Settlement statement was incorrect?

Question

I recently sold my townhouse and used the proceeds to purchase a new home. Two weeks after closing, I was contacted by my settlement agent who indicated that there was a $1000 error in the closing documents (They apparently applied a $1k reduction in realtor's commission twice). They're demanding payment of the $1000 and withholding my realtor's commission until I make payment (which means that I'm receiving pressure from him also).
Am I responsible for their mistake at closing (two weeks after settlement seems a bit late)? Is there anything to protect me from them coming back and telling me that something else was incorrect on the HUD-1?

Answer 1

This has happened to me 4-5 times. Yes, you need to correct the error. You are not paying them anything, it is money that was applied in the incorrect column in the first place. It is handled like a banking error, it is corrected and whoever has money they aren't entitled to returns the excess funds.

Answer 2

Here is my thought - although I may get blasted by the other Realtors out there.

Federal law requires that all interested parties must receive a copy of the HUD Closing Statement with 24 hours of closing.

So, you and your Realtor should have received the HUD within plenty of time to review the numbers and make sure they were correct.

Shame on the closing agent for making an error, but people do make honest mistakes. It was up to you and your Realtor to find this error before closing - and it did not happen.

I would put the onus on the Realtor because he/she was responsible for understanding the HUD (where you might not) and making sure it was correct. That is part of the job in representing you.

So, I would talk to your Realtor about splitting the difference. Get an agreement in writing and bring that to the settlement agent.

And next time DO NOT sign anything that has not been clearly explained to you, with all numbers double-checked.

Good luck and best wishes.

Answer 3

The HUD-I Settlement Statement is a recording of the FINAL settlement. You are under no legal obligation to accept an amended statement once you have closed.

Now having said that, you do have a Moral obligation to return the money and sign a new HUD-I. You were unjustly enriched. If you were shorted $1,000 you would see this ever so clearly, be demanding your money back and asking here, "How do I get it?"


ADDITIONAL INFORMATION:

There does not exist a Federal Law requiring the Settlement Statement to be delivered to all parties 24 hours prior to closing. The Real Estate Settlement Procedures Act (RESPA) provides for the Buyer to review the document 24hrs in advance, upon request. If so requested, the settlement agent is to deliver one based on the information known at the time.


TITLE 12 CHAPTER 27
§ 2603. Uniform settlement statement

(a)
(b) The form prescribed under this section shall be completed and made available for inspection by the borrower at or before settlement by the person conducting the settlement, except that
(1) the Secretary may exempt from the requirements of this section settlements occurring in localities where the final settlement statement is not customarily provided at or before the date of settlement, or settlements where such requirements are impractical and
(2) the borrower may, in accordance with regulations of the Secretary, waive his right to have the form made available at such time. Upon the request of the borrower to inspect the form prescribed under this section during the business day immediately preceding the day of settlement, the person who will conduct the settlement shall permit the borrower to inspect those items which are known to such person during such preceding day.

http://www.hud.gov/offices/hsg/sfh/res/respamor.cfm#HE

http://www.law.cornell.edu/uscode/html/uscode12/usc_sec_12_00002603----000-.html

Answer 4

If the error is reflected in the HUD-1 closing sheet then you'll have to settle up. Administrative errors are always subject to correction. This is why I always cross-check the math on the HUD-1 statement. I've found errors several times (benefit both ways) and had them corrected on the spot.

Answer 5

Errors do happen and the realtor should have caught it at the time of closing. Unfortunately, it is money you owe.