What can be done when a title insurance company gives wrong info on their final commitment?

Question

The title company provided incorrect tax information on it's final commitment and closing papers. Their "insured" amount was $1100 less than what the actual taxes are. Therefore they did not collect the correct amount from the previous owners for their share of the year's taxes. Isn't the reason for paying for title insurance so to ensure all information including the tax amounts are correct? Since they had the wrong information to begin with the incorrect information shows up on the closing papers. I paid the amount that was on the closing papers but now am delinquent for the extra $1100+ they did not report. Are they not liable to pay the insured amount since it was definately their gross error?

Answer 1

Who says it was their error?

The title company requires satisfaction of open or unpaid mortgages or taxes. If the current quarter or yearly assessments were not ready yet, they had to work with what they had, and they didn't pull the numbers out of their butt.

Usually the assessors office or the collectors office gives a guesstimate number out if they don't know the new figures. I do closings, and so many times I have been told the latest actual quarter plus 20%. Sometimes it is enough, sometimes it isn't.

Contact them and ask if they held any escrow from the sellers proceeds for the estimated taxes. If they didn't, then either you or they should contact the seller and ask for their pro-rated portion.

Answer 2

If they had the incorrect information, who provided it? If it was provided by the seller and not picked up by the insurance company, the seller is liable but the insurance company is partially liable also. Title insurance mandates the company carry out a thorough investigation of the liens and obligations on the property (mineral rights, condemnation of structures, access, etc) to indemnify the new owner. I would first file a suit in small claims court for the amount of the due taxes against both parties (the previous owner as well as the company). Do not use a lawyer at this stage (too expensive)...It will probably be resolved, but if not, then consult an attorney with the intent to file a suit both for the amount but also for punitive damage....people often shy away from small legal action as they know the cost of legal services, but many things can be done by yourself...just take a bit of time, and study the laws.

Answer 3

Here in California, this is something that happens with practically every sale, and then the new owner gets hit for an increased tax bill, when the assessment is modified for the new (usually higher) purchase price.

Answer 4

consult a real estate attorney...