4.4 Title & Closing Procedures
Key Takeaways
- New York is an 'attorney state': licensed attorneys typically draft the contract, review title, and conduct the closing, unlike escrow/title-company states
- Title insurance is a one-time premium paid at closing; the lender's policy protects the lender's loan amount and the owner's policy protects the buyer's equity
- New York follows a race-notice recording system in practice — a later purchaser who pays value, takes without notice, AND records first can defeat a prior unrecorded interest
- A valid deed must be in writing, by a competent grantor, name an identifiable grantee, contain an adequate description, and be signed, acknowledged (notarized), and delivered/accepted
- TRID rules require a Loan Estimate within 3 business days of application and a Closing Disclosure at least 3 business days before consummation
New York Is an Attorney State
Unlike many states that close through an escrow or title company, New York closings are conducted by attorneys. Each side typically retains counsel.
| Function | Who Performs It |
|---|---|
| Drafting/negotiating the contract | Attorneys (after the binder/offer) |
| Ordering and reviewing the title search | Buyer's attorney + title company |
| Conducting the closing | Attorneys at the table |
| Recording the deed and mortgage | Title company or attorney |
Salesperson limit: A licensee may fill in blanks on a standard form but may not draft custom contract clauses — that is the unauthorized practice of law. Refer clients to an attorney.
Title Insurance
Title insurance is a one-time premium paid at closing that protects against defects existing before the policy date.
| Policy | Protects | Amount |
|---|---|---|
| Lender's (mortgagee) policy | The lender | Declines as the loan is paid down |
| Owner's policy | The buyer | Fixed at purchase price; protects equity |
Covered vs. Not Covered
| Title insurance COVERS | Title insurance does NOT cover |
|---|---|
| Forged deed in the chain | Defects you already knew about |
| Recording/indexing errors | Government powers (eminent domain, police power) |
| Undisclosed/missing heirs | Zoning and land-use limits |
| Hidden liens, fraud | Issues arising after the policy date |
Trap: Lenders require a lender's policy, but the owner's policy is optional — yet without it the buyer's own equity is unprotected against a covered defect.
Recording & Priority
New York's recording statute is, in practice, a race-notice system. A subsequent bona fide purchaser who (1) pays value, (2) takes without notice of a prior claim, and (3) records first, can defeat an earlier unrecorded interest. Recording gives the world constructive notice, while actual knowledge of a prior claim is actual notice.
| Concept | Effect |
|---|---|
| Constructive notice | Recording puts everyone on notice |
| Actual notice | Personal knowledge of a prior claim |
| Bona fide purchaser | Pays value + no notice + records first = protected |
| Unrecorded deed | Valid between the parties, but loses to a protected later purchaser |
Worked example: Owner deeds Lot A to Anna (who does not record). The next week Owner fraudulently deeds the same lot to Ben, who pays full price, knows nothing of Anna, and records immediately. Under race-notice, Ben prevails because he is a bona fide purchaser who recorded first. This is why prompt recording is critical.
Elements of a Valid Deed
| Element | Requirement |
|---|---|
| Written instrument | Statute of Frauds |
| Competent grantor | Legal age and capacity |
| Identifiable grantee | Named recipient |
| Adequate legal description | Metes-and-bounds, lot/block, etc. |
| Granting clause / words of conveyance | Intent to transfer |
| Signed by grantor | Grantee need not sign |
| Acknowledged | Notarized — required to record in NY |
| Delivered and accepted | Title passes on delivery during the grantor's life |
Federal TRID Timing
The TILA-RESPA Integrated Disclosure (TRID) rule governs most residential closings:
| Document | Timing |
|---|---|
| Loan Estimate (LE) | Within 3 business days of loan application |
| Closing Disclosure (CD) | At least 3 business days before consummation |
Changing the APR beyond tolerance, switching loan products, or adding a prepayment penalty resets the 3-day CD waiting period — a frequent exam point.
Deed Types and the Covenants They Carry
New York transactions use several deed types, and the exam tests how much protection each gives the grantee. The more covenants (promises) the grantor makes, the stronger the buyer's position.
| Deed | Protection | Typical Use |
|---|---|---|
| Full covenant and warranty deed | Strongest; warrants title back through all prior owners | Standard arm's-length sale (rare in NYC) |
| Bargain and sale deed WITH covenants | Grantor warrants only against their own acts | Most common NYC residential conveyance |
| Bargain and sale deed WITHOUT covenants | No warranties; just conveys whatever interest exists | Some sales, foreclosures |
| Quitclaim deed | None; releases any interest the grantor may have | Divorce, clearing clouds, family transfers |
| Executor's / referee's deed | Conveys per court/estate authority | Estate sales, foreclosure auctions |
Trap: A quitclaim deed transfers ownership just as effectively as a warranty deed if the grantor actually holds title — it simply makes no promises about that title. It is not a "weaker" transfer of whatever the grantor owns; it is a weaker set of warranties.
Closing Costs, Adjustments, and the RP-5217
At a New York closing, the attorneys reconcile prorated items so each party pays only for its period of ownership. Commonly prorated (adjusted) items include property taxes, fuel oil left in the tank, water/sewer charges, and, for co-ops/condos, maintenance or common charges. The buyer typically pays for the mortgage recording tax (NYC adds its own portion), title insurance premiums, and the lender's fees; the seller typically pays the transfer taxes discussed in Section 4.2 and the broker's commission.
Every conveyance of real property in New York must be accompanied by a Form RP-5217 (Real Property Transfer Report), which captures the sale data for the state and is filed with the deed. NYC transactions also require Form TP-584 for the combined state/city transfer-tax filing.
Worked timeline: A buyer applies for a mortgage on April 1 and receives the Loan Estimate by April 4 (3 business days). The lender issues the Closing Disclosure on April 25 for a closing on April 30 — exactly the required 3-business-day cushion. If, on April 28, the parties switch from a fixed-rate to an adjustable-rate loan, that product change restarts the 3-day clock, pushing closing back. Mastering these timing rules and deed distinctions rounds out the most heavily tested closing material on the salesperson exam (75 questions, 90 minutes, 70% to pass, given directly by the Department of State).
Owner deeds a parcel to Anna, who does not record. The next day Owner deeds the same parcel to Ben, who pays fair value, has no knowledge of Anna's deed, and records immediately. Under New York's race-notice recording system, who prevails?
Under TRID, when must the Closing Disclosure be delivered to the borrower?
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