Understanding Recording Fees & Taxes

Written by Adam Headley

No transaction is complete until the paperwork is done, and purchasing or financing real estate is no different.
 
After the ink is dry on the appropriate documentation to secure your log home timber home property, the last step in the process is making those documents a part of the public record in the county where the real estate is located. This is accomplished by recording the deed or deeds and security instrument, if an additional entity (lender) has a financial interest in the property along with the owner.
 
After the documents are signed, they’re forwarded, typically by the title company or attorney’s office that presided over the closing, to the specific county’s deed, title or register’s office. (Depending on your location, the name of the office may differ.) The register’s office then dutifully records the documents in order to provide evidence of ownership and/or security interest such as a mortgage or deed of trust.
 
In order to provide this necessary service, the local government charges recording fees and taxes according to established rates. Recording fees are typically based on the number of pages being recorded, and the taxes are most often calculated on the dollar amount involved. These actual charges vary widely depending on the county and state where the real estate is located and where the recording takes place.
 

Recording Fees

Buyers and sellers pay recording fees in order to conclude the transfer, sale or purchase of real estate. Often, in purchase-money transactions the parties agree to split or apportion this expense. This agreement is noted in the sales contract and on the settlement statement and is collected at closing.
 
Counties charge recording fees in order to make the information readily available and accessible by the general public and to facilitate future transactions involving the particular piece of real estate. A simple title search reveals the name of the owner and the existence of any liens against the property. Failure to record ownership or financial interest in real estate literally opens the door to problems down the road, such as ownership disputes, priority of liens and the allocation of any equity in the property in the event of a future sale.
 
Often, a county will charge a higher fee for the first page of document and then a fee that is much lower for any additional pages. For example, a four-page document might incur a cost of $50 to record the first page, while the three remaining pages are recorded at $1 each, for total of $53.
 

Recording Taxes

Real estate recording taxes, also commonly known as transfer taxes, are typically assessed by the state or county in which the property is located. These taxes serve as a local and statewide revenue source and vary significantly across the United States. The tax is routinely based on the value of the home or the amount paid for it. If a new owner finances the transaction with a lender, the tax may be based on the amount of the loan, and in some states a “mansion” tax may apply for luxury homes valued at $1 million or more.
 
Recording taxes provide a significant revenue stream for local and state governments, supporting infrastructure, schools and other public services. Tax rates differ depending on the jurisdiction. For example, in New York, a rate of $2 for every $500 of value is assessed on real estate transfers, while in California the rate is $.55 for each $500 of value and applies to any real estate transfer in an amount greater than $100.
 
When purchasing, financing or transferring real estate, it pays to consult a professional. Real estate attorneys, title companies and bankers are experienced in calculating recording fees and taxes, and more importantly, in taking the mystery out of such transactions.
 
 
 
 
Adam Headley is a writer and career banker with more than 30 years of experience in finance and lending. He has written extensively on the varied aspects of building, purchas- ing and owning a log or timber home.