Reconveyance Fee Instruments-What is it for?

Those considering purchasing and selling property are often bombarded with unfamiliar terms, making the sale seem more complex than they expected. Rather than becoming too overwhelmed with new phrases to continue the sale, those interested in buying and selling property should become as educated about the process as possible. An example of an unfamiliar phrase that is often misunderstood is the Reconveyance Fee Instrument. Learning the basics associated with this term can help sellers continue the sale with confidence.

Reconveyance Fee Instruments have many other names. They are sometimes also referred to as Private Transfer Taxes, Private Transfer Fees, Capital Recovery Fee Instruments, and Private Transfer Fee Covenants. No matter which phrase is used, it should be known that they all refer to a fee that is charged every time a piece of property is sold. As some of the common names for this charge indicate, the fee only occurs at the time of the transfer of ownership from one party to another.

Many people get worried when they hear about fees being assessed when they are already spending a high amount of money to buy property, but they should know that the person responsible for paying the charge is the seller. Of course, buyers who plan to eventually sell the property should also be aware of Reconveyance Fee Instruments before they purchase. The fees cover all administrative and paperwork filing for the loan transfer from one entity to another.

Additionally, they should know that the fee exists for a reason. The point of Reconveyance Fee Instruments is to spread out the costs of development so that the original property buyer does not have to pay them all. This typically results in a lower initial price since the fees for infrastructure and general development are spread out over several years and a few different sellers in most cases.

Reconveyance Fee Instruments may be a predetermined amount of money no matter how much the property is selling for, or they may be a percentage of the price. In most cases, it is the latter, and it is usually 1%. This allows all sellers to be prepared before selling the property since they should know well in advance how much they will need to pay. The money is usually collected by the Title Company involved in the sale, which is why the same company usually decides whether it will be a flat fee or a percentage. While reconveyance fees will vary according from state to state; in California expect to pay around $75.

Buyers are usually made aware of Reconveyance Fee Instruments before they purchase property, as they will be responsible for the fee once they sell it. Once most people find out how the fee works and what it does, they find it to be quite reasonable. If Reconveyance Fee Instruments did not exist, the original buyer would have to pay much more upfront for the property than they should. Without this fee, they would go on to sell the property for more since they had to pay more upfront, which means that every buyer thereafter would end up paying at least the amount of the current fee, if not more. For this reason, Reconveyance Fee Instruments have many supporters.