What happens when the buyers, sellers, title rep., mortgage rep., and the real estate agents are all present for a closing on the sale of a property and there was a mistake on the settlement statement. There has been cases where the buyers have been requested to pay tens of thousands of dollars several weeks down the road. It’s a nightmare scenario for anyone. How could such a mistake get past so many supposed experts and does the obligation fall on the them.
For any real estate closing, the figures are sent from the mortgage company to the title company so that they can create a settlement statement commonly referred to a HUD-1 which stands for Housing and Urban Development. The title company then submits the HUD-1 to the mortgage company for approval. Once approved, the title company sends the HUD-1 to the agents, buyers, and sellers involved in the transaction. The HUD-1 is typically approved by all these experts prior to closing but mistakes occur far too often especially for the buyer’s figures.
Part of the problem is that mortgage companies typically do not get the figures into the title company in time. It was a common problem during our most recent real estate boom. Many times, the mortgage company would not provide the figures until just a few hours prior to closing. It’s not sufficient time for everyone involved to ensure the HUD-1 is correct. Some mortgage companies are notorious for this.
The HUD takes precedence over everything. If the title company calls the buyer and demands additional money because of a mistake, then the HUD-1 rules and the they must pay the additional money even if it’s tens of thousands. Not everyone that buys a home have tens of thousands left over. After all, the mortgage company provided the figures and then approved them prior to closing. The mortgage company should be responsible but our government does not want to do anything to jeopardize the financial institutions in this country so they are their side.
So buyers need to pay special attention to the settlement statement even with so many so called experts approving it and keep in mind that the obligation falls on the consumer to pay.