The Residential Real Estate Rule is vacated, but the litigation is not over. This article explains where the appeals stand, the outcomes they could produce, what FinCEN has said about the period of vacatur, and how offices can prepare for each scenario.
Current status (October 2026): The Residential Real Estate Rule was vacated by a federal court on March 19, 2026 and is not currently enforceable. FinCEN has appealed, and the rule may be reinstated. For the current legal position, see Is the FinCEN Real Estate Report Still Required in 2026?
Where the litigation stands
On March 19, 2026, the U.S. District Court for the Eastern District of Texas held in Flowers Title Companies, LLC v. Bessent that FinCEN exceeded its authority under the Bank Secrecy Act, and vacated the rule nationwide. FinCEN, through the Department of Justice, appealed to the Fifth Circuit on May 11, 2026, and the government filed its opening brief in August 2026.
The courts are divided. Before the Flowers decision, two other federal judges had rejected challenges to the rule. One of those cases, Fidelity National Financial, Inc. v. Bessent in the Middle District of Florida, is now before the Eleventh Circuit on the plaintiffs’ appeal, filed April 17, 2026. Only the Flowers court vacated the rule, but because its order applies nationwide, it controls for now.
The gap period will not be reported retroactively
FinCEN has stated that if the vacatur is overturned and the rule again becomes legally effective, reporting persons will not be required to file reports for transfers that would have been reportable while the court’s order was in force. FinCEN has also stated that, in that event, it will issue guidance on when reporting will be required.
Offices therefore do not need to reconstruct reports for closings during the vacatur. Preparation is about the transition back into compliance, not about clearing a backlog.
Possible outcomes
Reversal by the Fifth Circuit. If the Fifth Circuit reverses, the rule would become legally effective again and reporting would resume on the timetable FinCEN sets in its guidance. The length of any transition period is not yet known and could be short.
Reinstatement while the appeal is pending. The government could ask the court to stay the vacatur while the appeal is decided. A stay would bring the rule back into effect before the appeal is resolved, potentially with little notice. This is the scenario that leaves offices the least time to prepare.
Affirmance. If the Fifth Circuit affirms, the rule would remain vacated. The matter may not end there. Further review is available, and a contrary decision from the Eleventh Circuit in the Fidelity appeal would create a split between circuits on the same rule, a recognized basis for Supreme Court review.
A different regulatory approach. Whatever the outcome, the policy objective behind the rule is unlikely to disappear. FinCEN could revise the rule in response to the court’s reasoning, or return to Geographic Targeting Orders, the narrower, location- and price-based reporting orders it used for years before the rule. Either would affect the same kinds of transactions.
Preparing for reinstatement
Because the most disruptive scenarios offer the least notice, the practical approach is to keep the compliance framework ready to activate rather than rebuild it later.
Maintain intake screening. Continue identifying transactions involving an entity or trust transferee and non-traditional financing, using the four conditions in What Qualifies as a Reportable Transfer and the financing analysis in Non-Financed Transfers Under the Real Estate Rule.
Keep documents current. Beneficial ownership certification forms, client engagement language, and designation agreement templates should remain ready for use. The engagement language matters most where a buyer is reluctant to provide information, as covered in When a Transferee Won’t Provide the Required Information.
Confirm filing access. Reports are filed through FinCEN’s BSA E-Filing System. Offices should confirm that accounts and user access remain active, as described in How to File a Real Estate Report: Step by Step.
Retain institutional knowledge. Staff responsible for intake and closing should remain trained on the cascade, the exceptions, and the beneficial ownership standards, so that reporting can resume without retraining.
Assign monitoring. A specific person or partner should be responsible for tracking both appeals and FinCEN’s announcements, so that reinstatement and any transition guidance reach the office immediately.
These measures are set out in full in Preparing Your Office for the FinCEN Real Estate Report. The consequences of non-compliance once the rule is in effect are covered in Penalties and Liability Under the Real Estate Rule, and the retention obligations in Recordkeeping Requirements Under the Real Estate Rule.
Monitoring the rule with us
We track both appeals and FinCEN’s guidance, and update this site as the litigation develops. To assess your office’s readiness, or to be notified if the rule is reinstated, contact us.
