At a typical residential closing in New York, you can expect to see the seller, the seller’s attorney, the buyer, the buyer’s attorney and a representative from the title insurance company known as the title closer. Why do you need a title closer? This person plays an integral part in ensuring the success of the closing. The title closer ensures that the deed and any financing documents are in recordable form, confirms the pay-off of the seller’s existing loan, collects the amount needed to satisfy the seller’s existing loan and remits payment to the seller’s lender. Not very glamorous, but without these services, the title company would not be able to issue a policy of title insurance to the buyer or, perhaps even more importantly, to the buyer’s lender, as required by the lender to provide the loan to the buyer so they can purchase the home.
Given the importance of these services, it has been customary until very recently for buyers to provide title closers with a gratuity at the closing, anywhere between $100 to $200. Additionally, title closers would charge sellers a fee, called the “pick-up” fee, for taking on the responsibility of remitting the final payment to seller’s existing lender in satisfaction of seller’s existing mortgage. A typical pick-up fee would be $250 per mortgage being satisfied.
But on Dec. 18, 2017, new Part 228 of Title 11 of the Official Compilation of Codes, Rules and Regulations of the State of New York went into effect. Among other things, this regulation imposes an obligation on title insurance companies to prohibit their title closers from accepting any payment from the buyer, including gratuity. And if a title closer is an employee of the title insurance company, they may not charge a pick-up fee. If the title closer is an independent contractor, a pick-up fee may be charged, provided the fee is reasonable and the amount of the fee is provided to the seller no later than three days prior to the closing. It is unclear whether or not a separate pick-up fee may be charged for each mortgage being satisfied, and this, along with other provisions of the new regulation, are still being interpreted by title companies and legal practitioners.
How will this affect residential closings moving forward? For now, it’s too soon to tell, and we’ll have to wait and see.
Cuddy & Feder’s real estate team represents buyers, sellers and lenders in a variety of real estate transactions, both commercial and residential. Founded on the strength of our real estate practice, the firm has played a key role in shaping the real estate landscape throughout Westchester, Fairfield, Long Island and the Hudson Valley.