L Costello, Home Buyer in San Diego, CA

We had a federal payroll tax lien against our former home. When we sold the home and purchased a new home,?

Asked by L Costello, San Diego, CA Fri May 16, 2008

our title company did not pay the IRS the total amount of the lien (unsure why---most likely human error) and subsequently transferred the remaining funds to our personal bank account which we then used to put down on our new home. The IRS went after the title company to make up the difference. The title company paid the IRS and then began asking us for the money. Our accountant said the title company made a mistake and it was not our responsibility to make them whole. She said that's what title insurance is for. We're now being sued in small claims court by the title company (in CA). Do we have a responsiblity to pay back the title company? Or should the title insurance take care of this as our accountant says it should? If so, why are we getting sued?!

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Hi Larry,

I'm quite familiar with your situation. This happens quite often in the settlement business, believe it or not. Grab your final HUD from the sale of your property and contact me if you would like to discuss further.
0 votes Thank Flag Link Fri May 16, 2008
Even though the title company didn't pay off the remaining debt, their response is that the debtor incurred the debt and the title company is not resonsible for debts incurred by others.

your closing papers, ie: escrow instructions will have a clause to this effect.
0 votes Thank Flag Link Sun Sep 28, 2008
I wonder that title insurance is for??? I believe the Title Company should be responsible. That's what they are getting paid for. Well you learn something every day and this is not something I will forget.
0 votes Thank Flag Link Wed Aug 20, 2008
Good to know but sure makes me feel uncomfortable about title companies...
0 votes Thank Flag Link Wed Aug 20, 2008
Update on this case: the judge dismissed the lawsuit because the title company did not file in time to meet the statute of limitations for contracts (3 years in California---they filed 3 years and 8 months after the closing of the house). The judge did tell us however that had they filed in a timely manner, we would have had to pay them back.
0 votes Thank Flag Link Wed Aug 20, 2008
I have a very dear friend who experienced a similar story where the title company FIrst American not to name names... but they did not pay the 2nd mortgage holder on the property. A year went by before the mistake was found and first american came back for the money. My question is why are we paying title if they can make such "mistakes"? These are major players a 2nd mortgage and IRS lein? Make the title company pay the price. I would contact my current homeowners insurance agent and ask him for advice.
He provides you with coverage for liability issues. Maybe the insurance compnay can take down the title company. I know that us little people would end up stuck paying large amounts for attorney fees and have little to show for it. Its your call.
0 votes Thank Flag Link Wed Aug 20, 2008
Yikes! Definitely find a good attorney. Not that my opinion matters, but I would think that you do have a responsibility to pay the IRS, not the title company.
Web Reference: http://www.erinattardi.com
0 votes Thank Flag Link Fri May 16, 2008
Erin Stumpf, Real Estate Pro in Sacramento, CA
MVP'08
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That is a very different scenario I have never heard of and would love to see some intelligent answers on. I am not an attorney but I would advise you to seek a good real estate attorney if you are getting sued. If the IRS went after the title company I would think they would be liable. Good luck with this!
0 votes Thank Flag Link Fri May 16, 2008
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