Undercharged on HUD - 3 Weeks Later I'm Responsible???

Question

I closed on a house about a month ago. Yesterday I received a call from my Title Company saying I need to write them a check for $10k. I went back and took a look at the HUD sheet and it appears that they wrote my deposit down as $35k instead of $25k. In the meantime, while rehabbing the house, I've been budgeting my money accordingly. If I were to pony up the $10k, that would throw a wrench in my rehab and will end up costing me even more money since I won't be able to hire out for other repairs.

No one at closing caught the error, including the realtor who also received an extra $600 broker's fee for "reviewing the documents" with me.

Am I obligated to pay for this? Isn't this why the title company has E&O insurance?

No one at closing caught the error, including the realtor who also received an extra $600 broker's fee for "reviewing the documents" with me.

Am I obligated to pay for this? Isn't this why the title company has E&O insurance?

Jon Holdman · Answer

The Realtor was hired to help you find the house and get through the transaction.  Reviewing the math doesn't really fall into their responsibility.

The title company was hired to prepare all these docs and distribute the money.  Admittedly they make an error on the HUD-1.  That's equivalent to a store missing an item when ringing up your order or a waiter forgetting to ad an item onto the check.  It doesn't make the item free.  Without even getting to the question of the total being off from where you expected, line 201 on the HUD explicitly lists your deposit.  Sounds like you're looking at that now and seeing $35K rather than the $25K.  I'm frankly astounded you didn't check that number on the HUD at closing.  No need to go through all the details to see they had the wrong number.

Had it gone the other direction and they had sent you a check for $10,000, I have no doubt you would have accepted it.

"Mention of seller concessions" doesn't necessarily translate into money on the HUD.  Had you been given seller concessions, you should have been well aware of how much they were and they would have been on the HUD.

Discuss it with a lawyer it you wish, but I don't think you have a leg to stand on.

Live and learn.  Demand HUD-1s at least a day before closing and review them line by line.  Question anything you don't understand.  If you want to be in this business, you MUST understand HUDs and the other documents you sign at closing in detail.  Read through all those documents at closing, even if it takes you two hours to close.

Jon Holdman · Answer

I would guess you signed a statement at closing saying you would work with the title company to correct any errors found after closing.

No way would I have not noticed a $10K error in either direction.  I would have brought it up right at the closing table.

When you say you were budgeting your money accordingly, do you mean you realized you suddenly had an extra $10K and are spending that on your rehab?  Didn't you wonder where that $10K came from?  If you just assumed it was yours to keep and spent the extra cash, then I think you've just given away $10K of your profit!

Yes, I think you're on the hook to pay.  If you truly didn't notice it, then write this up as a lesson to read those HUDs VERY carefully in the future.  If you did notice and just didn't mention it to anyone, take this as a lesson that honesty is the best policy.

Jackie Patterson · Answer

You agreed to pay xxx amount for the home with a $25,000 earnest deposit.  You didn't notice when reviewing the HUD that it was incorrect?  You didn't notice that you were bringing $10,000 less to the closing? If paying that $10K now will throw a wrench into your rehab, wouldn't it have had the same impact if you had paid it when you were supposed to at closing?  I find it hard to believe that you didn't notice a $10,000 error in your favor.  Would you have noticed it if they were charging you $10,000 too much?

That being said, I always carefully review every HUD prepared for our short sales, and often find errors. Yesterday I was reviewing for an upcoming closing and found that the commision wasn't figured correctly and was too low. I'm sure the Realtor would have caught it however since I've never met an agent that couldn't figure 6% in their head immediately!   :D

I'm interested in hearing what others have to say, but my opinion is that you have an obligation to pay it.

Juan Michael · Answer

Great Advice Folks.....  Sounds like you took advantage of their error and figured you could over spend on the rehab.....  Lesson learned.

But mark is correct.... The sale is not FINAL and this WILL get messy.... Especially when you try to resell it.....

Mark Yuschak · Answer

If you're as novice as you claim about closing transactions and reading HUD-1s, then how do you know what E&O insurance is for?  Did someone plant that seed?

Furthermore, if you really didn't know what you were doing, you should have had your own attorney review the docs.

Either way, you need to pay up the $10,000.  Not doing so will make things go from bad to worse, as already stated.

Dion DePaoli · Answer

Math is absolute not mysterious.  Regardless of the clerical error, I agree with Jackie, you should have known.  This is not an error the title company will process on their O&E as you agreed to pay X for the property per your contract.

At this juncture, the sale is not complete because you have not paid the full purchase price to the seller.  If you do not cure the issue by giving them the money, you do not own the house and it will get really messy trying to recoup your rehab money that you have sunk into the house already.

Danny Day · Answer

Speak with a RE attorney, it might cost you $250-350 but its going to be well worth its weight in gold.

Ken Sanders · Answer

I'm a novice at this. The purchase price was $215k. The HUD said I owed $190k ($215k - $25k = $190k). It makes mathematical sense and made sense to me at the time. I simply figured that because of the prorations and fees, etc., I had extra money to spend on the rehab. Also, it's a Fannie Mae property and there was mention of closing cost incentives.

Had I known of the error I wouldn't have already hired out for the nominal things and saved my money for the things that I HAVE to hire out for.

I'm the kind of guy that pays his debts, but the title company AND the realtor were hired by me to do a job because I'm too naive in those areas (the same reason anyone hires any professional).

Undercharged on HUD - 3 Weeks Later I'm Responsible???

Most Popular Reply