A wants to know why she should have to pay a tax that the title company missed.

Diane,

Thank you for answering this email in advance.

I closed on my home 10-30-2013.  A clean Title was transferred.  I am now getting contacted by the title company stating I owe some property taxes.   The property taxes in question is from a sewer and recycling bill that was not paid in July (a bill I did not receive because I was living out of state) that automatically was applied to property taxes at the end of the year.  

Here is my issue; On the HUD-1 Settlement statement, #404 there is a credit for 2 months November and December (The bill comes out once a year in July).  The title company knew about the taxes owed, why did they not say anything about it at the time of closing?  Is it not the Title Company's responsibility to exercise Due Diligence?  It is not the title company's responsibility to investigate into the property and disclose what they find?  They found it, just didn't disclose it. I, the seller, should not be held liable for non-disclosure of information that was not discovered in the process of that investigation.  The  finding of the unpaid portion of the property taxes was not addressed at the time of  closing therefore would not be my responsibility.  Isn't that why we pay a title company and why we buy Title insurance?  Since the title was transferred free and clear at the time of closing The title company  is liable for anything that comes up Correct?   I, in no way, shape or form knew anything about this until January 4th 2014.  And the only reason I am being contacted is because the title company doesn't want to pay for their error.    If the research was done correctly this would have been noticed.  

A

Hi, A:  Thanks for letting me help you with this issue.  You are expressing the frustration that many consumers share when confronted with an error discovered after closing.

Let's start with the basic function of title insurance.  The insurance is for the benefit of the insured.  In the case of most purchase transactions the insured are the buyer - new owner - and their mortgage lender.  The insurance is not issued for the benefit of the seller.

Human error is one of the most common sources of title insurance claims.  Mistakes can happen at any stage of a transaction.  There may be mistakes at the courthouse, in the pre-closing examination, at closing or after closing.  The job of the title insurer once an error is discovered is to rectify it under the terms of the title insurance policy so that the "insured" parties are not injured.

The fact that the taxes were missed in the closing process does not negate the fact that you owe the tax.  It's a bit like a clerk giving you the wrong change.  You can't say gotcha and keep the extra any more than you would expect a clerk who shorted you to do the same back to you.  If the title insurer had made an error by charging you too much tax, you'd expect a refund, right?

So, here's how this is playing out.  The title insurer is making a demand to you to pay the taxes that you rightfully owe.  If you fail to pay the tax, they will pay it so that the insured are protected and then they will go after you in court.  In the end you will pay the tax.  Paying it now is the least expensive way to handle it. 

If you are in a bind and don't have the money, ask them if they will accept payments.  Some will, some won't.

I hope that answered the question.  Best wishes and I do understand your frustration.

Diane

M wants to know if there is any way to get out of an escrow shortage caused by oversight in refinance.

Diane: 

We refinanced in August. The bank just sent us the dreaded escrow shortage letter. I called the company that handled our refinance and we tracked the error. The title company (so the guy says) only put our school tax on the paperwork. Then the refinance company missed that error and it all went through. The full tax amounts were all correct on all paperwork until title company missed the other taxes and sent paperwork back to company, then the company ALSO missed it. I feel that they are both at fault. 

      Fast forward to right now and by February 1st we either pay $1893 and our payment will still go up $100 (I understand that it must go up because they didnt factor all of the taxes.) or our payments go back to just $5 short of what they were before the refinance. This is a rental property so we refinanced to get a smaller payment and hope to sell within a year. (We are military and renting to prior military and we have an assumable VA loan). So, my question is, is there anything we can do besides scream from mountain tops which title company and refinance company not to use?

     The biggest issue I have is that we paid the title company $2,000 and they didnt do their job properly. The refinance company made money off of us as well and they also didnt find the error and processed the loan with incorrect numbers and we are the ones now paying for it. Do we have any recourse?

M

Good morning, M:

Here's the situation.  As the owner of the property you have personal knowledge of what the taxes are and should have been on the paperwork.  There are three parties responsible for reviewing the documents used at closing - the title agent, the lender, and the borrower.  Sometimes all make a mistake and miss an error.  It is always unfortunate but the taxing authority won't reduce the tax liability and you are the one who must pay it.

You could consult an attorney to see if there is any other option because you are military but I don't think in this case there is because the payments would have been higher from the initial estimates you had from the lender.  In any event, please check with an attorney, just in case.

Sorry this happened but I do believe the dreaded shortage is real and must be resolved.  Best wishes.

Diane

Nisha wonders if a post closing request for proration of HOA fees is out of line.

Hi Diane,

I came across your blog while finding any answer for my recent issue.

I closed on my home on Jun 24, 2013 as buyer. 

As per the listing agent of the seller, she told us that seller has paid HOA due in advance for 2013 and we don't need to pay for this year. This was our verbal understanding.

Same reflected in HUD statement. 

But now almost after 5-6 months, we got an email from seller asking for us to prorate this amount. Can you please advise us. They are saying that they did not notice this during closing. They are also saying that they will go to lower court if we did not pay.

Thanks & regards,

Nisha

Hi, Nisha:  It is customary to prorate the HOA fee but not required.  Take a look at your sales contract.  Typically the contract will include language in which the parties agree to prorate taxes and items such as the HOA fee.  

This is one of those unfortunate situations in which everyone would have preferred it to be done correctly at closing but the error isn't discovered until later.  If you are unable to pay the seller the prorated amount, offer to make payments.  Most courts would see this as an act of good faith especially if the title agent failed to do an agreed proration at closing.

If you truly believe you should not have to pay the proration, ask the seller to show you where in the sales contract a proration agreement was outlined.

Thanks for checking in.  Good luck and Happy New Year!

Diane

title company wants to change borrower net proceeds after the rescission period has expired

HI!

  I just refinanced my house, We signed all the FINAL HUD FORMS! The title co sent us a check for the amount that we are getting from the lender, This was the final hud settlement forms . Now the title co wants me to hold the check and says they will stop payment on it if we deposit it. Everything was notorized and witnessed. After waiting the required 3 day resition period everybody was funded. Now he says I have to wait! Is this legal after closing and can he change the amount of our proceeds? Something seems to be fraudulent!

If the figures are being changed, you should be eligible for another 3 day rescission period.  Contact your lender immediately and tell them what is going on.  Tell them you insist that they inform the title company that it is too late or that they redo the closing statement and give you another 3 day right to cancel. Tell them you will contact the Consumer Finance Protection Bureau and the state banking department if they refuse to grant another right to cancel period. If you still don't get help, in addition to contacting these agencies you might want to talk with an attorney about sending in the cancellation form and rescinding the transaction anyway.

The entire purpose of the federal right to rescind on a refinance of a primary residence is to give the consumer a period of time to review the terms and the dollars involved in the refinance.  You have to have REAL figures to consider before you waive your right to cancel.  If these figures were wrong - and they might be legitimately in error - then you need to have good figures back in front of you with the right to cancel.

If the reality is that you would have cancelled if you had correct figures, then I believe you still have that right.  If the reality is that you would not have cancelled if you had the correct figures, then you might want to just go along with the correction.  There is a difference between a legitimate error and a bait and switch situation.

Hope this information is helpful.

Diane

Richard wants to know if the seller has to pay taxes that the title agent failed to collect.

Diane,

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.

 

Regards,
Richard

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. ;)

Diane

mistake in refinance not discovered until after rescission period

Hello Diane,

I noticed your blog online back in 2007 regarding Title/Escrow questions.  

My husband and I refinanced our home a couple of months ago.  We told the lender that we did not want the loan balance to increase.  When all of the documents were prepared and we were shown the HUD-1 for approval, our loan balance went up by $5000.  We were not happy with this and decided that we didn't want the loan.  But our lender assured us that we were going to get $3000 back to borrower that we could then apply to principle.  We felt better about this because then our new loan would only be increasing by $2000.  So we decided to go forward with the loan.  The next day we signed all of the documents and the HUD-1 stating that our new loan was $398,000 (up from $393,000) and we were going to receive a check for $3000.  

About 10 days later we received a check in the mail for $1500 instead of $3000.  There was no explanation as to why the check was short by $1500.  When we talked to the lender about this, she asked the title company to explain why the check was short.  At first there was no response from the title company.  Finally, after several attempts to get their response, the title company said there was an error and that $1500 was credited twice and should have only been credited once. 

My question is this:  

I understand that mistakes can be made in preparing documents, but we based the whole purchase of our loan on the fact that we were getting $3000 back.  We would not have purchased this loan had we known that we were only getting $1500 back.  Also, if there was an error, shouldn't the title company have notified us within the 3 day rescission period so that we could have the opportunity to back out of the loan based on accurate calculations?  If the title company didn't know of the mistake until after the 3 day rescission period, shouldn't they have then given us another 3 days to rescind based on the accurate information?  Was it right for them to go ahead and fund the loan without notifying us of the error?  Did they just assume that we wouldn't care and would buy the loan anyway?  Basically, we were sold a loan and signed documents based on false pretenses.  They had a price tag on their loan and we bought it at that price.  If they put the wrong price tag on their loan shouldn't they be held responsible for what the price tag stated?  They are telling us now that they put the wrong price tag on the loan but are now forcing us to buy it at the higher price.  We never would have bought this loan based on their new calculations and they never gave us a chance to rescind based on accurate calculations. 

Any clarification on this would be much appreciated!

Sincerely,

Amy

Hi, Amy:  I would make a giant stink out of this.  I would immediately send a certified letter to the lender - Attn:  Compliance Officer. Copy the letter to the title company, the loan officer, the Consumer Finance Protection Bureau, the state insurance department, the state banking department.  Insist that you want to be made whole. If you have copies of email conversations  with the lender and the title company send them with the letter.

The HUD-1 Settlement Statement is to have a comparison of the Good Faith Estimate versus the HUD-1.  I find it very hard to believe that the error did not come to the attention of the mortgage lender when they did their pre-closing approval of the HUD-1.  They are supposed to check this comparison which is on page 3 of the HUD-1.

The other mistake is that the title company did not check to make certain the transaction balanced before they did the closing.  If an amount was credited twice this would have been revealed in the balancing stage.

Good luck and let me know how it works out for you.

Diane

don't get snookered

That 6-inch stack of documents you sign when you buy a house or refinance your mortgage? Well, here's something to keep you awake at night: It could contain fraud or errors that would expose you to hundreds of thousands of dollars in costs or even criminal charges.

Borrowers sometimes blithely sign papers at their mortgage closing without comprehending them. It's understandable. You're eager to get the business wrapped up. But even though the end is in sight, don't relax yet. The closing conference, where you sign contracts and disclosure papers, is a crucial moment, and one that could expose you to serious risks.

http://realestate.msn.com/11-ways-to-keep-from-getting-snookered-at-the-closing-table

Title insurance does NOT cover the seller.

Last week I was contacted by a seller in a transaction we had closed last month.  He was concerned because he had received a notice of tax sale for the property and thought we had paid all of the delinquent property taxes.  I asked him to fax or email the tax sale notice which he did.

The first thing I noticed was that it was for a different tax map number. My immediate concern was that this may have been a parcel that they intended to sell but had not clearly identified it as part of the transaction.  The tax sale notice was for a Lot No. 108.

Our file was scanned so I was able to quickly determine that we had insured the conveyance for two lots - 107 and 108 - but they were both a part of ONE tax assessment and it was a different tax map number than the number on the tax sale notice.

Ah-oh...a merger...an undiscovered merger - likely not discoverable by a regular title search.

If you don't operate in the rural counties of Pennsylvania, you might think a merger of a two tax parcels would be clearly notated by the tax assessment office and thus easily discovered. That is the case in some counties but not all. In the rural county in which this property is located, the tax assessment office makes no such notation and so unless an abstractor stumbles onto something, they won't find it.

I asked our abstractor to re-check the assessment and get back to me.  He did and reported that in 2010 our seller had sent a letter to the tax assessor asking that the two lots be merged into one tax assessment.  The following year -2011 - both lots were billed under one number.

The delinquent taxes we collected from the seller at our closing were for years 2009 through 2011.  We did not know at the time of closing that there was outstanding additional taxes for years 2009 and 2010 under a different map number.  It would have been helpful if the seller had noticed but he didn't.

I contacted the seller and advised that he needed to pay the tax.  He refused and insisted that the title insurance should cover this error.  I explained that the title insurance protects the buyer and the lender.  I further explained that the seller gave a warranty to the buyer and signed affidavits for us that acknowledged he is responsible for the taxes and that if he doesn't pay, we will pay and then sue him.  I said this nicely, not in an angry way but with no wiggle room.

To help him better understand I said that if we had known about the tax parcel merger, he would have paid this additional money the month before at closing, right?  He's just paying it now, instead of then, nothing more, nothing less, just a month later.

So, I contacted the lender and the buyer - they know I am giving the seller a week to pay before we step in and take care of it.  I am hopeful the seller will ante up, but either way, the owner and lender are protected.

This is a good example of a title insurance claim - one that doesn't get logged at the title company or show up in the statistics.  We just resolve it and move on.

What do you do when you find errors after closing?

Hello Diane,

I bought a house in Florida 5 years ago. I recently discovered that my HUD is incorrect. I do fault myself for not paying more attention even though I was being rushed through the process by the title company on the day of closing.

It has become apparent that my purchase payment is $7,000 more than my purchase contract and the property address is also incorrect. The address and parcel ID on the Warranty Deed is also incorrect although the legal description is correct. What can I do about this now?

I thank you in advance for your time and look forward to your reply.

M

Hi, M:

I would write a letter to the company who handled the transaction with a copy going to your mortgage lender and real estate agent, if applicable.  Ask for an explanation of the $7000 purchase payment discrepancy.  There may have been a misunderstanding which their explanation will resolve.  If, however, they cannot explain it and you believe there was an error or some kind of fraud, you should follow with another letter which would be a formal demand for correction.  I always believe a demand letter should be sent via certified mail.  This shows you are serious.  If you aren't satisfied, you could hire an attorney to assist or perhaps talk with the Florida attorney general's office.  They should have some formal mechanism for handling consumer complaints.  It works like the Better Business Bureau but has teeth.

As for the deed, I would request that whoever insured your purchase transaction - the title company - create a corrective deed.  In my opinion it could be a deed from you to you simply to correct the parcel ID and address.  Since the legal description is correct, I don't see any reason they would have to go back to the seller.

You can handle both of these problems in the same letters, however, be sure to keep it easily understood that there are two issues and that you want them both resolved.

Good luck and I hope this helped.  ;)

Diane

active duty military family gets into a mortgage payoff horror

hello, i came across your website and yours is the only one that came close to what i'm dealing with. my situation seems really bizarre and i'm hoping you can help. ANY advice you can give me is greatly appreciated because i have a court date in a few weeks and i have to appear alone because my husband is deployed in afghanistan. i'm scared to death to go to court over this! here's the story:

we owned a secondary home that my father lived in (not as a rental). the neighbor approached me last summer and wanted to buy it so after careful consideration, i decided to sell it to him. my husband was deployed then as well, so i did everything with a POA. this is a very small town in West Virginia, and i am friends with both the buyer and the broker. the broker called me to tell me when the closing was and when i asked what i needed to bring to the closing other than the POA, she said (and i quote), "nothing but your pretty face, we take care of everything".

so that's what i did. i brought the POA and showed up to the closing, signed all the paperwork, and they handed me a check. when i looked at the check, i noticed it had a clerical error. i showed them the error and they cut another check. i turned over the keys to the house and went back home (to my primary residence a couple of hours away).

flash forward three weeks later, my husband returns from afghanistan. he is looking over the paperwork and says to me, "they paid off the wrong house, w. they paid off THIS house, not the other house". he shows me the HUD-1 settlement paperwork that we all signed and sure enough, it shows the physical address of my primary home as well as the payoff amount for my primary home. both mortgages were held by [lender redacted] and evidently when the broker called for the payoff amount, she was either given the wrong one by [lender redacted] or something, i'm not sure. but either way it happened. so my husband calls her, tells her what she did, and she said, "oh my god you're right. i'll have to look into this and call you back".

she called him back a few days later but he was gone again - deployed in the US for three weeks with no access to his cell or personal email. she sent him several emails and when he never responded she emailed me and said "we paid off the wrong house and as a result, you were overpaid by $8k at the closing. i reversed the payoff on your primary home but am holding the money in a non-interest bearing account until you pay back the money you were overpaid. when we receive it, we will pay off the mortgage on the home you sold".

now mind you almost a month has gone by. there is no more money. i had $4k in my checking account so i drove 2 hours back there, gave her a check for $4k and wrote a post-dated check for the remaining. i said, "i need to figure out how this happened, it just doesn't seem right". she said she was sorry about the mix up but stressed how important it was for me to pay back the remaining balance sooner than the date on the post-dated check. she said that with each passing day the situation was getting worse. i explained that i used the money to pay my daughter's tuition and to buy her a car - that was the only reason i sold the house in the first place! she said again that i REALLY needed to hurry up and pay the balance to her so she could straighten it out. 

i went home and started telling some people about this and they all said, "do not let her cash that second check!". the more i thought about it the more mad i became. i know people make mistakes but this was huge. to make matters worse, since she reversed the payoff on the wrong house but didn't apply it to the house i sold, i was still responsible for both mortgages! i had automatic payments set up for both so both were taken out in june and in july. so now i sold i house in june but have made two payments on it. AND the new owners were making payments on it!

i emailed her and told her not to cash the second check and that i needed her to contact [lender redacted] and get the two payments back that i made on the house i "sold". i did not hear back from her and another month rolled around and with it another mortgage payment. i finally wrote an email to her and the bank she represents, as well as the law firm that handled the closing. i explained the situation and again told them to get the THREE mortgage payments that i had made on a house i sold three months prior and i would be glad to pay them any monies still owed. at that point i received a reply from the bank's attorney that basically said i was scamming the bank and refusing to pay back money that didn't belong to me. i was furious.

i called [lender redacted] myself and explained what was going on. they said they had never heard of anything like this before and they were astonished that the bank, the broker, AND the attorney handling the closing could make such a huge mistake. that said, i was told by [lender redacted] that i was still legally responsible for the mortgage and there was nothing they could do. and then another month rolled around and i made yet ANOTHER mortgage payment on a home i sold (five months prior).

i finally got sick of it and called [lender redacted] back and stopped the automatic mortgage payments. the following month i received a notice of late payment and the month after that i received a certified letter stating i was now two months behind and foreclosure procedures would begin and that my credit was being ruined. i thought, "oh well, i hope it DOES go to foreclosure court and the new owners are kicked out of their home! then they can sue!"

fortunately it didn't come to that and i received a payoff notice from [lender redacted] in january 2012...7 months after i sold the property and over $4k in mortgage payments, not to mention homeowners' insurance and property taxes. i just was thankful it was over.

but it wasn't.

i was served with a civil complaint and am being sued for unjust enrichment in the amount of $3840. i don't even know how that amount was calculated. in fact, the complaint says "approximately $3840". it goes on to say that the defendant "should have known the amount she received was more than she was entitled to" and says "the defendant refuses to pay the money back and spent money that didn't belong to her". 

i cannot believe the audacity! so now i have to appear in court by myself as i cannot afford a lawyer to represent me. i filed an answer and counterclaim seeking the mortgage payments back, but i don't know if i have a chance in court because i'm going up against a law firm and a bank in magistrate court in a small town where they all know each other.

any advice? i'm nervous as hell :(

thanks so much,

w

Wow, W.  Thank you for contacting me and I hope I can help.  First, please contact the Consumer Finance ProtectionBureau.  This is the new federal department and they have a special section that helps veterans and families with active duty service personnel.  I'm not certain if they can help, but again, since they have taken on a special task of protecting the military, they may.

Here's what's bothering me about what you have told me.  

1.  The buyer purchased the property using the services of an attorney and got title insurance.  Whoever was writing the title insurance and performing the closing was responsible for the accuracy of the mortgage payoff.  I'm appalled that they allowed the real estate agent to obtain your mortgage payoff letter.  I am also appalled that the attorney or title agent did not check the payoff letter to make certain it was for the correct property.  This is a normal security step and part of a competent title examination/insurance routine.  In my opinion, the lack of pre-closing review of the mortgage payoff letter was negligence.

2.  [lender redacted] should not have given a payoff letter to anyone who did not have your permission.  Did you sign a document giving your real estate agent permission to get the payoff letter?  Take a look at it and see if it has the property address on it.  Just because you had two mortgages with [lender redacted] and gave a person authorization to obtain private information for ONE account does not mean that you gave permission to access another account.  When mortgage payoff letters are requested, this is typically done by fax or phone.  The party ordering the payoff letter usually has to have the account number and the last four numbers of your social security number.  Did you provide this information to the real estate agent?  If you gave them the wrong account number, that still doesn't mean the attorney shouldn't have checked it but it does help explain how the problem started.

3.  Title insurance companies are trained to deal with these types of problems.  Real estate agents are not. I am horrified that the real estate agent was the one who reversed the mortgage payoff and held the money in escrow, refusing to release it to [lender redacted] as payment on the correct mortgage.  What should have happened is that the money - even though not enough for a payoff - should have been immediately directed towards the correct mortgage as well as the $4000 you returned from the proceeds.  Then, if you were unable to return the other proceeds, the title insurance company would have advanced the balance to protect their client, the person who bought the house.  You should not have made any payments on the mortgage for the house you sold.  When the dust settled you would still owe back the additional money but it would have been a lower amount as you wouldn't have advanced the other payments plus additional interest and fees would not have accrued on the [lender redacted] payoff.  Whoever orchestrated the methodology of correcting the error of not checking the mortgage payoff did a terrible job and created a much more expensive solution.  I would try to find out who made the decision to hold your money in escrow and not forward it to [lender redacted].  They had no business holding your money while interest was accruing on your mortgage.

There is no doubt that you owe money back into the transaction is you were unjustly enriched by the payoff letter error, however, I do think you need to carefully calculate how much that would have been if they had done it correctly on the day of closing versus what they are asking for now and how much extra you paid in the meantime with the additional interest and fees accruing plus extra monies you may have paid in additional mortgage payments.  It is possible that the extras that accrued because of the combined negligence of the parties would offset your unjust enrichment.  You appear to have suffered financial damages due to their negligence and that's got to be a part of determining the bottom line of what you owe, if anything.

I also suggest that you try to get an attorney.  See if a support group for military families can make a suggestion or perhaps CFPB can help there.

You may also want to contact the state real estate commission, department of insurance, state bar association, and state banking department and file complaints about the inappropriate and negligent services provided by the real estate agent, attorney, title insurance agent/company, and perhaps [lender redacted].  I am not certain whether [lender redacted] made any errors but certainly once the error was discovered they could have done a better job of suggesting ways to resolve it.

This is a terrible story of incompetence by a real estate agent and a closing attorney/title insurance agent.  I hope it works out for you.  Good luck.

Diane.

tax amount calculated incorrectly on HUD-1

A tax amount was calculated incorrectly on my hud-1 statement in my favor.  The settlement lawyer called me and requested that I pay the money back; which I believe I should.  However, there is no correction being made on my statement.  My question is:  Shouldn’t I get a corrected Hud-1 statement to show my true settlement cost.  Also is this even legal without a correction?

I would really appreciate an answer as I researched this and can’t find anything that covers this situation, I am being harassed at my job and receiving phone calls on my cell asking for the money.

I not really sure what’s the right thing to do.

Thank you,

L

Hi, L.  If the taxes that were incorrect impact the prorations on HUD-1 keep an eye on the 1099 if one is being issued to the IRS.  You want to be certain correct figures are given to the IRS.  Otherwise, I think you should expect a letter from the attorney explaining what happened and evidence to support the tax figures.  You are honorably correct that you need to make right an error but I wouldn't give money unless I had documentation for my records.  You can use the letter and evidence in addition to your HUD-1 statement as a formal record for your tax preparer.  These things are often resolved without redoing the HUD-1 statement.

Thanks for reading and sharing.  Hope this helps.  ;)

Diane

PS  Hmmm..not to confuse - when I mentioned the IRS 1099 I was presuming you were the seller.  If you were the buyer and you had a mortgage lender, then your mortgage lender needs to be part of the decision whether or not to create a corrected HUD-1. If they don't care, get that in writing - email is fine.  ;)

query: title company settlement statement mistake error

Here's a good one. Who is responsible when there is an error on the HUD-1 Settlement Statement? There's no real rule here, but I'll give you my opinion. Whoever was responsible for paying the item in question in the first place should take care of it when the error is discovered.

I believe each party to the transaction bears responsibility for review and approval of the HUD-1 prior to closing. The title company or agent preparing the HUD-1 has less personal knowledge of the transaction than the seller, buyer, Realtor, or lender. The person preparing the HUD-1 is gathering instructions and data from numerous sources and using the best information available. They are typically receiving this data last minute and finishing the statement in a compressed timeframe, under a lot of pressure. They are likely to make an error or two - even the best make mistakes.

Once the HUD-1 is prepared it is the responsibility of the title company/agent to distribute the statement to ALL parties for review and approval. Each person should carefully review the final figures against their personal knowledge of the transaction.

If you find a mistake, you must bring it to the attention of the title company/agent.

If a mistake slips through and isn't discovered until after closing, the title company/agent will contact the parties and work out a plan for correction.

Here's an example. Last year a member of my staff prepared a HUD-1 with a seller assist of $3000. She was new to HUD prep. She gave the buyer the $3000 credit and failed to hit the button that deducted the $3000 from the seller. Her checks balanced because the computer software created a deposit of $3000 to offset the credit to the buyer. She did not notice the odd deposit on the report. The transaction closed and the seller walked out of closing with $3000 more than expected. She said nothing.

I discovered the error during our monthly escrow account reconciliation. I noticed the odd $3000 deposit in uncleared items. We contacted the seller and she refused to pay because she thought we should eat the mistake. It took three months and a court date with a magistrate before she finally listened to reason. She called her attorney to prepare for the magistrate and upon hearing the facts of the case, he told her the $3000 was her responsiblity and she should pay it immediately. She did.

Oh happy day.