What is “recording” when closing on a home purchase?

Failing to properly record these documents can lead to problems. These include ownership disputes. It can make it hard to get a mortgage. The legal and financial results can be severe.

That’s why your lender will not give the go-ahead for you to get the keys to your new home until recording is complete. Yes, your county recording office can hold up your move-in date by failing to record on time.

“Recording is simply the process for making deeds and other real estate documents part of the public record for your local county,” says attorney Andrew Maguire.

Note that over 100 types of documents can be recorded. These include those pertaining to deeds, mortgages, foreclosures, licenses, easements, subdivision declarations and fees. The recording fees charged depend on the nature and volume of the documents.

Attorney and Realtor Brian Swan says your title company or lawyer will deliver all recordable documents to the recorder’s office in your county. There, a recorder of deeds, county clerk or another official will handle the recording tasks.

How much are recording fees?

The national average for recording fees is $125, according to the Home Buying Institute. But they can range from as low as zero in Alaska to percentages of the home price that can push costs into the thousands. In addition, some states combine real estate transfer taxes with recording fees, and others separate the charges.

The table below is from the National Conference of State Legislatures and details how transfer taxes and recording fees are assessed by the state.

NCSL TABLE

REAL ESTATE TRANSFER TAXES

Cities within a county that implements a transfer tax can have a tax rate that is half of the county rate, $.275/$500, and the city tax can be applied as a credit against the county tax.

Real estate instrument recording fee: up to $10

TABOR prohibits new or increased local transfer tax rates that were not in existence prior to Jan. 14, 1993. Localities’ rates that imposed taxes before TABOR vary from 1% to 4%.

Municipal portion of transfer tax: 0.25%

Any targeted investment community/municipality with a qualified manufacturing plant may impose an additional tax of up to 0.25%

Local tax: up to 1.5%

Deed transfer tax: 1.45% or 1.1% for values up to $400,000.

Optional county documentary surtax: up to $0.45/$100

Mortgage tax: $0.35/$100

The state nonrecurring intangible tax rate is $2/$1000

Intangible recording tax: $1.50/$500. The maximum amount of any intangible recording tax payable with respect to any single note is $25,000.

$0.10/$100 on property with a value < $600,000

$0.20/$100 on property with a value between $600,000 but under $1M

$0.30/$100 on property with a value between $1M but under $2M

$0.50/$100 on property with a value between $2M but under $4M

$0.70/$100 on property with a value between $4M but under $6M

$0.90/$100 on property with a value between $6M but under $10M

$1.00/$100 on property with a value ≥ $10M

For condos and single family residences where the purchaser is ineligible for a county homeowner’s exemption, the tax imposed for each transaction is:

$0.15/$100 on property with a value < $600,000

$0.25/$100 on property with a value between $600,000 to $1M

$0.40/$100 on property with a value between $1M but under $2M

$0.60/$100 on property with a value between $2M but under $4M

$0.85/$100 on property with a value between $4M but under $6M

$1.10/$100 on property with a value between $6M but under $10M

$1.25/$100 on property with a value ≥ $10M

County real estate transfer tax (optional): $0.25/$500

Home rule municipalities with a population over 1M may impose an additional transfer tax of up to $1.50/$500

Counties may levy a local transfer tax at a rate of up to 0.5%

State recordation tax rate: $0.55 for a property that is in 2 or more counties and is security for a corporate bond of a public service company.

County recordation tax rates vary.

Agricultural land transfer tax:

  1. 20 acres or more of agricultural land: 5%
  2. Less than 20 acres of agricultural land for agricultural use or as unimproved agricultural land: 4%
  3. Less than 20 acres of agricultural land assessed as improved agricultural land or agricultural land with site improvements: 3%

Only Barnstable County has reduced the basic state excise tax rate, bringing their rate to: $1.50 plus a 14% surtax (total=$1.71)/$500

County real estate transfer tax: $0.55 - $0.75/$500 depending on +/- 2 million county population.

Mortgage registry tax $0.23/$100

$5 transaction fee on the registration of any deed or mortgage for metropolitan counties.

County transfer tax:

$0.65/$500 up to 700,000 county population

$1.25/$500 over 700,000 county population

Counties with a population under 700,000 may impose an additional transfer tax up to $0.05/$500.

Paid by buyer and by seller, making total rate 1.5%

$20 minimum tax on transfers of $4,000 or less, for both buyer and seller, totaling to $40.

Recordation fee: $25

  1. State fee $1.25/$500
  2. County fee $0.50/$500
  3. Additional fee of $0.75/$500 for deeds more than $150,000
  4. General purpose fee that varies from $0.90-$2.15/$500 for deeds more than $350,000
  5. Supplemental fee that varies from $0.25-$1.40/$500, depending on value of deed.
  6. Grantee fee on sales over $1M have a fee equal to 1% of entire price.

Reduced rates are available for sellers of low- and moderate-income housing who are senior citizens, blind or disabled. Rates range from $0.50-$3.40/$500

NY City realty transfer tax: 1% to 2.625% based on +/- $500K home value and type of property.

Mortgage recording tax:

  1. Basic tax of $0.50/$100
  2. Special additional tax $0.25/$100
  3. Additional tax: $0.25/$100 for counties outside of the Metropolitan Commuter Transportation District and $0.30/$100 for counties within it.

NY City mortgage recording tax: $1.00-$1.75/$100 based on +/- $500K home value and type of property.

There are many other local optional taxes with rates varying by locality.

Seven counties (Camden, Chowan, Currituck, Dare, Pasquotank, Perquimans and Washington) can levy an optional local real estate excise tax to a maximum of $1.00/$100.

Counties have the option to levy $0.30/$100

County auditors must collect a $0.50 parcel fee for each transfer of land or lot.

Mortgage registration tax: $0.02-$0.10/$100, based on term of mortgage.

Municipalities and school districts may impose a local realty transfer tax to a maximum of 1%.

($1.30 state, $0.55 county)

Local real estate transfer fees are prohibited except for those in effect before January 1, 1991.

Mortgage tax: $0.115/$100

For any instrument that requires a receipt by the county of the state transfer tax or mortgage tax, the county collects a $1.00 fee.

Tax rate is 0.5% on the first $100,000 of value and 1.25% over $100,000. On a home financed with a purchase money mortgage in conjunction with the VT Housing and Conservation Trust Fund, VT Housing Finance Agency, or the US Dept. of Agriculture and Rural Development—there is no tax on the first $110,000 and 1.25% on any amount higher.

Property transfer return fee: $10

Clean water surcharge: 0.2%, however, there are special rates on select transfers.

Capital gains tax imposed on land sales, based on length of ownership.

For amounts greater than $10M, the rates are:

  1. $0.22/$100 $10M to $20M
  2. $0.19/$100 $20M to $30M
  3. $0.16/$100 $30M to $40M
  4. $0.13/$100 for anything over $40M

Deed of release recordation tax: $0.50

Grantor tax: $0.50/$500 when the consideration paid for or value of interest, whichever is greater, exceeds $100.

Optional local recordation tax equal to one-third of state recordation tax.

Regional Congestion Relief Fee: $0.15/$100

State deed recording fee: $20

Homeless Housing and Assistance (Document Recording) Surcharge Fee:

$40 surcharge on each document recorded through June 30, 2019. Exempts assignments or substitutions of previously recorded deeds of trust.

A county with a farmland protection program has the option to levy an additional county excise tax up to $1.10/$500.

Flat recording fee: $20.

Why recording is vital

When recorded, these documents create a chain of title. This chain is traceable to your property. And it helps verify a history of ownership. The public can access these records to learn who owns your property. This helps prevent fraud, like “those people” on Craigslist who try to sell property they don’t even own.

Attorney Elizabeth A. Whitman says this recording is crucial.

“It’s important that legal documents affecting title be recorded. It puts the public on notice about claims of rights to real estate. Without recording, a buyer may not be obligated to honor those claims,” she says. “It also creates an official record of ownership. This way, it’s not devastating if the owner loses his or her original deed, for example.”

Keep in mind that real estate recording has tradeoffs. It provides greater legal protection to owners.

“But it also puts your information on public record that anyone can access,” says Swan. For example, a tax lien against your home is out there for all to see.

What recording protects you from

Maguire notes that failure to record the deed can lead to bad outcomes.

“It can make it impossible for you to obtain title insurance or borrow money from a lender. And it can invite challenges to the validity of your ownership of the property,” he says.

The latter scenario is the most worrisome.

“What if your home’s seller conveyed the deed to you and another buyer? Now you have two different buyers with a claim on the same property,” says Swan. “Assume you never recorded the deed. And say buyer two never knew that you also had a deed. Buyer two actually has a better chance of being awarded the property in most jurisdictions.”

The good news? Your lender requires you to buy title insurance. This protects you if a title defect, lien or claim of ownership arises before or after you buy your home.

“If there is a title defect, the title company must correct it or pay you damages,” Whitman says. “But even with title insurance, it’s still important for you to pay attention to your real estate records.”

Recording rules

Whitman says every state has different recording rules. Recording fees vary between counties. However, they are usually a very small part of the overall costs to buy or refinance a property.

“Many states uniformly require documents to be notarized. Some also require one or two witnesses,” she says. “Most states require that the attorney preparing a recorded document be named on that document. Several states require that the real estate tax parcel number be on the deed.”

When you pay off your mortgage, the lender may or may not be required to record a lien release. And sometimes they just overlook it. You want to make sure that it is released in case you want to borrow against or sell your home in the future.

Parsing the fine print

Note that real estate recording doesn’t actually establish your ownership. Instead, it helps resolve disputes between parties with competing claims to your property.

“Some people believe they obtain ownership rights when their deed is put onto public record. But this is wrong,” Swan says. “Having the deed in hand establishes ownership, in most cases.” Recording the deed puts the public on notice that you own the property.

Remember: recording of real estate documents establishes a chain of title. It also alerts others that there may be other claims against your title — say a lawsuit, a lien from an unpaid contractor, a tax lien from the government, or an easement allowing others to use the property.

“Say you and another party are each trying to claim ownership of your property. A court can examine how each of the parties fits into that chain of title. It will look at the record of ownership based on the valid recorded deeds,” says Maguire.

If there are title issues you need to resolve to firmly establish your rights, you can file in court to “quiet” the title. That means resolving these problems and in court establishing your rights as the owner and dismissing other claims.