefits such as improved community health outcomes and reduced healthcare costs. Financially, the project is expected to be sustainable, with a mix of funding from public health grants and private partnerships. We are projecting a positive ROI within three years due to reduced hospital admissions. The next steps involve securing funding, establishing partnerships with local health professionals and organizations, and launching a pilot center in the downtown district, with a plan to expand to five more urban areas within two years.
Nonprofit Executive Summary Example
An executive summary for a nonprofit organization should communicate the essence of a project or initiative to donors and volunteers. It should concisely outline the organization’s mission, goals, and key solutions while also detailing strategies, actions, and their impact.
![sample executive summary real estate business plan DWB Executive Summary Examples](https://www.smartsheet.com/sites/default/files/2024-02/IC-DWB-Executive-Summary-Examples-c.png)
This executive summary example from Doctors Without Borders emphasizes the inadequacy of current Universal Health Coverage (UHC) agendas in meeting the needs of vulnerable populations. It then proposes six key recommendations to address these shortcomings.
This executive summary succinctly identifies the core issue — inequitable access to healthcare — and clearly outlines actionable recommendations. This document helps facilitate advocacy and policy change, which are central to this organization’s goals.
Research Report Executive Summary Example
An executive summary in a research report concisely presents the key findings, conclusions, and recommendations derived from a research project. It covers elements such as the project topic, background, research methods, and critical insights, tailored for quick understanding and decision-making.
In this real-world exampl e from the ASPCA , the executive summary details a study showing that veterinary hospitals’ proactive discussions about pet health insurance positively impacted hospital revenue and increased patient visits.
![sample executive summary real estate business plan ASPCA Executive Summary Example](https://www.smartsheet.com/sites/default/files/2024-02/IC-ASPCA-Executive-Summary-Example-c.png)
Notice how this summary concisely outlines the study’s purpose, methodology, and significant findings, providing a clear overview for readers. In addition, it highlights the study’s relevance and implications for veterinary practices, emphasizing the practical benefits of educating clients about pet health insurance.
Research Report Executive Summary Template
![sample executive summary real estate business plan Research Report Executive Summary Example Template](https://www.smartsheet.com/sites/default/files/2024-02/IC-Research-Report-Executive-Summary-Template-EXAMPLE.png)
Download a Blank Research Report Executive Summary Template for
Microsoft Word | Adobe PDF | Google Docs Download an Example Research Report Executive Summary Template for
To create your own research report executive summary, download this customizable template. Available in blank and example versions and three printable formats, this template serves as a structured guide to organize and present the key components of a research report. Simply fill in each section with specific details about your research, including the project topic, background information, methods used, conclusions, and recommendations.
Research Project Proposal Executive Summary Example
An executive summary for a research project focuses mainly on the research question, methods, and expected outcomes. These summaries often point out how important the research could be and what impact it might have on the field.
![sample executive summary real estate business plan Research Project Proposal Executive Summary Template](https://www.smartsheet.com/sites/default/files/2024-02/IC-Research-Project-Executive-Summary-Template-EXAMPLE.png)
Download a Blank Research Project Proposal Executive Summary Template for Microsoft Word | Google Docs
Download an Example Research Project Proposal Executive Template for Microsoft Word | Google Docs
Teams can use this one-page executive summary — available in a blank or sample version — to concisely present the key elements of a research project to stakeholders, potential funders, or academic committees. By structuring the summary with specific sections such as background, objectives, and methodology, you can be sure that you’ve clearly and briefly outlined all critical aspects of your research.
Executive Summary Slide Example
Executive summaries are often documents that one distributes to executives, potential investors, and other stakeholders. However, slideshow presentations can facilitate a more interactive discussion. Plus, the inclusion of charts, graphs, and other images can better illustrate key points.
![sample executive summary real estate business plan Single Slide Executive Summary Example Template](https://www.smartsheet.com/sites/default/files/2024-02/IC-Single-Slide-Executive-Summary-Template-EXAMPLE.png)
Download an Example Single Slide Executive Summary Template for
PowerPoint | Google Slides
Download a Blank Single Slide Executive Summary Template for
This executive summary slide template is a versatile tool for succinctly conveying key project information in a single, visually engaging slide. You can enter your project information in the blank template or download the sample version for additional guidance. Input relevant details in each section, such as an overview of your project and next steps. The template allows users to insert their own text, graphics, and data. Copy your completed slide into a longer presentation, or use it on its own as a visual complement to any stakeholder presentation.
How to Improve Your Executive Summary
A poorly constructed executive summary can serve as an instructive example of what to avoid. Ineffective executive summaries might be too detailed or technical, lack focus on key points, or omit a clear call to action.
Here are examples of the three most common mistakes found in executive summaries:
Includes Too Many Details or Technical Information
![sample executive summary real estate business plan Too Detailed Exectuive Summary Example](https://www.smartsheet.com/sites/default/files/2024-02/IC-Too-Detailed-Exectuive-Summary-Example-c_0.png)
This example demonstrates one of the most common mistakes, which is including too much detail or overly technical language. It dives deeply into the specific technical specifications of the equipment and financial metrics, which might be overwhelming for readers. A more effective executive summary would focus on the broader objectives, expected impacts, and benefits of the project in a language that is accessible to a non-technical audience.
Lacks Focus on Key Points
![sample executive summary real estate business plan Unfocused Executive Summary Example](https://www.smartsheet.com/sites/default/files/2024-02/IC-Unfocused-Executive-Summary-Example-c_0.png)
Sometimes, summaries fail to clearly highlight the most critical aspects of the project or proposal. This summary lacks focus concerning the key points of the Pathways to Knowledge project. A more effective summary would concisely state the project’s goal, significance, and anticipated outcomes.
Omits a Clear Call to Action or Conclusion
![sample executive summary real estate business plan No Call to Action Executive Summary Example](https://www.smartsheet.com/sites/default/files/2024-02/IC-No-Call-to-Action-Executive-Summary-Example-c_0.png)
Failing to include a clear conclusion or call to action is another common mistake. The summary should not only inform but also persuade and guide the reader toward the desired action or decision. This summary outlines the project’s goals and structure, but omits a clear call to action. The document doesn’t specify what is expected from the reader or potential stakeholders, such as support, partnership, funding, or involvement in the project.
Corrected Example
To create a more effective example, start by removing overly technical details. (Stakeholders don’t need to know the specific standards with which the training modules are aligned or which types of processors power your computers.) Next, take out unnecessary details that stray from the main point of the project. An executive summary is not the place to discuss the origins of the project idea or the elements your team has not yet decided on. Finally, always conclude your executive summary with a clear call to action.
The Pathways to Knowledge project is a pioneering educational initiative by a nonprofit organization, aimed at bridging the educational divide in underprivileged and remote communities. This project involves the deployment of Mobile Education Hubs: state-of-the-art, solar-powered mobile units that are equipped with educational resources, technology, and internet access. These hubs are designed to travel to various underserved areas, providing children and adults with access to quality educational materials, online learning platforms, and virtual tutoring. Each hub also hosts workshops and seminars led by educators and experts, covering a wide range of subjects from basic literacy and numeracy to vocational training and digital literacy. The initiative seeks to empower communities by enhancing educational opportunities, fostering a culture of lifelong learning, and equipping individuals with the skills necessary for the 21st-century job market. By focusing on accessibility and adaptability, the Pathways to Knowledge project aspires to create a ripple effect of educational advancement and social upliftment across diverse communities.
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- Writing a Business Plan
Writing a business plan may seem a daunting task as there are so many moving parts and concepts to address. Take it one step at a time and be sure to schedule regular review (quarterly, semi-annually, or annually) of your plan to be sure you on are track to meet your goals.
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Why Write a Business Plan?
Making a business plan creates the foundation for your business. It provides an easy-to-understand framework and allows you to navigate the unexpected.
Quick Takeaways
- A good business plan not only creates a road map for your business, but helps you work through your goals and get them on paper
- Business plans come in many formats and contain many sections, but even the most basic should include a mission and vision statement, marketing plans, and a proposed management structure
- Business plans can help you get investors and new business partners
Source: Write Your Business Plan: United States Small Business Association
Writing a business plan is imperative to getting your business of the ground. While every plan is different – and most likely depends on the type and size of your business – there are some basic elements you don’t want to ignore.
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NAR Library & Archives has already done the research for you. References (formerly Field Guides) offer links to articles, eBooks, websites, statistics, and more to provide a comprehensive overview of perspectives. EBSCO articles ( E ) are available only to NAR members and require the member's nar.realtor login.
Defining Your Mission & Vision
Writing a business plan begins by defining your business’s mission and vision statement. Though creating such a statement may seem like fluff, it is an important exercise. The mission and vision statement sets the foundation upon which to launch your business. It is difficult to move forward successfully without first defining your business and the ideals under which your business operates. A company description should be included as a part of the mission and vision statement. Some questions you should ask yourself include:
- What type of real estate do you sell?
- Where is your business located?
- Who founded your business?
- What sets your business apart from your competitors?
What is a Vision Statement ( Business News Daily , Jan. 16, 2024)
How to Write a Mission Statement ( The Balance , Jan. 2, 2020)
How to Write a Mission Statement ( Janel M. Radtke , 1998)
Using a SWOT Analysis to Structure Your Business Plan
Once you’ve created a mission and vision statement, the next step is to develop a SWOT analysis. SWOT stands for “Strengths, Weaknesses, Opportunities, and Threats.” It is difficult to set goals for your business without first enumerating your business’s strengths and weaknesses, and the strengths and weaknesses of your competitors. Evaluate by using the following questions:
- Do you offer superior customer service as compared with your competitors?
- Do you specialize in a niche market? What experiences do you have that set you apart from your competitors?
- What are your competitors’ strengths?
- Where do you see the market already saturated, and where are there opportunities for expansion and growth?
Strength, Weakness, Opportunity, and Threat (SWOT) ( Investopedia , Oct. 30, 2023)
How to Conduct a SWOT Analysis for Your Small Business ( SCORE , Apr. 28, 2022)
SWOT Analysis Toolbox ( University of Washington )
Setting Business Goals
Next, translate your mission and vision into tangible goals. For instance, if your mission statement is to make every client feel like your most important client, think about the following:
- How specifically will you implement this?
- Do you want to grow your business?
- Is this growth measured by gross revenue, profit, personnel, or physical office space?
- How much growth do you aim for annually?
- What specific targets will you strive to hit annually in the next few years?
Setting Business Goals & Objectives: 4 Considerations ( Harvard Business School , Oct. 31, 2023)
What are Business Goals? Definition, How To Set Business Goals and Examples ( Indeed , Jul. 31, 2023)
Establishing a Format
Most businesses either follow a traditional business plan format or a lean startup plan.
Traditional Business Plan
A traditional business plan is detailed and comprehensive. Writing this business plan takes more time. A traditional business plan typically contains the following elements:
- Executive Summary
- Company description
- Market analysis
- Organization and management
- Service or product line
- Marketing and sales
- Funding request
- Financial projections
Lean Startup Plan
A lean startup plan requires high-level focus but is easier to write, with an emphasis on key elements. A lean startup plan typically contains the following elements:
- Key partnerships
- Key activities
- Key resources
- Value proposition
- Customer relationships
- Customer segments
- Cost structure
- Revenue stream
Creating a Marketing Plan
You may wish to create a marketing plan as either a section of your business plan or as an addendum. The Marketing Mix concerns product , price , place and promotion .
- What is your product?
- How does your price distinguish you from your competitors—is it industry average, upper quartile, or lower quartile?
- How does your pricing strategy benefit your clients?
- How and where will you promote your services?
- What types of promotions will you advertise?
- Will you ask clients for referrals or use coupons?
- Which channels will you use to place your marketing message?
Your Guide to Creating a Small Business Marketing Plan ( Business.com , Feb. 2, 2024)
10 Questions You Need to Answer to Create a Powerful Marketing Plan ( The Balance , Jan. 16, 2020)
Developing a Marketing Plan ( Federal Deposit Insurance Corporation )
Forming a Team
Ensuring the cooperation of all colleagues, supervisors, and supervisees involved in your plan is another important element to consider. Some questions to consider are:
- Is your business plan’s success contingent upon the cooperation of your colleagues?
- If so, what specifically do you need them to do?
- How will you evaluate their participation?
- Are they on-board with the role you have assigned them?
- How will you get “buy in” from these individuals?
How to Build a Real Estate Team + 7 Critical Mistakes to Avoid ( The Close , May 17, 2023)
Don’t Start a Real Estate Team Without Asking Yourself These 8 Questions ( Homelight , Jan. 21, 2020)
Implementing a Business Plan and Reviewing Regularly
Implementation and follow-up are frequently overlooked aspects to the business plan, yet vital to the success of the plan. Set dates (annually, semi-annually, quarterly, or monthly) to review your business plans goals. Consider the following while reviewing:
- Are you on track?
- Are the goals reasonable to achieve, impossible, or too easy?
- How do you measure success—is it by revenue, profit, or number of transactions?
And lastly, think about overall goals.
- How do you plan to implement your business plan’s goals?
- When will you review and refine your business plan goals?
- What process will you use to review your goals?
- What types of quantitative and qualitative data will you collect and use to measure your success?
These items are only a few sections of a business plan. Depending on your business, you may want to include additional sections in your plan such as a:
- Cover letter stating the reasoning behind developing a business plan
- Non-disclosure statement
- Table of contents
How To Write a Business Proposal Letter (With Examples) ( Indeed , Jul. 18, 2023)
How To Implement Your Business Plan Objectives ( The Balance , Aug. 19, 2022)
The Bottom Line
Creating a business plan may seem daunting, but by understanding your business and market fully, you can create a plan that generates success (however you choose to define it).
Real Estate Business Plans – Samples, Instructional Guides, and Templates
9 Steps to Writing a Real Estate Business Plan + Templates ( The Close , Apr. 3, 2024)
How to Write a Real Estate Business Plan (+Free Template) ( Fit Small Business , Jun. 30, 2023)
The Ultimate Guide to Creating a Real Estate Business Plan + Free Template ( Placester )
Write Your Business Plan ( U.S. Small Business Administration )
General Business Plans – Samples, Instructional Guides, and Templates
Business Plan Template for a Startup Business ( SCORE , Apr. 23, 2024)
Guide to Creating a Business Plan with Template (Business News Daily, Mar. 28, 2024)
Nine Lessons These Entrepreneurs Wish They Knew Before Writing Their First Business Plans ( Forbes , Jul. 25, 2021)
How to Write a Business Plan 101 ( Entrepreneur , Feb. 22, 2021)
Books, eBooks & Other Resources
Ebooks & other resources.
The following eBooks and digital audiobooks are available to NAR members:
The Straightforward Business Plan (eBook)
Business Plan Checklist (eBook)
The SWOT Analysis (eBook)
The Business Plan Workbook (eBook)
Start-Up! A Beginner's Guide to Planning a 21st Century Business (eBook)
Complete Book of Business Plans (eBook)
How to Write a Business Plan (eBook)
The Easy Step by Step Guide to Writing a Business Plan and Making it Work (eBook)
Business Planning: 25 Keys to a Sound Business Plan (Audiobook)
Your First Business Plan, 5 th Edition (eBook)
Anatomy of a Business Plan (eBook)
Writing a Business Plan and Making it Work (Audiobook)
The Social Network Business Plan (eBook)
Books, Videos, Research Reports & More
As a member benefit, the following resources and more are available for loan through the NAR Library. Items will be mailed directly to you or made available for pickup at the REALTOR® Building in Chicago.
Writing an Effective Business Plan (Deloitte and Touche, 1999) HD 1375 D37w
Have an idea for a real estate topic? Send us your suggestions .
The inclusion of links on this page does not imply endorsement by the National Association of REALTORS®. NAR makes no representations about whether the content of any external sites which may be linked in this page complies with state or federal laws or regulations or with applicable NAR policies. These links are provided for your convenience only and you rely on them at your own risk.
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- Republic of Adygea
![sample executive summary real estate business plan Coat of arms](https://rusmania.com/sites/default/files/maikop_1.jpg)
Maikop is the capital of the small and pastoral Republic of Adygea which is entirely located within the Krasnodar Territory and therefore easy to visit from Krasnodar . It is a very pleasant city with an impressive central mosque. There are also some beautiful natural sites on the outskirts of the city.
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THE 15 BEST Things to Do in Maykop
Things to do in maykop.
- 5.0 of 5 bubbles
- 4.0 of 5 bubbles & up
- Good for a Rainy Day
- Good for Kids
- Good for Big Groups
- Adventurous
- Budget-friendly
- Hidden Gems
- Good for Couples
- Honeymoon spot
- Good for Adrenaline Seekers
- Things to do ranked using Tripadvisor data including reviews, ratings, number of page views, and user location.
![sample executive summary real estate business plan](https://dynamic-media-cdn.tripadvisor.com/media/photo-o/0f/91/05/28/photo0jpg.jpg?w=500&h=-1&s=1)
1. Maykop Cathedral Mosque
![sample executive summary real estate business plan Alexander_Kudrin](https://dynamic-media-cdn.tripadvisor.com/media/photo-o/11/ec/74/6a/alexander-kudrin.jpg?w=100&h=-1&s=1)
2. State Museum of Oriental Art
![sample executive summary real estate business plan](https://dynamic-media-cdn.tripadvisor.com/media/photo-o/28/fc/22/a6/caption.jpg?w=500&h=400&s=1)
3. Zolotaya Kladovaya Asi Yeutykh
![sample executive summary real estate business plan](https://dynamic-media-cdn.tripadvisor.com/media/photo-o/0b/39/58/84/caption.jpg?w=500&h=400&s=1)
4. Maykop Park
![sample executive summary real estate business plan](https://dynamic-media-cdn.tripadvisor.com/media/photo-o/0f/91/06/14/photo0jpg.jpg?w=500&h=-1&s=1)
5. Adygea Republican Museum of Local Lore
![sample executive summary real estate business plan 819bobr](https://dynamic-media-cdn.tripadvisor.com/media/photo-o/1a/f6/f6/0d/default-avatar-2020-34.jpg?w=100&h=-1&s=1)
6. Beer Factory
![sample executive summary real estate business plan](https://dynamic-media-cdn.tripadvisor.com/media/photo-o/0d/41/5b/c5/caption.jpg?w=500&h=400&s=1)
7. Monument to Saint Nicholas
![sample executive summary real estate business plan](https://dynamic-media-cdn.tripadvisor.com/media/photo-o/0b/c9/b7/c3/caption.jpg?w=500&h=400&s=1)
8. Chamber Musical Theater
![sample executive summary real estate business plan](https://dynamic-media-cdn.tripadvisor.com/media/photo-o/11/02/a8/7b/caption.jpg?w=500&h=-1&s=1)
9. Memorial to the Soldiers of the 131st Maykop Separate Motorized Rifle Troop
![sample executive summary real estate business plan](https://dynamic-media-cdn.tripadvisor.com/media/photo-o/29/c6/2b/65/caption.jpg?w=500&h=-1&s=1)
10. Konopli Museum
![sample executive summary real estate business plan](https://dynamic-media-cdn.tripadvisor.com/media/photo-o/26/e2/91/fb/caption.jpg?w=500&h=400&s=1)
11. Pushkin State Drama Theater
12. adygea art gallery, 13. observation deck.
![sample executive summary real estate business plan](https://dynamic-media-cdn.tripadvisor.com/media/photo-o/28/be/a8/a9/caption.jpg?w=500&h=400&s=1)
14. Adygea Gory Udovolstviy
![sample executive summary real estate business plan](https://dynamic-media-cdn.tripadvisor.com/media/photo-o/28/da/69/b3/caption.jpg?w=500&h=400&s=1)
15. The Building of the Railway Station Maikop
![sample executive summary real estate business plan](https://dynamic-media-cdn.tripadvisor.com/media/photo-o/26/dd/e4/1b/caption.jpg?w=500&h=-1&s=1)
16. Monument The Unity and Concord
![sample executive summary real estate business plan](https://dynamic-media-cdn.tripadvisor.com/media/photo-o/1a/47/eb/a8/caption.jpg?w=500&h=-1&s=1)
17. Adygea Republican Sports and Health Complex
18. sculptural composition "shoe"..
![sample executive summary real estate business plan](https://dynamic-media-cdn.tripadvisor.com/media/photo-o/0a/d0/52/78/caption.jpg?w=500&h=-1&s=1)
19. Church of Saint George
![sample executive summary real estate business plan](https://dynamic-media-cdn.tripadvisor.com/media/photo-o/26/e4/c0/34/caption.jpg?w=500&h=400&s=1)
20. Obelisk Forever With Russia
21. konopli museum.
![sample executive summary real estate business plan](https://dynamic-media-cdn.tripadvisor.com/media/photo-o/26/e4/c3/14/caption.jpg?w=500&h=400&s=1)
22. Friendship Square
![sample executive summary real estate business plan](https://dynamic-media-cdn.tripadvisor.com/media/photo-o/26/e0/6d/3a/caption.jpg?w=500&h=400&s=1)
23. Holy Trinity Cathedral
![sample executive summary real estate business plan](https://dynamic-media-cdn.tripadvisor.com/media/photo-o/26/e4/c8/99/caption.jpg?w=500&h=400&s=1)
24. Lenin Square
![sample executive summary real estate business plan](https://dynamic-media-cdn.tripadvisor.com/media/photo-o/10/ad/4e/19/caption.jpg?w=500&h=400&s=1)
25. Ananas Entertainment Center
![sample executive summary real estate business plan](https://dynamic-media-cdn.tripadvisor.com/media/photo-o/26/e0/70/53/caption.jpg?w=500&h=400&s=1)
26. Surb Harutyun Church
![sample executive summary real estate business plan](https://dynamic-media-cdn.tripadvisor.com/media/photo-o/26/e4/bd/10/caption.jpg?w=500&h=400&s=1)
27. Philharmonic Building
![sample executive summary real estate business plan](https://dynamic-media-cdn.tripadvisor.com/media/photo-o/26/e4/c6/5a/caption.jpg?w=500&h=400&s=1)
28. Monument to V. I. Lenin
![sample executive summary real estate business plan](https://dynamic-media-cdn.tripadvisor.com/media/photo-o/26/e7/fb/48/caption.jpg?w=500&h=400&s=1)
29. Monument to A. S. Pushkin
![sample executive summary real estate business plan](https://dynamic-media-cdn.tripadvisor.com/media/photo-o/26/eb/43/a9/caption.jpg?w=500&h=400&s=1)
30. Monument to M. S. Shovgenov
What travellers are saying.
![sample executive summary real estate business plan Bob R](https://dynamic-media-cdn.tripadvisor.com/media/photo-o/1a/f6/f6/0d/default-avatar-2020-34.jpg?w=100&h=-1&s=1)
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Business leads by State in Maykop
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Find B2B Leads In Maykop Across Different Domains
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A florist business plan needs a straightforward executive summary. This part of your plan is the first thing investors and partners see, and it should clearly outline what your store is all about. It's where you explain what makes your florist different and worth investing in. We recommend using a two-slide PowerPoint format for this summary.
AGENCY: Financial Crimes Enforcement Network (FinCEN), Treasury. ACTION: Final rule. SUMMARY: FinCEN is issuing a final rule to require certain persons involved in real estate closings and settlements to submit reports and keep records on certain non-financed transfers of residential real property to specified legal entities and trusts on a nationwide basis.
Template 1: Real Estate Startup One Page Executive Summary Template. There is plenty of room in this editable PowerPoint presentation to add the name and logo of your business. By using the images of your team members together with their names and roles, you can bring a personal touch to your presentation.
Here's a detailed guide to help you craft an effective business plan: Tell your story: Start with a self-evaluation. Define who you are as a real estate agent, why you are in this business and what you do. Develop your mission statement, vision statement and an executive summary .
In 2019, 49 % of renters were under 30 2. years old 3 , while persons aged above 30 years make up 51 % of home renters. 23 % were aged between 30-44 years. The secondary target market will include first-time buyers aged 22 and 39 years. Most buyers 39 and younger were first-time buyers, at 33% in 2020.
A real estate agency business plan needs a straightforward executive summary. This part of your plan is the first thing investors and partners see, and it should clearly outline what your real estate agency is all about. It's where you explain what makes your real estate agency different and worth investing in.
Best of all — you can get started today! Just download our free real estate business plan template and add your own goals, projections, expenses and data. Don't forget to update it regularly to accurately track your progress, evolve with the market and stay current with your target client's needs. Download. All agent tools.
This is the standard real estate business plan outline which will cover all important sections that you should include in your business plan. Executive Summary. Market Opportunity. Demand for Housing. Management. Financing & Investment Forecast. Company Overview.
Table of Contents. A business plan is a document that you create that outlines your company's objectives and how you plan to meet those objectives. Every business plan has key sections such as ...
Real Estate Business Plan Example. Below are links to each of the key sections of a sample real estate business plan (if you'd like a real estate investment business plan template, go here.) Executive Summary - The executive summary is the first section of your real estate business plan and should give a brief overview of your business plan ...
The executive summary is a concise introduction to your real estate business. It should provide an overview to investors and other readers. ... In this section, outline how your real estate business plan will implement your business strategies and define milestones and timelines based on your objectives and goals. Role and Responsibilities of ...
Detail financial projections: Summarize your financial outlook, including revenue projections and funding requirements. Include a conclusion: Sum up why your business is a promising investment opportunity. Keep It Concise: An executive summary should typically be no longer than two pages, ideally one page. Make every word count.
The 8 elements of an effective real estate investment business plan. 1. Executive summary. Most business plans start with an executive summary outlining the business opportunity and the core strategies of your business. It's the first section that most readers (including loan officers) will read.
An executive summary is a concise overview of your entire real estate business plan. It serves as a snapshot that captures the essence of your venture, highlighting its key components and objectives. A well-crafted executive summary should provide a clear understanding of your real estate business' purpose, market opportunity, strategies and potential for success.
By regularly assessing performance and goal progress, businesses can ensure that they are making the most of their resources and achieving their desired results. Ultimately, a sound monitoring and evaluation plan are crucial for any real estate business that wants to stay ahead of the competition. 8. Risk Management.
Follow our guide to writing a well-formed real estate business plan below. 1. Executive Summary. The executive summary contains an overall review of the rest of the business plan. It should include an outline of your history, your mission statement, and an overview of the rest of the report. This section will include things like: Target clients ...
Free Download:Real Estate Business PlanEvery business needs a plan to succeed; a plan gets you and your team on the same. page and heading in the right direction.A good real estate business plan shows you where you are today, where y. u want to be and how you'll get there. It also helps you measure your performance, and recognize where and wh ...
Create professional and comprehensive real estate executive summaries with ClickUp's Real Estate Executive Summary Template. This Doc template includes: Custom Statuses: Track the progress of your real estate projects with custom statuses such as In Progress, Completed, and Pending Approval. Custom Fields: Capture essential information about ...
Focus on where you are now, where you want to go, and how you can reasonably get there. Here are six critical elements of a straightforward real estate business plan: Executive summary: The executive summary serves as a brief overview of who you are, your purpose, and your goals. Overview and objectives: The overview and objectives section can ...
Executive summaries allow decision-makers to quickly grasp the key points of important documents and make decisions. We've collected a variety of executive summary examples and templates that you can use as models for your executive summaries. Included in this article, you'll find a business plan executive summary example, a project ...
Creating a business plan may seem daunting, but by understanding your business and market fully, you can create a plan that generates success (however you choose to define it). Real Estate Business Plans - Samples, Instructional Guides, and Templates. 9 Steps to Writing a Real Estate Business Plan + Templates (The Close, Apr. 3, 2024)
Maikop. Maikop is the capital of the small and pastoral Republic of Adygea which is entirely located within the Krasnodar Territory and therefore easy to visit from Krasnodar. It is a very pleasant city with an impressive central mosque. There are also some beautiful natural sites on the outskirts of the city.
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The hotel is a family owned business who over the years have extended the hotel to about thirty rooms or more. The garden restaurant is delightful the gardens are carefully tended and are planted with a wide variety of plants. There are also water features that boast some rather loud frogs that can be heard calling.
Download the list of Boot stores in Maykop. Smartscrapers provides an accurate directory and the latest data on the number of Boot stores in Maykop