Trust This. February 2, 2024.

Happy Friday! A friend’s recent Facebook post today:

Is anyone interested in a private jet flight for 8-10 people to Las Vegas to see the Super Bowl?

Still looking for 3-4 more people to join us. We’ll leave Friday, Feb 9th from JFK and fly to Vegas, stay through the game on Sunday and then fly back. If interested please PM me.

Preferably someone with a private jet and tickets to the game, otherwise we can’t go.

🏈 Enjoy your chicken wings, hot dogs, and entertaining commercials on Sunday! 🏈

1 big thing: FinCEN coming for trusts

On Wednesday afternoon, FinCEN announced that it would release a proposed rule to regulate cash-only residential real estate transactions further.

Why it matters: If enacted as proposed, the rule would be a major expansion of the current Geographical Targeting Orders that have been in effect for the past few years and covering trusts for the first time.

State of play: The GTO’s have focused on residential property in certain metro areas.

  • If an entity (trusts not included) purchases those properties with cash (no bank loan) for a certain threshold amount (typically between $300,000 and $3 million), then the closing agent must file a FinCEN report that details the entities’ owners and source of funds.

The proposed rule would require businesses, including attorneys, performing specified closing or settlement functions for the non-financed sale or transfer of residential real property to an entity or trust to collect and report information to FinCEN. This information includes:

  • Beneficial ownership information for the legal entity (transferee entity) or trust (transferee trust) receiving the property

  • Individuals representing the transferee entity or transferee trust

  • The business filing the report (the reporting person)

  • The residential real property being sold or transferred

  • The transferor (e.g., the seller)

  • Any payments made

Yes, but: there is no threshold purchase price for the transfer; in other words, the transfer would be reportable irrespective of purchase price. Likewise, transfers of ownership for which no consideration is exchanged, such as a gift, would need to be reported.

  • This catch-all language would require that any transfer of residential real estate for estate planning, asset protection, or any other reason for no consideration would require filing the “Real Estate Report” with FinCEN within 30 days after the transfer and retained on file for at least five years along with copies of all the related transaction documents.

  • It applies to vacant land if a one-to-four-family residence could be constructed on the land.

  • It applies everywhere nationwide.

The bottom line: The actual proposed rule will be published next week on February 16, and we’ll be watching it. Mark Warda and I are in agreement that the rule makers don’t understand land trusts, and the rule will create redundant red tape to make all-cash or gift residential real estate transfers to entities or trusts more burdensome.

  • We’re also concerned that this is the first step to requiring all trusts to file FinCEN BOI reports in the future. They’re exempt — for now — if they don’t have to file their existence with the state.

  • It’s one thing to catch only trusts buying property in the future, but — at some point — they’ll want to know what all the trusts in the country own already.

Go deeper: FinCEN NPRM Fact Sheet

2. More deets: The proposed real estate money laundering rule

The proposed rule will be published in the Federal Register on February 16 with comments due by April 16, and the rule will go into effect one year later in April 2025.

Why it matters: Title agents, real estate attorneys, estate planning attorneys, and real estate investors affected by the rule should submit comments to ensure their voices are heard before the final rule is written.

  • Comments on the current FinCEN BOI requirements and even the current Geographic Targeting Orders were pivotal in tailoring the final rules to be less expansive and cumbersome than originally written.

  • Comments may be submitted by any of the following methods, but only submit one or the other:

  • Federal E-rulemaking Portal: Follow the instructions for submitting comments. Refer to Docket Number FINCEN-2024-0005 and RIN 1506AB54. Or

  • Mail: Policy Division, Financial Crimes Enforcement Network, P.O. Box 39, Vienna, VA 22183. Refer to Docket Number FINCEN-2024-0005 and RIN 1506-AB54.

Some points that will likely be addressed in the public comments:

  • The rule defines the “reporting person” as the person conducting the settlement/closing or the person who prepares the settlement statement, but the rule also applies when there is no consideration (it’s a gift) when there is no settlement statement. In that case, is it still required, and — if so — who reports?

  • Gift transactions and all-cash transactions (including those with hard money or private lenders) are subject to the rule. If the purpose of the rule is to catch money laundering, then why are gift transactions or those that require a private loan still reported?

  • Training is expected to take 75 minutes in the first year and 30 minutes in each subsequent year, costing the real estate and legal industries an estimated $44.3 million in the first year for training costs, plus $20.2 to $27.3 million in following years. That’s burdensome on small title agencies, real estate brokerages, and law firms.

  • FinCEN estimates the cost to file each report to range between $193 to $244 per transaction based on the wages paid to employees making the reports online. However, based on the estimated 800,000 to 850,000 filings annually, this is up to an additional $392.75 in costs per transaction. This translates to overall reporting costs between $158.2 million and $314.2 million a year. Ultimately, it’s another cost to add to each real estate transaction.

  • FinCEN estimates that it will take 3.75 hours to determine if a transaction is reportable, gather the required information, complete the report online, and then review and file it. Ask any title agent or lawyer if they have another 3.75 hours to put into each cash/hard money/gift residential real estate transfer, and let me know what they say.

Better yet, let FinCEN know what they say.

Podcast Highlight

Subscribers to our YouTube Channel have already seen my interview with Tom Lehmann.

  • Don’t have time to sit and watch a video? No problem.

  • The audio-only podcast is also available on Apple Podcasts, Spotify, Google Podcasts, or many other podcasting apps.

  • Subscribe today so you don’t miss a thing with new content weekly.

3. Catch up fast

  1. Home prices increased in the last quarter of 2023 as mortgage interest rates dropped. The monthly mortgage payment on a typical existing single-family home with a 20% down payment was $2,163, down from $2,189 in the third quarter but up from $1,967 one year earlier. The typical household allocated 26.1% of its income to cover its mortgage payments, down from 26.7% in the previous quarter but up from 24.2% in Q4 2022. HousingWire

  2. A Florida-based company has launched an automated title data platform, offering 15 AI-generated Florida real estate title reports a month for $100. Dono

  3. Tampa is #18, and Orlando is #22 on the list of the top 100 markets for year-over-year home price growth between 2022 and 2023. Bigger Pockets

  4. Fed Chair Jerome Powell said he believes the Fed can hold off on lowering the Federal Funds Rate until it sees higher unemployment. 60 Minutes on CBS

  5. The Orlando-Kissimme-Sanford MSA moved up one notch from 13 to 12 on the Milken Institute’s Best-Performing Cities list, while the Tampa MSA dropped six slots from 17 to 23. The list ranks cities based on many factors, including the city’s ability to withstand severe weather and economic turmoil. Milken Institute

4. Closing Thought

A leader’s job is not to motivate their followers.

Why it matters: Many business owners beat themselves up, thinking they’re failing as leaders if their crew members aren’t “motivated” to do their jobs. That’s a trap.

If someone has to be motivated to do their job, then they’re in the wrong seat (or the wrong company).

The leader, instead, should focus on:

  • attracting talented professionals who are intrinsically motivated to excel;

  • creating an environment where the company’s vision and core values are clear to everyone;

  • building a growth path for employees to follow up the ladder; and

  • tying the core values and mission to the daily grinding work the crew members are doing.

If the leader builds an organization with these attributes, then rock star employees will shine while the “unmotivated” ones disinvite themselves from the company so they can play on their phones at home all day.

The bottom line: If a leader is banging their head against the wall trying to “motivate” employees, it’s time to focus instead on the environment to attract employees who will effortlessly elevate clients and the company as well as themselves.

We hope you found this helpful — any feedback is appreciated and can be shared by hitting reply or using the feedback feature below.

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