Last month we closed a transaction - conventional loan with a large down payment. On the HUD-1, pursuant to the sales contract, the seller paid for a home warranty. We remitted the fee to the home warranty company.
Today I received a call from the buyer who said he had contacted the home warranty company and cancelled it. They told him they would be sending our check back to us. He was calling me because he wanted that money. I told him I couldn't redirect the money to him. I would be refunding it to the seller.
He then explained that he never wanted the home warranty and had asked the real estate agent to change the contract and have the seller give him a credit for the fee. There was no seller assist in the contract so there wouldn't have been any problem, I think, getting approval from the lender to do this.
For some reason his agent told him to just take care of it outside of the closing. This is how people get into trouble. There is no way the consumers would know that doing things outside of closing isn't kosher.