I would appreciate your thoughts on this situation:
Preliminary title report lists property taxes for the current year as due, supplemental taxes as payable. But it doesn't show up in the HUD-1, so seller receives more than she would have if they were accurately reflected. Two months later, the title company tells the seller they have to reimburse the title company for the taxes they paid (the ones in the title report). Would seem they made a mistake and while they may not be required to pay all the taxes, the seller shouldn't have to pay their fees, since as the title company's representative has indicated they "screwed the pooch".
Your thoughts much appreciated.
Hi, Richard. One of the documents required for title insurance is an owner/seller affidavit used to bind the seller legally in the event of just such an error. Title insurance covers human error. Some errors happen in the closing process because people are human and often rushed at the end of the process. There are checks and balances in the system to help find and eliminate these types of errors.
The seller has personal knowledge of the property and thus should have noticed that the taxes were not collected on the HUD-1. The affidavit is supposed to jiggle their memory. When the seller signed that affidavit, the seller affirmed that all taxes are paid or are being paid on the HUD-1. The affidavit is made for the purpose of inducing the title insurer to insure.
The seller should pay the taxes. If the seller does not, the title insurer may litigate to recover damages.
It's a bit like having a store clerk give you the wrong change or a bank accidentally depositing money into your account and discovering the error later. It's not your money and you can't keep it. In this case, the seller was unjustly enriched. ;)