Title Tip: What Happens When The Title Company Drops The Ball?
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Watching the ball drop on New Year’s Eve can be fun and exciting. But watching someone drop the ball on a real estate transaction is no fun at all.
What happens when the title company drops the ball and problems arise with your transaction? Get ready for a jaw-dropping surprise.
In Texas, the title company is not a party to the residential real estate contract. The buyers and sellers are the parties to the contract. While the title company is mentioned in the contract, their actions are made on behalf of the buyer or seller.
Let’s take a look at a few instances where the title company may drop the ball and examine the potential consequences.
The title commitment is not delivered on time.
The Texas contract states that within 20 days of receiving the contract, the seller shall furnish the buyer with a commitment for title insurance along with copies of any restrictive covenants attached to the property. Then the buyer has a specific number of days to object to items on the commitment (and maybe get out of the contract). The number of days is agreed upon by both parties and filled in the blank on Paragraph 6D of the contract. If the buyer doesn’t get these documents within 20 days, the time may be extended up to 15 days.
If the buyer doesn’t get the documents on time, they may terminate the contract and get their earnest money back. Whose responsibility is it to deliver the title commitment? It’s the seller’s. The contract states that the “Seller shall furnish” it. But the seller has to get it from the title company. So if the title company drops the ball, it’s the seller, not the title company, who suffers the consequences. It doesn’t quite sound fair, but that’s how it works.
New survey or HOA documents are not ordered before deadlines.
The duty to supply the HOA documents belongs to the seller. And the contract states that either buyer or seller is responsible for obtaining a new survey if it is necessary. However, many title companies do this as a courtesy to buyer or seller. If documents and surveys are not ordered on time, the fault goes to the buyer or seller who the contracts says must supply it. The title company isn’t to blame.
Liens or judgments against the property are not cleared prior to closing.
Most homebuyers trust the title company to ensure this doesn’t happen. But they typically wouldn’t find out about them until they started getting notices or go to sell the property. This is why you get title insurance. The homeowner would file a claim with the title insurance company to cover any losses due to previous debts that should have been cleared at closing.
Not recording or mis-recording documents.
Deeds and other documents are filed and recorded by regular people and mistakes can happen. When they do, it is the title company’s responsibility to correct them. Another reason to have title insurance.
These examples are a good basis to ensure you pick a proficient title company. Since all title companies in Texas charge the same for title insurance, the difference in them lies in their service and expertise. And their ability to get the ball smoothly across the finish line.
The opinions expressed are of the individual author for informational purposes only and not for legal advice. Contact an attorney for any particular issue or problem.
Lydia Blair (formerly Lydia Player) was a successful Realtor for 10 years before jumping to the title side of the business in 2015. Prior to selling real estate, she bought, remodeled and sold homes (before house flipping was an expression). She’s been through the real estate closing process countless times as either a buyer, a seller, a Realtor, and an Escrow Officer. As an Escrow Officer for Allegiance Title at Preston Center, she likes solving problems and cutting through red tape. The most fun part of her job is handing people keys or a check.
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May 2020 enhance our Vision and success for the coming year. Happy New Year.
Fortunately, this doesn’t happen often. Unfortunately, because this doesn’t happen often it’s really easy for principals and agents to miss critical dates on the sales contract. My 3rd year a very reputable title company (who shall remain unnamed) missed an HOA foreclosure on a condominium at Monticello Crossroads until the day of closing. We were able to cancel the contract, but it was a terrible situation. My buyer blamed me because I suggested the title company, and the seller filed a frivolous TREC complaint against the listing agent.
bought a property that was advertised as a lot and a half. After closing, and title company clearing the sale and telling us we did NOT need a survey, it was found the second lot was not owned by the seller and had been split by the person foreclosed on before the seller bought it at auction. Because the title company did not catch this, our lives have been hell for over a year. Part of our house and our fence was on the property and the owner took all of it down and refused to sell us the lot. They let our dog out of the yard who was then hit by a car. \My question is this, it was OBVIOUS on the county website that the fence has been on the 2 lots for over 40 years, since the subdivision was establishes. We were told by the title company we did NOT need a survey, they did NOT however tell us that not getting one absolved them from doing their job. I think they dropped the ball and it should be illegal to tell someone not to get a survey when you are selling them insurance saying the property has been checked out and is as described. is there anything we can do? The seller of the property was just as surprised as we were and has no money. The “owner” of property is trying to extort more than 3xs what the property is worth and stole our fence we had put in when we bought the home. The lawyer says we cant be grandfathered in, the seller has no money and would file bankruptcy. What can we do? We are in our early 20’s, this is our first home and every single person dropped the ball and screwed us. Now we cant sell our house because the physical building is a foot over the property line, even though its been there since the 1950’s, the inspector missed a foundation leak, and we paid more money than our house is worth without the other lot. Is there ANYTHING we can do?
I don’t know the additional details or your particular situation. It sounds like you must have paid cash for the property if a survey was not required. Did you use a Realtor and purchase the property through the MLS?
It is not unusual for a title company to make the survey (and survey insurance coverage) option when the purchaser is paying cash. With a mortgage loan, you typically must have a survey in order for the title company to issue the lender-required coverage that includes details on the survey.
As the previous person suggested, you can contact the Texas Dept. of Insurance that regulates title companies. They can advise you on filing a claim.
Call the Texas Department of Insurance, speek with their representave. As clear ans as short as possable explaine what happened. as if you have grounds to file a case with the Texas Department of Insurance.
Have all your documents with ypu when you make the call. They ma want some information.
Closed on selling of my home on 11-4 and was funded same day and today 11/8 the title company calls me saying I need to wire them 13K for schedule 1 funds that were not collected? We are signed and done why didnt the title company include these deductions in the closing???
Title companies are neutral third parties, and cannot act except upon written instruction by the parties or the buyer’s lender. The parties agree in writing to provide each other with certain documents or order surveys, but title companies over the years have taken on those responsibilities for “customer service” reasons. As an attorney, I think that is a mistake since it makes people — especially realtors — think it is on our shoulders to do this within the time frames agreed to by the parties. Also understand that we only have the information provided to us, so while we try not to “drop the ball,” I can recite countless times where we repeatedly ask for things prior to closing and either don’t get them, or get them on the day before closing and are still expected to pull everything together correctly in one day.
The bottom line is that we are a title INSURANCE company, so much of our business is a matter of identifying and managing insurance risk. We are held to very high standards for the receipt and disbursements of escrow funds, and our files are heavily audited by the Texas Dept. of Insurance, our Underwriters, and outside CPAs. It is up the parties to find competent real estate, legal and/or accounting professionals to assist them with understanding the legal consequences of the contract and the provisions and timelines they have agreed to therein. To expect title companies to wear all of those hats and protect these interests is simply naive.
We are in the process of selling our house, and under contract. We had something come we had no idea about. Apparently there is a deed of trust from one of the siblings of the family we bought the house from. We have title commitment insurance, and our realtor called them today to see if they had the proper paperwork, and apparently they never did. What can we do? We are in the process of trying to get ahold of this person so they can back date a form to us so we can close on our house. Can we sue them for not doing their job, since we have the title commitment insurance? This has caused us so much stress and time and money. All because someone didn’t do their job properly.
What happens if the title company does not secure the funds from the buyer? All paperwork has been signed by both parties, but no funds were ever received. We sold our house to a real estate investor (wholesaler) and used their title company. The title company says that they’re just waiting on the buyer. Is there anything we can do?
Title company failed to issue a Commitment to Title, CC&Rs, and Schedule B about the exceptions that have now turned into a lawsuit against the Sellers who lied about the exceptions being in effect (road and well agreements) but were not. Title states they can’t promise a perfect title, but failing to issue a Commitment to the buyer has nothing to do with promises of a clear title, it has to do with not giving the buyer a chance to approve the items that were not covered by the title insurance Where is the liability?
I have a friend that canceled the deal after going through hell to buy the house because the title was clouded. The title company says that they can not release earnest money without the sellers signature, and its been 2 years and the money it sitll sitting at title company! Can anything be done?
I just purchased my first home 2 months ago (Maryland). Now I’m being told that city taxes were not included in my settlement, and therefore not in escrow. I was not aware that I had to pay both city and county taxes for the property. There is no mention of city taxes in any documentation from the lender and title company. I’m being told that my mortgage is going to increase $200/month with the city taxes now include (right now). This is a serious problem but who is Liable, the title company? The lender and underwriter? Everyone (including the real estate agents)? I would have never went through with buying the house if I knew I had to pay double taxes.
I used to own 13 acres sold 3 to my son in-law who then turned around and sold it to a druggie. I got tired of his druggie traffic and the problems he brought to my 10 acres I still owned and lived on so I sold the rest and moved. Almost a year after that sale me and the new owners get letters of intent to sue fron the druggies lawyer because the title company screwed up and listed his land with the 10 acres I owned and sold. Can we be sued for the title companies mistake of putting 13 instead of 10. They made the deed up for us to sign and me or the new owners never thought to look at it thinking they knew their job and wouldn’t screw it up