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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Our mailing address: PO Box 547945, Orlando, FL 32854-7945

Our physical address: 1901 West Colonial Drive, First Floor, Orlando, FL 32804

Newsletter

February 2024

January 2024

Title

👋 Happy Friday! We’re thankful for our readers, clients, beneficiaries, vendors, crew members, families, friends, pets, and everyone who gives us a reason to get out of bed daily. We’ll be taking off next week to celebrate 🦃 Thanksgiving 🥧 for all of these things formally, and we wish you all a great Thanksgiving week ahead.

1 big thing: More data breach reports on the horizon

The Federal Trade Commission (FTC) recently amended its Safeguards Rule to require nonbank financial institutions to report data breaches.

Why it matters: The new protocols mean nonbank businesses offering financial services will spend more time understanding, documenting, and reporting data breaches. They may also feel pressured to invest in new security measures and surveillance technologies.

Define “nonbank financial institution”: NBFIs provide services similar to banks but don’t have a banking license. These include:

  • Mortgage brokers

  • Investment advisers

  • Loan or finance companies

  • Payday loan operations

  • Car dealerships

Because NBFIs offer credit, investment, and financing services, they fall under the authority of the Dodd-Frank Act — just like banks.

State of play: Financial institutions were already required to create, execute, and maintain comprehensive security programs to protect and keep their customers’ data confidential. Effective May 13, 2024, NBFIs will have to report data breaches that affect 500 customers or more to the FTC within 30 days.

  • Institutions must report the nature of the breach, the number of consumers affected, consumers at risk, and other information.

Transparency and accountability: Companies entrusted with “sensitive financial information” must be transparent if a customer’s financial information has been compromised, says Samuel Levine, director of FTC’s Bureau of Consumer Protection. The FTC hopes the new requirement will provide further incentive for institutions to keep their customers’ information secure.

Response to the new amendment:

  • Supporters of the new amendment claim it will allow the FTC to enforce better requirements for comprehensive and effective data security measures at financial institutions.

  • Opponents claim it duplicates existing state breach notification laws, which the FTC can access and review.

The bottom line: The new amendment will enable the FTC to track emerging data security threats more comprehensively. But it also means nonbank financial institutions must invest time and resources to comply, including ramping up technology and data security services, which can be costly.

2. The commission lawsuits’ worst case scenario

Individual and class action lawsuits over real estate broker commissions could reshape the industry. REALTORs need to prepare.

What’s happening: Since 2019, homeowners have filed a number of lawsuits against the National Association of Realtors (NAR) and prominent real estate companies like Keller Williams and Re/Max.

  • The complaints take issue with NAR requirements, which they say violate US antitrust laws.

  • One of these requirements, which says listing brokers must offer buyer brokers a commission if they want their properties to appear in the MLS, raises particular ire.

Why it matters: The outcomes of these cases could significantly reshape the real estate industry.

Real estate brokers should be concerned. Many real estate professionals believe these lawsuits could change how agents get paid for sales and, by extension, how brokerage companies and other MLS companies do business.

  • But they’re not: A 2023 survey by RealTrends Broker Pulse discovered that only 3.45% of brokers believed the outcome of these lawsuits was a “challenge or concern,” and around 60% of respondents claimed they were doing nothing to prepare for a worst-case outcome.

To prepare, buyer brokers need to figure out how buyers’ agents will be compensated. Other measures include:

  • Adding buyer representation agreements to their practices and training agents on new compensation procedures. This could mean shoring up a substantial compensation rate if the industry takes a significant hit in total gross revenues.

  • Shoring up core services. But, experts caution, only to a point. Evidence so far suggests the most efficient use of resources could mean moving away from a traditional sales-office culture.

  • Exploring alternative business models. Regardless of the fallout from the lawsuits, recessions are an ever-present danger when it comes to real estate industry commissions.

The bottom line: Given the potential impacts on real estate broker commissions, brokers must take the current spate of lawsuits seriously. Having a plan for the worst-case scenario can ease the transition to a new model — and doesn’t prevent hoping for the best.

3. Catch up fast

  1. Orlando home sales fell 5% from September to October. This is the fifth straight month of falling sales. But the median house price still increased from $370,000.00 to $377,000.00 in that month. Orlando Sentinel

  2. Weekly jobless claims increased by another 13,000, continuing claims rose by 32,000, manufacturing dropped 0.7%, and oil prices dropped by 5% — all signs that the Fed’s higher rates are cooling the economy which should lead to lower inflation. Reuters

  3. The current state of the housing market, state by state. Go Banking Rate

  4. Foreclosure starts are up by 6% since last year, but down 6% from last month. DSNews

  5. Survey of 281 Realtors provides insight on thinking about the commission lawsuits and their fallout. HousingWire

4. Pic of the day

The back of our new offices at night. The parking lot lights were too bright for the neighbors' taste, so we're working on that. Photo: Joe Seagle

We spent this past week moving into and unpacking the new offices.

  • We take up the first floor, which is as large as the entire building we left.

  • This allows us to serve clients and beneficiaries better in the future.

But that wasn’t the highlight of my week. Instead, on Thursday, I had the pleasure of driving an hour to Tavares to appear at a trial where I was named as the defendant.

I’ve written about this in the past, so it’s no secret it was coming. But — for those who missed that story — the short version is that a neighbor sued me individually, alleging that I had killed a tree on his property, causing it to fall.

I hadn’t been to Lake County since 2019, when I took the Christmas lights boat tour in Mount Dora.

  • But that didn’t matter in this case.

  • As the plaintiff stated in the small claims case, “Joe Seagle is the apex of the organization, so he’s to blame for anything that his company did to my tree.”

I had to refrain from grinning, but I found it ironic that he was alleging that I, an officer of a company that is the trustee of a trust that owns the property next door to his, have unfettered power to do anything I want with not only the trust property but also his property. If I only had such infinite powers …..

But I don’t. Nor do I want them.

I say I had the “pleasure” of sitting through the trial because the trust worked as it should have. I suffered the accusations being hurled at me while our beneficiary was blissfully ignorant of what was happening. I was taking my time and energy to travel the two-hour round trip to sit in a two-hour trial while our beneficiaries could continue their productive day.

The judge dismissed the case with prejudice thanks to the great work of my longtime colleague and our local attorney, Laura Hargove.

I felt bad for the plaintiff to the extent that he lost a large and beautiful tree, but it was never our fault nor our beneficiary’s fault that the tree died. Fortunately, the trust worked, and the plaintiff couldn’t drag our beneficiary through the mud as he took out his anger on me instead.

The bottom line: What a wonderful world.

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

Be on the lookout for our next issue! 👋

  • Our mailing address: PO Box 547945, Orlando, FL 32854-7945

  • Our physical address: 1901 West Colonial Drive, Orlando, FL 32804

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