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What is a Deed of Reconveyance?
A deed of reconveyance is a legal document that includes transferring a property’s title from lender to borrower once a mortgage is paid in full. In cases where a mortgage is not involved in the sale of a home, the deed of reconveyance is delivered with the deed of trust and the title to a home.
What Does Reconveyance Mean?
Reconveyance means the transfer of property from lender to borrower after a property is fully paid for.
Getting Rid of Liens
When you purchase a home, you typically sign a mortgage that indicates how much the home is being sold for, the interest rates, how much your payments are, and how long you will make them before the loan is satisfied and your house is satisfied paid off.
When you make the final payment on your mortgage, your lender will submit for a deed of reconveyance. This type of deed indicates that you have fulfilled your end of the bargain by completing payment in full for the property and should now be awarded the deed to your home.
In other words, it transfers ownership of real estate contracts from your lender to you.
This process is essential because while you are still paying against your mortgage, your lender has a financial interest in your home per your purchase and sale agreement . This means that if you ever default on payments or neglect to pay property taxes on your home, the lender needs a way to recover its money.
They do this by filing for a lien on the property. A lien denotes that as long as you are making payments against the loan documents, the mortgage company has a right to foreclose upon your house and kick you out if you default on payments or otherwise dishonor your agreement. Then, they can sell your home to recuperate the costs involved.
Without a deed of reconveyance, you may not be able to prove that you have satisfied the terms of the contract by making that final payment.
Making Homeownership Public Record
From a legal standpoint, these deeds protect homeowners. Deeds of reconveyance must be filed with the state in the county where the house is located. Government employees then record the deed in the state’s system to ensure no liens will come up in the event of a deed search on the property.
Deed of Reconveyance and Real Estate
A deed of reconveyance is also essential for homeowners who want to sell their homes. There are two situations in which they would be allowed to do so:
- The mortgage note has been paid in full, which a deed of reconveyance is needed to verify.
- Prior arrangements have been made with the mortgage company to pay the remainder of what’s owed on the home with the sale proceeds. In this case, a deed of reconveyance is created during the closing portion of the sale to certify that the purchase of the property is allowed and lawful.
Other Special Inclusions
In addition to the basic information included above, a few special considerations might consist of a deed of reconveyance.
For example, a home is not always purchased from a mortgage company. In some cases, it might be given as a gift. Since the purchase price must be listed on the reconveyance, if the home was given as a gift, the standard price of $10 might be included for legal purposes.
A deed of reconveyance also usually has a two to three-inch margin with blank space at the top of the page. This area is left blank for the County Recorder at the local courthouse, who will use the area to document a stamp, case number, or other case-identifying information for organizational purposes. You should never write in this space and instead leave it completely clear for any information that may need to be added at the state level.
Some states also require a witness signature to certify the deed of reconveyance is binding. Be sure to check the laws in your state to see if you should require a witness signature.
Deed of Reconveyance Examples
The purpose of a deed of reconveyance is to free owners from any security interest that their mortgage company might have in their property. Here is an example of how a deed of reconveyance is beneficial to homeowners:
Lina completed the last payment on her mortgage two months ago. Her mortgage company issued a deed of reconveyance to certify that her financial obligation had been fulfilled. Today, she received a letter from the mortgage company stating that her mortgage payments for the last two months had not been received and that prompt payment was required to prevent foreclosure. Lina was able to contact the mortgage company and provide documentation of her deed of reconveyance to prove that no money was owed. The lender accepted the document and cleared Lina’s account from the system.
Check out this article to learn more about what reconveyance means and how it works.
What’s Included in a Deed of Reconveyance?
A successful deed of reconveyance is a detailed, legally enforceable document that releases homeowners from the security interests of their borrowers.
At a minimum, a deed of reconveyance should include:
- Names and addresses for lender and borrower
- Date of last payment
- Names of any involved lenders or trustees
- A detailed description of the property that matches the original deed or other legal documents
- An indication that the borrower has fulfilled their financial obligations per the purchase and sale agreement and that they are released from any further monetary obligations to the lender
- Signature lines for all parties and a space for a public notary to certify that the signatures are valid and of each party’s own free will
Here is an article where you can learn more about what’s included in a deed of reconveyance.
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Who Needs to Sign a Deed of Reconveyance?
The deed of reconveyance must be signed by the trustee of the property, and the signature must be reinforced by a stamp from a notary public to be valid.
Learn more about who needs to sign a deed of reconveyance by checking out this article .
How Do You Record a Deed of Reconveyance?
Recording a deed of reconveyance is as simple as bringing the document to the courthouse and turning it into the Country Recorder, who will place the details in the state’s system.
Once a deed of reconveyance is filed with the courthouse, the information is a public record. This means that anyone who requests information about the property will be able to tell that there is no lien on the home and that the mortgage obligations have been fulfilled completely.
Whether you need help with a deed of reconveyance, warranty deed, grant deed, property deed, or special warranty deed, real estate lawyers can help. Post a project on ContractsCounsel today to connect with experienced real estate lawyers who can walk you through every step in the process.
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