The Property Recording System
by William Bronchick
Virtually every county in the United States has a place where records of title are publicly recorded. The recording system gives constructive notice to the world of the transfer of title to property. Recording simply involves bringing the original deed to the local county courthouse or clerk and recorder's office.
The original deed is copied onto computer or microfiche, recorded in ledger books (or computers), then returned to the new owner. There is a filing fee for the deed, which runs about $8 per page. In addition, the county, city and/or state may assess a transfer tax based on the value of the property or the selling price.
PRACTICAL TIP: If you are trying to find out how much someone paid for a property, simply read the edge of the deed. The recorder usually prints how much transfer tax was paid on the margin of the deed. If you know the tax rate for transfers in your county, simply do the math backwards and you will discover what was paid for the property, even if the purchase price is not stated on the deed.
Grantor/Grantee. The most common indexing system is by grantor (the person conveying an interest, usually the seller or mortgagor) and grantee (the person receiving an interest, usually the buyer or mortgagee). All documents conveying property or an interest therein (deed, mortgage, lease, easement, etc.) are recorded by the grantor's last name in the grantor index. The same transaction is cross-indexed by the grantee's last name in the grantee index.
Geographical Index. A few areas of the country use a geographical grid system. By locating the property on a grid map, one can obtain all records of transfers and liens on the property.
Torrens Title Registration. A few areas of the country use a title registration system, which is much like a car title registration. Proof of ownership is presented to the county recorder, who then issues a certificate of title. The certificate of title is conclusive proof of ownership.
Recording Statutes. Every state has a recording statute which dictates who wins in a battle over ownership. For example, what happens if John gives title to Mary, then he gives it again to Fred and Fred records first? What happens if John gives a mortgage to ABC Savings and Loan, but the mortgage is not filed for six months and then John borrows from another lender who records their mortgage first?
Most states follow a "race-notice" rule, which means that the first person to record his document, wins, so long as:
He received title in good faith, and
He paid value, and
He had no notice of a prior transfer
Example. John buys a home, and, in doing so, borrows $75,000 from ABC Savings & Loan. John signs a promissory note and a mortgage pledging his home as collateral. ABC messes up the paperwork and the mortgage does not get recorded for 18 months. In the interim, John borrows a $12,000 from The Money Store, for which he gives a mortgage as collateral. The Money Store records its mortgage, unaware of John's unrecorded first mortgage to ABC. The Money store will now have a first mortgage on the property.
Example. Fred sell his home to Ira, who forgets to record the deed. In the interim, Fred gives a deed to his daughter, Susan, as a gift. Susan records her deed. Susan will not defeat Ira's ownership, since Susan did not pay value for the property.