How final is a house closing?

Factual Questions
1

I recently bought a new home, and a week after the closing, the title company has discovered a mistake in the price of the home. Luckily this mistake is in my favor. :slight_smile: This discovery probably happened when the builder (my home is a new construction) received their cut of the proceeds.

The discrepancy is sizable to me, but less than 2% of the price of the home. Also, the title company and the builder are essentially part of the same company. The person at the title company admitted they were at fault, but are still asking me to pay the difference. :dubious:

I do not possess the deed as yet (they said they routinely “record” something at the courthouse before mailing me my final, signed documents). Should I tell the title company that they are on the hook for the discrepancy and demand that they send me my deed?

Or am I on the hook for their mistake? :frowning:

2

The only good answer to this question is one I’ll bet you’re expecting:

Talk to a lawyer.

The answer is going to depend very emphatically on your state’s laws regarding real property transactions. And you did have a lawyer at the closing, I hope? It’s his job to represent you in situations like this.

BTW, that little bit about builder and title company being the same business makes me wonder about exactly what the legality and bonafideness of their “error” – a consultation with a lawyer (which should be covered by your original fee if you were represented at signing, and will be cheap compared to paying the difference in any case) is really important to address that possibility.

3

Title companies are not concerned with the price you paid, but only whether you got good title. The fact that they stated that you didn’t pay enough indicates that this is a statement made by the builder, which happens to be the same entity as the title company. Assuming that that was the price stated in the contract, IMHO the builder is screwed. You may not have the deed yet (this was probably the instrument that was recorded at the courthouse) but you most assuredly have a signed copy of the contract. The terms of the contract are binding.

4

Before I get lawyers involved, I’d rather see if I can resolve this on my own, since the price is right (free).

I did not have a lawyer present at closing, because I handle all my affairs myself if possible. I believe that I am competent enough to handle this myself as long as I am armed with the right information.

This matter, if it gets that far, would go into arbitration long before legal action and lawyers are needed.

I called the county courthouse today and they have a “warranty deed” on record, but no “deed of trust” yet.

Right now, I’m searching for precedents in Texas on these types of mistakes. I hope to claim that the price I paid was the final negotiated price. After all, if the system allows for price adjustments after closing, what is to stop the builder and title company from naming any arbitrary price after the close?

By the way, I did get a copy of the settlement contract from closing, and the price on those documents is the price I paid (and what the title company says is in error). I’ll have to review the fine print tonight, but my copy only has my signatures on it. A representative for the seller / builder was not present at closing.

5

I’d still talk to a lawyer, if I were you. It sounds like a scam.

Most of the time, you can set up an appointment with an attorney, get legal advice on the situation and pay a consultation fee of around fifty dollars. It would be well worth it just to get the law on the subject.

I don’t know Texas law, but common sense says to me that if there was an agreed upon price, and the sale went through, the builder cannot now change his mind about how much he wants, mistake or no. The period of time between the signing of the contracts and the closing is the time in which these sort of issues should be researched and brought to light.

That’s their problem. They cannot now say that the fact that a rep was not present nulls the deal, because they chose not to have a representative present. They were aware of their rights at the time.

I would also suggest contacting the Better Business Bureau in your region. They would know if the builder has tried this little scam before. Actually, there’s a chance that if the BBB got involved, you might see this little situation magically dissapear.

6

If the builder did not sign the contract, it is not bound by it. What kind of contract is this that only one party signs? What kind of closing is this where the seller is not present? Strange laws in Texas. Agreements involving real estate must be in writing and signed by all the parties involved.

A “deed of trust” is a form of mortgage in which the lender actually obtains legal title.

Fine, and what’s “the right information”? Are you well versed in the real estate laws of Texas? You know what they say about one who is his own attorney.

7

Ok, I looked over the papers I got on closing. It wasn’t a “settlement contract”, but a “HUD settlement statement” that has a price on it and it only has my signature.

Thanks for clarifying the “deed of trust”. I do not have a mortgage on this property, so that probably explains why no such item was recorded. Does the presence of a “warranty deed” on this property at the county courthouse effectively mean I own this place?

As for the lawyer, the service they provide is essentially information. I am not well versed in the real estate laws of Texas, but I enjoy learning about things and figuring stuff out. If I lack the information I need and I cannot get it elsewhere, then perhaps I will consult with a real estate expert.

8

Believe me, they are squirming with joy at the thought. If you go to arbitration, you need counsel. Period. I am not a lawyer, don’t know any personally, have no stake in your legal fees but I can tell you that you are not equipped to handle formal arbitration.

[QUOTE=The Controvert]

I called the county courthouse today and they have a “warranty deed” on record, but no “deed of trust” yet.

Right now, I’m searching for precedents in Texas on these types of mistakes. I hope to claim that the price I paid was the final negotiated price. After all, if the system allows for price adjustments after closing, what is to stop the builder and title company from naming any arbitrary price after the close?

By the way, I did get a copy of the settlement contract from closing, and the price on those documents is the price I paid (and what the title company says is in error). I’ll have to review the fine print tonight, but my copy only has my signatures on it. A representative for the seller / builder was not present at closing.QUOTE]

I am not a lawyer and cannot be your lawyer. I cannot provide useful legal advice to you. But I can recollect in my business law class that the most important part of a contract is not the words on the paper, but if there was in fact a meeting of the minds. If they made in mistake in their price quote, it is possible there was not a meeting of the minds. However if that mistake was consistently made in writing they probably cannot prove it.

I think you should talk to a lawyer for five minutes. It will cost you nothing.

9

A warranty deed is a warranty from the title company that means that there are no liens or other claimants against your property. It does not mean you purchased it from last owner of record; but neither does a recorded deed. A recorded deed or title only means you are the current owner of record. There must be a sales contract…I suppose its possible the sales contract is on the title paperwork, just as it is when you sell an automobile privately but I seriously doubt this in regard to real estate…

10

As a recent homebuyer, all I can say is I’d avoid going to court if at all possible. If the difference is only 2% of the price of the house, you could easily blow that on lawyer fees and wait ages before you can move in.

I don’t know where you are, but around where I am, buyers essentially have no rights. The market is so hot we take what we get, and put up with a ton of shit because we have to. If at any time I were to raise a major stink, the builder or homeseller would simply hand me back my deposit, with interest, and wish me good speed. They know in two weeks, tops, they’ll have another contract. If I wasn’t satisfied with that kind of response, they’d give me their lawer’s card to expedite things. And I’d be fucked. The house would sit there, partially built for a year, and in the end I’d have massive legal bills, storage bills, rental bills, etc. I’d be lucky to not lose my shirt and still be able to move in. If you’re in that kind of market, do yourself a favor and forget about it. Pay the money and enjoy your house.

11

Let me start with the usual caveat that you should really consult a lawyer if you want the right answer for your situation. I don’t have all the facts, I’m not your lawyer, etc…

I think you are probably bound by whatever price is stated in your purchase contract, which you probably signed some time before closing. If you used this form from the Texas Real Estate Commission, then you promised in paragraph 9(B)(2) to “pay the sales price in good funds” at closing. If you used a different contract, it probably contains a similar provision. A goof by the title company probably doesn’t excuse you from this duty. The purpose of closing isn’t (usually) to set the terms of the sale, but rather to complete the sale based on the terms in your sales contract.

I recently bought a home in Texas, and in looking over the closing documents, I see that I signed something which said that if the title company goofed and got a number wrong, the parties would take the necessary steps to correct the error. I’d look over your closing documents and see if there’s something similar. If so, that would be another factor indicating that you’ll probably have to cough up the remainder of the sales price.

Two assumptions I should mention:

  1. I’m assuming that your sales contract contains the correct price, and the mistake occurred at closing; i.e., the price used at closing did not match what was in the contract. If the mistake is actually in the sales contract, the analysis is quite different.

  2. I’m assuming that the mistake was actually in the sales price of the home (as you said), and not in the various fees and charges that you pay at closing. If they’re trying to charge you additional fees or charges after the fact, that’s different.

12

I’ve been watching this thread without responding, because the OP seems to have a strong interest in handling this without input from my kind. (Besides, half a dozen people have already said what I would say - talk to a Texas lawyer.)

But this:

needs a response. It’s nonsense from start to finish.

13

OK, I’ll correct this absurd response. A warranty deed is a type of conveyance (deed) of the highest quality, better than a special warranty deed, a general deed, a quit claim deed, etc. It is a conveyance from the seller that he owns the land free and clear of all liens, encumbrances, interests, etc. not stated in the document, and that he will compensate the buyer for all valid claims (but not invalid claims). The title company has nothing to do with it, except insofar as it may be the seller. The title company issues a policy guaranteeing the buyer the same as the warranty deed does, but it will also defend the property against all claims, whether valid or frivolous. In addition, it guarantees that there are no easements on the property other than that stated in the policy (which may include “easements of record” if it is a second-rate company). Note that the title company will defend the property in a court of law, if necessary, and not merely make any monetary compensation.

14

Thank you guys for clearing up “warranty deed” – I knew there were errors in Cooper’s assertion, but did not know the specifics well enough to refute what he said.

For what it’s worth, “Deed of trust” and “Mortgage” are similar but not identical concepts. (And many people mistake “mortgage” for the loan it guarantees, by the way.) Texas and other lawyers may want to amend or clarify this to make it correspond to what their state in particular does.

A mortgage is like an all-encompassing lien or easement – it is the conveyance of a claim on your property that you give to the lending institution in exchange for the loan that they give you. The mortgagor is the person getting the loan; the mortgagee, the bank or related institution that gives it.

When Joe Smith gets a loan from the bank to buy a home and gives them a mortgage on the property for it, after closing title to the house belongs to Joe Smith, subject to the interest of the bank which they may act on only after foreclosure, for consistent failure to make payments on the loan or for other good and valid reasons.

A deed of trust, on the other hand, is an odd little conveyance. In this case, in addition to Joe Smith the home-buyer and the bank, we need a third party, often a lawyer – let’s call her Sue Quigley (pun intended). So they all go to closing, Joe signs the paperwork, the bank loans the money to buy the house – and it’s signed over to Sue as trustee. Sue holds title to the house as trustee of a trust in which the house and land is the matter of trust, Joe is the beneficiary, and the bank is the contingent beneficiary. Sue will do nothing in regards to the house, merely holding the title in trust, until one of three things happens: (1) Joe sells the house with money still owed on it, the loan to the new owner subsuming the loan under which she is trustee, in which case she will convey title to a new trustee; (2) Joe pays off the loan, in which case she signs title free and clear over to him; (3) Joe defaults on the loan or otherwise breaks the terms of the loan or the deed of trust, in which case the bank requests her to sell the house, pay the outstanding balance plus costs to it, and give Joe anything that may be left over for his equity.

15

I should have stated regarding the WD that there are two types: a general WD and a special WD. In a special WD, the seller only warrants against his own acts; whereas, in a general WD, the seller warrants title free and clear of all adverse claims. A title company also insures against hidden defects, such as forgeries, frauds, homestead rights, etc.

The laws regarding mortgages and deeds of trust (which I will refer to as “trust deeds” [TDs]) varies so much from state to state that one cannot make a general statement. In some states, a mortgage does not convey title, but is merely a lien; whereas, in other states it does. In Illinois, which I am most familiar, a mortgage is a mere lien, but a TD conveys title. In Illinois, in addition, a TD usually conveys title to an institution which holds the title in trust for the actual lenders, who are very commonly bondholders. This arrangement is usually found on large investments, such as large office buildings, large developments, etc. It is much easier to convey to one entity than to numerous entities. In addition, sometimes the investors don’t want their names to be disclosed. A TD is rarely used, if ever, for the sale of a residential house.

In either case, if the purchaser defaults on the loan, the loan must be foreclosed, through judicial proceedings. There is no difference between the two regarding the foreclosure action: both retain the right of the mortgagor (or trustor) to redeem from the foreclosure. Even if it is a TD and legal title is technically in the trustee, the trustor retains the right to redeem just like any other mortgage. So the fact that one conveys title and the other doesn’t is a mere technicality and has no practical application except for one instance. That instance is that upon the loan being paid off. In a mtg, the mtgee issues a satisfaction piece, noting that the loan was satisfied. However, in a TD, the trustee must issue a release deed, conveying title back to the trustor. In those states wherein a mortgage also conveys title, a release deed must be executed and not a satfn piece.

16

I have to modify my last posting in view of the fact that the courthouse informed the poster that there was no TD of record. What I posted was the way it is done in Illinois and the few other states I’ve done real estate law in. It appears in Texas that most, of not all, loans are secured by TD’s, unless it was just loose language used. As I said, states differ so much regarding mortgages and trust deeds that no general statement can be made.

17

Layman’s view:

I take it for granted you didn’t have a fixed sales price. There could hardly be a legitimate argument over whether the figure was “x” or “y”.

You owe what the contract was, independent of the figure shown by the closing statement from the title company. You or the builder may have some legal action available against the title company for their error however.

So the dispute seems to be a difference of opinion of the financial effect of changes of the material, plans, labor from the original plan.

I also assume what should have been done wasn’t – every change from the original both you and the builder sign a written statement specifically showing the item and the financial effect with numeric exactness.

18

Just in passing, Cooper’s error may have been in confusing warranty deed with warranty, a term sometimes used for a document (not an abstract of title) resulting from a title search that merely guarantees that in the opinion of the preparer, X has the power to vend clear title to Y (often “subject to these exceptions.”) Obviously, that has no legal validity except that it is an opinion produced after research by a professional, hence somewhat more authoritative than a letter from Great-Aunt Emma that Great-Grandpaw bought the land back in '06 from Old Man Reilly, so he got title to it.

It’s intriguing that some states protect lenders’ rights through Mortgages exclusively, some through Deeds of Trust, and some mix the two (as Barbitu8’s comments on Illinois show).

While we’re on the subject of deeds, let’s note that a Quitclaim Deed simply conveys whatever interest the deedor may have in the property to the deedee. For $10 I will be happy to produce a quitclaim deed granting to the first person to send me the money all interest that I may have in the Empire State Building and the land it stands on – and it will be a legal transaction – though I hasten to note that insofar as I know, I have no legal interest in that building or land. The value of such deeds is their simplicity in transferring property where there is no likelihood of adverse claims, on the one hand, and their use where there are disputed claims and someone wants the particular parcel enough to pay off all claimants – each vends to him whatever interest they may have in the land, with the net result that by satisfying all claimants, he can then assert clear title. Such a process can be significantly cheaper than establishing title through a complex lawsuit or series of lawsuits when there are competing, conflicting claims.

19

I was trying to keep out of this one, but I just can’t stand it anymore…

First of all, let me say that I own a title company, am a licensed title producer in my state, and have held a licenses in another state (neither of them is TX). So I guess I can put in my two cents. Let me also make the standard disclaimer: I am not a lawyer, this is not legal advice, etc. etc. All that said…

Yes, I strongly agree that you consult with a lawyer (who knows how far the fight could go? You need someone who represents YOU at the ready. The Title Company does not represent you, even if it were not affiliated with the Builder). From a professional standpoint, this sort of “mistake” is absolutely inexcuseable…and not an easy one to make. Any good closer knows to read the contract, verify the price, and have the closing statement approved/reviewed by all parties prior to closing…especially a purchase.

While not knowing the whole story about what exactly happened with your transaction, I am guessing that the Title Company is simply hoping you pay up. You may or may not have to pay up, depending on circumstances. First, I would look at your contract (as a poster above mentioned). What does it say the contract sales price is?

If a deed has been recorded, you are in title to the property. You own it. In addition, the seller/it’s representative has signed the HUD and accepted the consideration (although a cash transaction is not covered under RESPA, the Real Estate Settlement Procedures Act). How much weight that ultimately carries will depend on what your contract says, but it sure doesn’t hurt your case. Whether or not your builder can pursue a judgement against you/lien your property for the amount in dispute is another story (again, speak to a lawyer regarding TX law).

Also, if it were me, I would look at a copy of the Title Commitment (which they should have provided to you before closing) and see who the insurance underwriter is. You may be able to file a claim with them to cover the difference (worth a shot…and your title company will not like it if their underwriter gets involved due to their mistake).

Your title company is supposed to have Errors & Omissions insurance as well…in other words, insurance that is supposed to cover them if the Screw Up Fairy visits.

Just wanted to put some things out there that you might not have known about. And of course, give you some things to ask your lawyer about :wink:

20

Thanks, Cherry2000 and the other posters… I appreciate a lot of the points that have been brought up.

I will probably end up talking to a lawyer about this.

I have reviewed the rest of my documents. I actually have an original contract and about three amended contracts after that. (I spent about six months negotiating the price down) Each of these are signed by both parties (myself and a rep for the builder) and each has a different price on it.

The title company goofed up and used a price from out of nowhere at closing. So, essentially, I am hoping that I can still benefit from the mistake. Perhaps the seller won’t consider the discrepancy large enough to go through the hassle of contesting it.