For the time being, New York homebuyers’ closing costs will not include the cost of Madison Square Garden tickets, trips to strip clubs, or even the price of a humble cup of coffee.
New regulations to curtail fees charged by title insurers have gone into effect – though they may prove short-lived. An aggressive lobbying push in Albany has inspired the State Senate to pass a bill gutting the new regulations, which went into effect, after a delay, on Feb. 1. The General Assembly is set to consider the anti-reform bill.
Virtually all homebuyers purchase title insurance, which guarantees that a property can change hands without anyone else having a valid claim to it. The new reforms seek to end the long-standing practice of title insurers entertaining potential clients – the lawyers, accountants, brokers and others who work for homebuyers – and then getting the homebuyer’s business. The entertainment costs are then baked into the closing costs and passed onto consumers as “marketing fees.”
There are 30 title insurers in New York. All but two of them charge the exact same rates, which are approved by the state Department of Financial Services and are the highest in the country – 40 percent more than Connecticut, 25 percent more than New Jersey, according to the New York Times. How do you spell c-a-r-t-e-l?
The two companies that charge less are OneTitle and Entitle Direct. How do they do it? “All but one of our competitors file a single set of rates collectively, and that’s legal,” says Dan Price, president and CEO of OneTitle. “We’re not driven by the rest of the industry. We were driven by our own analysis of how much it would cost for us to operate.”
It probably doesn’t hurt that OneTitle, unlike most of its competitors, refuses to pass lavish entertainment expenses on to homebuyers. “We would never add a fee to a title bill that was driven by marketing expenses,” Price says. In the world of New York title insurance, that qualifies as downright quaint.
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