Closing Error

[JimMIA]

Mistakes in this type of transaction are serious. They can have immense impact on the finances and ownership clarity of two different parties.

I agree that someone in the state should be given a heads up about the situation. Lives can be seriously affected if you realize a mistake years later and ownership, inheritance or other factors about a piece of property are suddenly in question.

I'll give you just one quick example of the kind of problems we are talking about here. Upon closing, the title agency makes disbursements from escrow - sellers proceeds, realtor's commissions, various taxes, title insurance premiums, loan payoffs, etc.

But what if they dont'? Would you really notice? Certainly you would notice if you didn't receive the proceeds of your sale and the realtors would notice the lack of a commission, but how many buyers would notice if the deed was not really recorded, or the title insurance policy never actually got issued? How many sellers really check to be sure their mortgage was actually paid off?

In a recent case in Florida (NOT involving any of the title agents who work on timeshare resales) a title agent simply never purchased title insurance on hundreds of mortgages. They issued the committments, but pocketed the premiums instead of actually issuing the policies. They were so sloppy, they even issued the same insurance committments for different pieces of property. Those mortgages were packaged by an Orlando bank and sold to private investors.

When the fraud was discovered, there were two groups of people at risk - homeowners without title insurance, and investors holding uninsured mortgages. Do you think the bank notified anyone? NO, of course not. To do so would reveal their incompetence. They kept their mouths shut and hoped for the best. The title insurance companies eventually contacted the homeowners and notified them of their exposure and that they needed to get title insurance on their own, but there are still a lot of investors unprotected. The bank (a private mortgage bank, not a retail bank you would deal with) never did do the right thing.

I'm not sure what happened to the bank. The state should have closed them, but I don't know if they did or not. They did close the title agency, which then moved to Ohio...where I'm sure they are doing the same thing.

 

[JimMIA]

If there was something unscrupulous going on, that "extra" $10k would be "missing". It was just misapplied. It's not like the closing company was trying to embezzle an extra $10 out of the deal. If so, the seller surely wouldn't have had possession of it!

That is very sensible, and logical. And wrong.

"Extra" money just doesn't exist in an escrow account, and if some "extra" turns up somewhere, it is missing somewhere else. Has to be - can't be any other way.

I agree that the title agency caught the mistake and is trying (with some significant problems - which is equally troubling) to correct their mistake. But these problems are significant "red flags" which should be brought to the attention of appropriate authorities. At best, the title company is doing a very sloppy job of accounting for millions of dollars passing through their escrow accounts each month. At worst, the potential for fraud is enormous.

 

[dis-happy]

I think whenever you are dealing with any kind of financial transaction, if there is an error, it is usually caught before any checks change hands. It bothers me that this was not the case here. Things like this can not only be a sign of deeper problems. It might not constitute fraudulant actions, but it could be an internal problem with an employee.

ITA that there could be an employee problem here. My dh has twice unearthed cheating employees at the Fortune 500 company he used to work for--and in both cases, the amounts looked small, where most people would shrug them off, but in the end the true theft was quite high.

As far as "notifying the authorities" (although would hardly consider a complaint with the BBB as strong a statement as that), listen to this true story that just happened. We have a family owned condo in Hilton Head, managed for several years by a firm that also managed several other villa associations. Last year we were told by the managers that an employee had been found steailing from our accounts, but that they, the managing company, would make up the difference. Our condo board looked at matters and filed a suit anyway. Good thing they did! Because a second complex also found shortages, and the response by the owners that time was to take our reserves the very next day and start spreading them around into other accounts---covering themselves, so it looked like the money was there. It turned out the owners were mismanaging the funds as well, lots of shortages, and now the state has stepped in and filed suit as well. You know where this is heading---bankruptcy of this family owned operation. But, because our assoc. filed first, our claim is made against the remaining funds and insurance first, so hopefully our funds will remain intact.

In some situations, and fiduciary is one of them, it is expected that the ones handling things will be more than careful to do it right, as there is a lot at stake. Not to start an argument, but I'm sure that if someone here was left with a shortage of 9900. after selling a house or something, it would be more than a shrug of the shoulders, "people make mistakes, don't worry about it, it will get figured out eventually, not too different from running a yellow light." When I ran payroll and did small business taxes, those figures were always double and triple checked, because it matters a lot if there's an error.

Another example of higher standards would be pharmicists---yesterday I picked up my ds' necessary prescription for a congenital heart condition, looked at the pills in the bottle and knew immediately that they were the wrong pills. Needless to say, my blood ran cold. And while I calmly pointed out the mistake and they quickly fixed it, I will still follow up with letter to the head office of Target, so they know there was a problem and will take steps to fix it. I guess that would be better all around than a lawsuit for a dead child due to someone's honest mistake.

Off my soapbox now, time to plan our trip to WDW....

 

[JimMIA]

I would never report something like this to a Better Business Bureau. It's just not the type of thing they deal with. They wouldn't even know what you were talking about - they'd think it was a customer service issue. The correct people to report to would be the state regulators outlined in my post above.

If you click on that link, you'll see quite a bit of discussion about what happens when reports like that get made. It's not a witch hunt; it's just an everyday regulatory matter and it's no big deal if everything is okay.

 

[dis-happy]

Sorry Jim, I didn't go back and read what you wrote carefully, instead pulled out the idea, not the exact wording---What I meant to convey is that filing a complaint with an agency that look into such things didn't seem over the top to me.

 

[NCRedding]

First, the closing company did not make the mistake, DISNEY made the mistake when providing the payoff to the closing company. As a closing company, they have no way of verifying whether that figure is correct or not--the closing company may have the amount of the original loan, but without the amount of loan, interest rate, amortization schedule, and history of payments made, then there is no way for the closing company to determine if the payoff is correct or not. They have to rely on the lender. The seller bears some responsibility for checking with its prior statements--ie, end of the year final balance, etc.

Almost all payoff statements include words to the effect that the payoff is subject to the actual verification and final audit when it reaches the lender. Payments may be made in the interim, or payments might be debited due to NSF.

As to the deed being recorded before, in my state, it has to be before I am allowed to disburse funds from my trust account. Otherwise, the buyer is unprotected.

As to the money being missing or out of balance, I think the OP indicated they believed that this amount was included in the proceeds check. There was no "extra" money involved.

As to the amount being forwarded as being different from the Disney quote, payoffs differ daily due to interest. If you are sending the check to the closing company, they must add in at least one day's interest to account for the time delay. Of course, if the sum is more than several days worth of interest, then I would certainly question why.

I know that there are unscrupulous people involved in this business as I hear about them every time I go to seminars, but in this case, it appears to be a mistake, and nothing more.

 

[Dean]

Certainly mistakes happen. Step back and find out EXACTLY what the numbers should have been. Add to that the amount you're out as a result of their mistakes, sounds like it's $34. Don't just accept their numbers again this time. Check with DVC about the payout and maintenance fees. And depending on how the contract was worded, some of those extra maint fees due by the buyer might be coming to the seller. They wouldn't go to DVC unless this were a contract one were paying month by month for. Have them prepare a new closing summary and get things set BEFORE you send them any money.

 

[Dean]

First, the closing company did not make the mistake, DISNEY made the mistake when providing the payoff to the closing company. As a closing company, they have no way of verifying whether that figure is correct or not--the closing company may have the amount of the original loan, but without the amount of loan, interest rate, amortization schedule, and history of payments made, then there is no way for the closing company to determine if the payoff is correct or not. They have to rely on the lender. The seller bears some responsibility for checking with its prior statements--ie, end of the year final balance, etc.

Maybe, maybe not. Sounds like it might have been two closing with the same closing company and last name. I thinks it's just as likely DVC gave the right info and they applied it incorrectly. Either way, it should be able to be worked out fairly simply.

 

[jwkidd3]

Well the situation has finally been resolved. But, the way that the closing company handled it was very very poor from a business perspective. My contact pitched a fit about paying for her mistakes. I think she may not have wanted her boss to know what had happened.

And then last Friday I get a call from the buyer. The closing company was asking for $500 more from them to cover the maintenance fee shortfall. The figures made sense and the revised closing statement is correct. Anyway, the buyer felt that I should pay the $500 and said the closing company said they should call me to ask. Ha! I politely referred to the contract for the sale and left it at that.

The closing company I used was Timeshare Closing Services. They came recommended by many that have used them several times. I would be very cautious about using them... and not just because they might make a mistake (hey we all do that) but how they handled themselves when they did. So very unprofessional.

John

 

[dianeschlicht]

You are not the first person we have heard from here who has had an issue with that same closing company. I think the way they handled your case indicates that they are having LOTS of problems and trying to cover them up. Glad you finally got things straight though!

 

[Northern Lights]

If you read my post "Journey to DVC Ownership" you will note that this is the same escrow agency that screwed up my closing, but they did at least step up to get the problem fixed ASAP. They obviously have serious problems there, which is not surprising as they were not responsive to phone calls or emails leading up to the closing. Gave me the "we're so busy" line of bull. I worked with Brenda Smith and she was fine and like I said, she did step up to make things right. She needs to micromanage her subordinates a bit more though b/c they are very sloppy - which is never a good trait but is worse when it comes to real estate transactions.

 

[dianeschlicht]

If you read my post "Journey to DVC Ownership" you will note that this is the same escrow agency that screwed up my closing, but they did at least step up to get the problem fixed ASAP. They obviously have serious problems there, which is not surprising as they were not responsive to phone calls or emails leading up to the closing. Gave me the "we're so busy" line of bull. I worked with Brenda Smith and she was fine and like I said, she did step up to make things right. She needs to micromanage her subordinates a bit more though b/c they are very sloppy - which is never a good trait but is worse when it comes to real estate transactions.

This isn't just "never a good trait", it is unacceptable business practice for any closing company!

 

[LIFERBABE]

Glad to hear you got your situation resolved.

That was just tacky the way they handled it!

 

[dis-happy]

The closing company I used was Timeshare Closing Services.

Why am I not surprised? I was told some blatently wrong information during my last closing as well and will never use them again (2 strikes against them during 2 different contracts, not to mention lost paperwork galore). Glad you got things resolved, finally. Brenda helped cut through some problems for me as well--hope she gets employee of the year, or maybe a better job somewhere else.

As far as your poor buyers goes, I can't imagine what they must be thinking. Considering that closing fees with TCS start at $400., one would hope they would offer to pay for some of their mistakes.

Take care and thanks for letting us know the rest of the story....

 

[Dean]

I'm curious as to whether DVC has changed over the registration yet. If the buyer balks and decides to cancel, you may have to make a decision. If they buyer refused to pay the extra, the closing company could, and likely should, pay it. But I doubt they would based on their reaction thus far. And if your contract didn't include the 10 day right to cancel, they have a year to do so.

 

[utahkennedys]

I am very nervous now reading about this closing company because isn't that who TTS uses? That is who I bought my OKW resale from and it is closing soon! I had read a few good things about that company but I guess now at least I can be on the look-out for anything going wrong...

 

[Poorman]

I too am involved in a closing with this company and I just e-mailed Pat Spell to show her my concerns.