You’ve probably never heard of a reconveyance fee, but it has serious legal implications when you buy or refinance a home. Learn more about what a reconveyance fee is and why you should care.
That house you’re buying probably has a lien on it. But don’t panic—that just means that the current owner still has a mortgage on the house. As long as there is still a loan out on a house, the bank that provided the loan technically has a lien on it. When you’re ready to buy the house and take out your own loan on it, that lien needs to be cleared. This is where a reconveyance fee comes in.
The reconveyance fee is one of the many fees that you have to contend with as you move through the real estate transaction. Here are some of the basics about the reconveyance fee and why it is so important for you to understand as a homeowner.
What is a reconveyance fee?
A reconveyance fee covers the cost of removing any lien that a lender has on the property title when the owner wants to either sell or refinance a property. Depending on the state, reconveyance fees are collected by the title company or a real estate lawyer and paid to the county. The fee is taken at closing and typically paid by the buyer.
Why do I have to pay a reconveyance fee?
When the property title is transferred to a new owner, or a property owner chooses to refinance their loan, the existing loan must be completely cleared. The previous lender must be made whole before the new lender will give any credence to a loan application—even, in the case of refinancing, if the original lender and the refinanced lender are the same.
A reconveyance deed is also filed with the municipality in order to show that the lien has been released and transferred over to the new loan. This reconveyance deed also serves as a guarantee that the title is legally clear so the only loans on the property are the most current.
What can I expect to pay for reconveyance fees?
Reconveyance fees vary depending on your state, but they usually range from $50 to $65. Your lender or lawyer may also charge a slight premium for the convenience of paying the county registrar on your behalf. Ask your real estate agent how much you should expect to pay and you can check with your local municipality to see what your state charges if you think that you are being overcharged.
What do the reconveyance fees cover?
The fees cover all of the administrative costs of filing the paperwork that transfers a loan from one party to another. The agency that does the filing and takes the fee can be the county clerk, the registrar, or the county recorder. If you ever need to find records on your property from previous owners, you can look to the agency that takes the reconveyance fee for those records. Part of the reason why this fee is so important is to ensure records are kept up-to-date.
What happens if the reconveyance is not property executed?
The reconveyance deed has serious legal implications, so it’s one of the most important aspects of the real estate transaction process. If a reconveyance is not properly executed, the first mortgage that is on the property may stay on the property from a legal standpoint. This will show up as an unpaid lien and can cause a great deal of trouble for owners when they try to sell or take out any other loans.
When are reconveyance fees collected?
Because reconveyance fees are closing out a loan, they are collected when you close. Lenders and lawyers may require that a borrower place the fee in escrow ahead of time, or the borrower may simply bring the appropriate amount in cash at closing. The exact nature of the payment will depend upon your lender or the lawyer that is helping to execute the reconveyance.
I do not see a reconveyance fee in my paperwork. Is it still there?
If a reconveyance deed is required in your state, you will definitely have a reconveyance fee associated with your mortgage closing costs. It may or may not show up as a line item in your paperwork because it may be rolled up into the title insurance fee depending on your lender.
You can ask your real estate lawyer or the lender putting together the closing table paperwork where the reconveyance fee is on the line items. It may benefit you to know if it is not a direct line item, especially if you feel you are being overcharged.
How do I make sure that the loan has been property reconveyed to me?
Whether or not the reconveyance line item shows up in the paperwork, you can make sure that the property has been properly reconveyed to you through a reconveyance letter. The mortgage holder will have this sent out to you if you request it in writing, but they usually don’t send it to you automatically.
Requesting a reconveyance letter immediately after closing will save you time and money when you’re preparing to do something else with your property. Future title searches and credit searches will become much easier and you will always be able to prove that you own the property free and clear beyond a shadow of a doubt.
