Know the lingo: Recording fees

Recording fees are charges collected by a county recorder when certain real estate documents are added to the official public record.

They are relatively small compared with the price of a property or the size of a loan but they can add up quickly and are a prime example or why investors need to consider all the costs before acquiring and financing a property.

There may be multiple recording fees associated with the purchase of a property and they may vary from county to county.

In a California real estate transaction, documents that may need to be recorded include:

• grant deeds
• deeds of trust
• reconveyances
• notices of default
• notices of trustee sale
• assignments
• certain liens
• releases of liens
• other real estate instruments

Recording establishes an official public record of documents affecting ownership or interests in a property.

For investors using hard money financing, recording fees commonly appear among the various closing costs associated with recording the deed and loan/security documents.

Why recording matters

Recording helps establish the chain of title and gives public notice of interests affecting the property.

It is fundamental to real estate transactions and should not just be regarded as administrative red tape.

Recording is particularly important for flippers and property investors because it allows them to discover information about a prospective property that may not otherwise be apparent.

Recording fees in California

Understand that while California law establishes many of the charges and requirements, transactions are recorded and charged by the county where the property is located.

These charges can vary depending on:

• document type
• county-specific charges
• number of pages
• number of titles/documents
• applicable statutory surcharges
• exemptions

For example, the current Los Angeles County Recorder fee schedule lists:

For a regular recording

Base recording fee: $15

Potential SB 2 Building Home and Jobs Act fee: $75

Special Real Estate Fraud Prosecution Program fee: $10

For a grant deed

Base recording fee: $15

Potential SB 2 fee: $75

Fraud notification fee: $7

Restrictive Covenant Modification Program fee: $2

Potential Survey Monument Preservation fee: $10

Each Additional Page: $3

San Diego County’s current fee schedule lists

First page of certain standard documents: $14

First page for titles associated with the real-estate fraud fee: $17

Each additional qualifying title can trigger another fee.

Additional indexing can create further charges.

It also states that California documentary transfer tax is collected on taxable conveyances over $100 at $0.55 per $500, or fraction thereof, of a property value after certain qualifying liens/encumbrances.

The SB 2 fee

California’s Building Homes and Jobs Act 2017 (SB 2) created an additional recording charge of $75 on certain real estate documents, subject to statutory exemptions.

The total SB 2 fee cannot exceed $225 per transaction per parcel but it is not a cap of $225 on all recording charges.

Once the $225 ceiling is reached, additional qualifying documents in that same transaction do not create further SB 2 charges.

But how each county interprets the law beyond the $225 cap may vary.

Some ordinary property purchases don’t pay SB 2 at all.

In San Diego County, the fee is not imposed on instruments recorded in connection with a transfer that is subject to Documentary Transfer Tax (DTT).

But where SB 2 is charged, it is important to remember it is entirely separate from DTT and ordinary recording fees.

Recording fees can accumulate

Multiple recording fees can add up quickly.

A transaction might involve:

• a deed transferring ownership
• a deed of trust securing financing
• additional security or title documents
• later documents associated with paying off or releasing the loan

While these fees are unlikely to determine whether or not a flip succeed, sophisticated investors budget all acquisition, financing and disposition costs rather than focusing solely on purchase price and construction.

Recording fees are not the only fees

Recording fees should not be confused with multiple other fees associated with property development.

They specifically refer to the cost associated with placing qualifying documents in the offical public record.

Other fees which are not recording fees include:

• escrow fees
• title insurance
• documentary transfer taxes (DTT)
• property taxes
• loan origination fees
• appraisal charges
• legal fees
• notary fees

Who pays recording fees?

Recording-related charges may be allocated between buyer, seller and borrower.

It depends largely on the transaction, custom and purchase agreement or escrow instructions between the parties.

In California, there is no statewide law dictating that all fees must be paid by any one party.

Ultimately, recording fees may be passed on to the buyer of a flipped property by way of its selling price.

Get finance and support today

Recording fees are county charges associated with placing deeds, deeds of trust, liens and other qualifying real-estate documents into the public record.

California investors should not assume there is one flat statewide fee.

The amount depends on the county, document and applicable statutory charges or exemptions.

For a hard money borrower, recording fees are simply one more component of the true cost of acquiring and financing an investment property.

For further advice about recording fees and who pays them, set up a meeting with the accomplished team at Equidy.

Equidy has an intimate and personal history with all aspects of property development in California and has done so for well over 40 years.

Their sole focus is to help you maximize the return on your investment without putting yourself at unnecessary financial risk.

And the best part is that Equidy is also a hard money lender that can finance flippers and developers in as little as 48 hours.

They stand by their core belief that anything is possible and they strive to prove it every single day.

Even in tough economic times, they are determined to reward entrepreneurship and resolve to help their clients crystallize their wealth creation dreams.

Equidy enjoys long and established relationships with serious investors, sellers and real estate professionals while leveraging their reputation and trust, using clear communication to minimize the risk to all parties.

Contact Equidy today to book your free strategy call.