We closed on a house in PA in October 2003. Everything went smoothly (seemingly so). Five months later, the settlement company (a local law firm) called and said they found an error during their end-of-year accounting review.

Apparently, someone in their office had double counted an early $10k escrow deposit. We did get cash back at closing; apparently it was $10k too much.

The settlement company requested that we pay them back the $10k. After reviewing their records, I see how this mistake occurred; obviously, it is their fault. They admit as much.

I've been dragging this out for awhile (almost a year now), but I have this question for the forum.

Legally, do we need to repay this money, since the settlement company made the mistake and since it took several months for them to contact us?

I thought that the whole idea of a settlement company was to prevent problems like this.

Thanks for your feedback.

Yes of course you need to repay the money - it's not yours.

Yes.

If you check your closing documents, you most likely signed an agreement that you agreed to work with the closing company/ title company to resolve any errors.

Yes, you do owe the money.

And, if they have to file a Les Pendens to collect it will most likely cause you to pay legal cost and possible interest. It could also impact your credit significantly. In many states they can foreclose to collect the amount due after the Les Pendens.

I would strongly recommend you work with them and they may even agree to a discounted payment... if you have not already burned your bridges.

There are two questions you must ask yourself...

1. Do you feel right benefiting from someone's accident?

2. Do you feel good knowing you have in your possession $10,000 that is not yours? (form of stealing even though unintentional now that it has been brought to your attention.)

I agree with the previous posts. And I,too, suggest that you pay it off before it goes to collection agency and ruins your credit.

Keeping a good credit history is worth more than $10K.

You knew right from the get go that they had credited you too much at closing. Where was your integrity then? and now, for that matter, by posing that kind of question on line for all to see?

Tyring to make someone feel sorry for you now because you tried to get away with something and got caught. Forty lashes to you.

(Some people are just snakes)

Campion has harsh words, I sort of agree. There's a good chance that someone knew 10k too much was an error. I got a couple hundred dollars back at closing and was double-checking to make sure the numbers looked right.

It's not your agent or mortgage person's fault necessarily, but my mortgage people and I bring calculators to closing to help make sure all of the credits are correct. In review of your question, if you'd found out that they'd not credited you 10k, you'd probably be very upset and want what is rightfully yours.

The title companies in my area have the buyer and seller sign a statement concerning clerical errors. It basically says that if the title company realizes (after closing) an error was made, you will get an explanation of the error and you will honor it and pay any monies due (or get a credit for overages). Do you remember signing anything like that? Only fair to pay what is due... sorry, we can't side with you.

You should morally give back the money, as to whether it is legal, consult a lawyer. But I bet you will have to pay

I can't believe that they haven't slapped a lien against the property already. Especially after a year. They are treating you more than fair. As stated earlier, you probably did sign a clerical error statement. You are lucky they aren't asking for interest as well. If you keep dragging it out, you may end up in court and it will cost you a lot. Or quit being so cheap and pay for legal advice.

Be a citizen and do the right thing.

Tough crowd!

Guess you can't accuse us of not giving honest opinions...

It true, morally you should return the money. But, I don't blame you for having second thoughts. I bet you even the people that are badmouthing you, would find it difficult to give up 10k.

http://www.emortgagers.com/

I find it surprising that you didn't notice it right away and tell someone that there was a mistake. If I got $10k more than I was supposed to at a closing, I would have known it then and there and I would have said something. If they had kept an extra $10k of your money, you would have known it right away, right?

You're screwing around with a law firm for $10k? In my book, that ranks right up there with playing with matches at a gasoline pump. Everybody's going to get burned, eventually.

The law firm will look inept, because they can't keep track of 10k, you will look like a crook because you're holding onto money that's not yours... Nobody is going to come out unsinged, and after a year, I imagine some bad blood has crept up between you and this firm. It's a matter of saving face at this point, isn't it?

If you don't have a good reason to keep the money, (Like it wasn't in the contract) then settle with the firm ASAP, if for no other reason than to maintain your reputation, a reputation that would probably be damaged by a lawsuit and bad press if you let the lawyers take it to court. (Sorry, I recently had a rather, shall we say "Eye Opening" experience with lawyers... I'm not impressed... You can read about it on my blog. http://rivalarrival.dyndns.org

I just wanted to mention a little experience I had with overpayment. Seems I didn't file my taxes properly in 2003, and was entitled to $412 more than I had claimed. !!UNCLE SAM!! found the mistake and cut me a check. I couldn't believe it.

Good luck, and I hope I didn't offend you. That was NOT my intention.

JohnSoPa- What have you decided upon doing- keep the money or give it back?

John will be giving the money back whether he's decided to do it voluntarily or not.

John also seems to have left the building; must not have liked our 'advice' to him.

I would not hesitate to give the money back IF I had not caught it from the start. It's not mine, it's not honest, it's not worth it.

Pretty Harsh responses here on this question. I think we are all assuming this guy has 10K sitting in the bank to fix a problem that was created by a professional. The scope of the transaction was not defined - if it was the sale of a $100,000 home then I agree it would be hard to miss a $10K mistake. On the other hand, if it was a $800K transaction it might not be as obvious. If this individual did not know of the issue, and has re-invested the money in his new home, he may not have the ability to simply write a check or drop down a credit card.

So, just to be devils advocate here, what about Errors and Omissions Insurance on the part of the professional? Are they not covered to handle these sorts of issues. Why should their lack of quality in workmanship and the mistake it created become a financial burden to this individual?

BTW, I think the HUD statement pretty much demonstrates all of the financial transaction and it is agreed to by both parties as part of the signing of the final closing documents.

I guess the answer here depends on which side of the transaction you sit in my eyes. I'm not as convinced it is black and white in the eyes of the courts and would advise this client to hire an attorney prior to any further discussion on this matter.

HUD agrees that it ends, but you sign documents that give the title/mortgage Company the right to find mistakes, fix errors, and perform further inquiries.

The bottom line is that if someone received 10k back from a transaction, they had an inkling that the money that was not theirs. I think we're being harsh because, if he'd LOST 10k, he'd have spoken up and would expect his money back. Mistakes happen and we have to do what's right to fix them. If the situation was reversed, he'd be the one screaming for justice.

"Pretty Harsh responses here"

Really???

What if were your $10,000 the guy had; would you want it back right away??? :p

But "Harsh" or not, the point is that it's not now, and never was his $10,000; he owes it back to whoever it belongs to.

The problem was created by a clerical or computer error of sort sort. He got 10 grand he shouldn't have, he knew it then, he knows it now, and he needs to give it back.

I can't imagine any court saying it's OK for him to profit from someone else's mistake.

Exactly.

I still disagree that he will be REQUIRED to pay this back. Everyone had given their apparent "moral" answer to this, but the reality is that he MAY not be required to pay it back.

He does need to see an attorney for advise on this, and it may well be that he will have to pay it back. But his chances are also that he may not.

I guess there aren't any real estate agents that left off an appliance on a contract, or to include something on a contract that they had to take care of either personally or via their errors and ommissions insurance. This is no different.

You knew you got an extra 10K--even if it were a 800K home--you knew you weren't suppose to. It's just the ethical thing to have done to step up and said something when it happened. Pay up..you agreed to fix any mistakes and errors on the HUD. Don't make them track you down....it won't be pretty!!

Bull!!

This is HUGELY different.

What if you were cashing a commission check for $1,000 at a bank and the teller gave you an extra $100 dollar bill.

Would you give it back???

Should you give it back???

Would you give it back of you knew the teller would have to pay the $100 out of her own pocket???

The 10 grand belongs to someone and it is not our guy here.

I posed this specific question to an insurance underwriter for an errors and ommissions company in Washington DC at the NAR Mid-Year last week.

This situation does come up, and it is one that is covered by errors and ommissions, and in fact many escrow companies cover these themselves without even using their E&O insurance.

In their opinion, it was a professiosal error.

So, as I said, it is not so cut and dried as to if he needs to pay it back. I'm not taking a moral stand here, only answering the question that was originally stated.

I agree with Wa Homes. Especially considering the person might not have known it was an error, might have already spent it, and might have a really tough time coming up with ten grand right now.

Some paid professional at closing screws up, and Joe Anybody now has to scratch and scrape to come up with ten grand to pay them back?

Most agents are broke or going broke, yet all of you except one are nailing this poor guy to the cross. How many of you guys could write a check for ten grand right now? I bet not many. I bet I could count on one hand how many of you could do it.

So I steal $50,000 from a bank and I go spend it all, they catch and arrest me and want it back... since there's no way I can come up with it that is your justification for them not being liable?

Weak!

-J

I think you may be missing a part of the puzzle here Josh. When the bank makes a mistake it is not tied to a contractual event like the purchase and sale of a home. Everyone involved in the process of a home sale has Errors and Omissions insurance to handle such mistakes, because there is no question they do happen.

I have not stated that to keep the money is ethical or not. It's not my position to put my opinion on it. The fact of the matter is that someone who was a PAID professional, and PAID by the buyer and seller in this transaction, made a mistake. Neither the buyer or seller have a responsibility for their mistake and should not have to pay for their mistake.

If this seller/buyer had to go out and borrow money to pay this back, it would come at an expense to them, an expense they should not have responsibility for and should not have to pay.

It's no different than when you get in a car wreck. Should some poor insurance company have to pay to fix your car when you make a mistake and rear-end another car, is that fair to them to pay for your mistake? No, it's not fair, but that is what insurance is for, to cover for mistakes.

This particular insurance is called ERRORS and OMISSIONS for a reason - an error or an omission.

I am not a Lawyer, but I believe this is called unjust enrichment. The money must be returned. It may be a hardship to return all the funds at once, but I think the closing company would be willing to work out some type of repayment. The buyer was not damaged, he was made richer. How is he suffering? Unless he can't sleep at night knowing he just took $10,000 that's not his.

The closing company may be covered by E & O insurance, but their rates will suffer over the long run.

Do the right thing and give the money back!

Your analogy is very different. I thought you were sharper than that.

This person didn't steal the money, it was given to them by mistake and the person thought it was the correct settlement he was entitled to. Not surprising since most people are lost when looking at HUDs and the like.

Hell, I bet if you had to calculate 10 settlements yourself while sitting in a closing room with nothing but a calculator and a pencil you'd probably get at least 1 wrong and you're an experienced agent ... surely we can't expect laypeople to check and correct the math of the closer?

Come on but $10,000 off? Even if you were off a 1,000 or 2,000 in your estimate for closing costs (which would be an enormous amount to be off) and as long as you knew your payoff and how much the house sold for you should be able to get an idea... and when the number you end up with is even 7 to 8k higher than you expected, you're telling me you wouldn't even ask to make sure? I don't know about where this person came from but at closing here, the closer reads through each line of the HUD-1, ignorance is no excuse for refusing to give the money back.

-J

I'm a little clairvoyant at times... Every time I open this thread, a little voice repeats this phrase to me...

"In the matter of Closing Company v. JohnSoPA, we the jury find for the plaintiff, specific damages of $10,000, and punitive damages of..."

The voice kinda fades out there at the end... I'm not sure what that means, exactly... Does this make sense to anyone?

I had a closing today and it was the last of the day for the title company so I got the owner and her title attorney together and posed this scenario to them.

They have had a similar situation at their title company which they found a couple of months later.

The couple that got the additional monies had already spent most of it and, to make matters worse, they had divorced. They called them up and told them to pay up or they would be seeing them in court. The husband is now making monthly payments to the title company.

They have a form both buyers and sellers sign at closings saying they will cooperate with the title company in correcting any mistakes they may make preparing and executing the paperwork.

They also said a claim like the $10,000 misunderstanding COULD be covered by their Errors & Omissions insurance but that they would probably pay it them selves to avoid filing a claim which could lead to cancellation of their E & O insurance or higher premiums.

In whatever event they also said they would pursue recovering the monies very vigorously including going to court if necessary.

Additionally if they did file a claim with the E & O carrier then after the E & O carrier reimbursed the title company the E & O company would almost certainly go after the guy that got the money wrongly under their subrogation rights.

Subrogation is when you pay off someone's debt and then try to get the money from the debtor yourself.

Subrogation is, for example, an uninsured motorist hits your car and damages it. Your insurance company will repair your car but they will also go after the drive that was at fault to recover their expenses in fixing your car.

Somehow after hearing all this I don't think the guy that wrote the original question here is going to get to keep the 10 grand he got that he was not supposed to.

No free lunch in real estate.

If at Closing this person had $10,000 taken away and the title company found this out during their year end evaluation... Do you really think the title company would have called this guy and sent him a refund???? I DON'T THINK SO.... Keep the money and see if they have the procedures in place to make you pay it back..... And for all you who posted and seem so sure you would give it back... Give me a break...

Thanks for sharing Mwgreco, Are you a Realtor? If so, do you apply the same finders keepers, losers weepers standards when dealing with your clients funds?

Interesting thread here I have been reading. I just can not believe we are all responding to the orignal post. First its not his money. Two It should be returned. Three why even ask. And four I know I aways look at the HUD and also check my and my clients figures figures very carefully. I think he should have caught this at the closing company and had them correct it. I can not believe he did not notice it also. ten grand is something anyone should have noticed. It not at the closing table then the next day when you processed it. So in plain english he should give the money back and thank his blessing he is not being charged interest and also going to jail.

In our state the broker has a liability/responsibility for the correctness of the HUD1 (Brokers can do closings here). Maybe the broker should pay?

In reply to mwgreco, Yes, I do think the title company would refund the money. Suppose they were audited after they found the error. You think they might get fined for sittting on 10,000?

Dave Clark is 100% correct.... Title Companies are under a similar requirement as Real Estate Brokerages in handling of ESCROW Accounts... they must be fully auditable and they do have mandatory reports on funds being held/ for whom/ and why.

Those funds are NOT in the Title Companies Operation Funds.... they are an Escrow account.