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Deed of Reconveyance

DEFINITION

A deed of reconveyance is a legal document that conveys a property title from the trustee to the borrower (trustor) after the borrower has completely repaid the loan whose security was a trust deed.

EXPLANATION

The deed of reconveyance usually details the parcel number of the property as well as its legal description and is typically notarized. Such a deed must be filed with the county authorities where the property is located. The filing of the deed of reconveyance typically signals that there are no liens against the property.

Sellers should be aware that a property with existing liens against it cannot be legally sold to a new owner. The only way such a property can be sold is if the lien is a mortgage loan that shall be fully paid once the property is sold. In such cases, the deed of reconveyance is typically filed by a title insurance company as part of the sale process.

Importance of Filing a Deed of Reconveyance

Property owners who have completely paid off their loan obligations under a trust deed should ensure that they get a deed of reconveyance from the trustee and that the deed is filed at the county public records office. The destruction or loss of a deed of reconveyance usually hangs a dark cloud over the affected title because it is the only document that can prove that the loan on the property was fully paid.

There are numerous cases where a deed of reconveyance was issued, but was not recorded. These cases are very common and might happen when there is an error during the funds transfer, or if the parties involved thought that others had recorded the document. If this happens, only the title company that had insured the first transaction can insure the next one as it is the only entity familiar with the title’s history.

Difference between a Satisfaction of Mortgage and a Deed of Reconveyance

A satisfaction of mortgage and a deed of reconveyance serve a similar purpose with the main difference between the two documents being that they apply to different types of prior documents.

A deed of reconveyance is typically issued to indicate that the loan conditions stipulated in a deed of trust have been fully met. On the other hand, a satisfaction of mortgage letter usually indicates that the terms of a mortgage loan described in a mortgage agreement have been fully met. Both documents are typically issued when the debt on a property is fully paid off.

Fixing Errors on the Document

In case the deed of reconveyance is issued with clerical errors such as the misspelling of either of the parties’ names, or even with an error in the legal description of the property, then the parties involved can file a deed of correction with the correct information.

A Word of Caution

You should be aware of the property taxes associated with deeds of reconveyance in some states, which must be paid within 30 days of the deed being issued. Failure to pay such cases might lead to the local government repossessing your home in order to recover the taxes owed.

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