Sunday, December 18, 2011

Closing Agent Screw-Up Failing To Clear Existing Mortgage Leaves Homebuyers' Equity Tied Up In Escrow Upon Subsequent Sale 12 Years Later

In Avenel, New Jersey, The Star Ledger reports:

  • It’s not uncommon for funds to be held aside in escrow during a home sale. The money is kept on the side as an assurance that a seller will fulfill any outstanding obligations to a sales contract. But that’s not how it happened for Michael Moore, 64, of Avenel, who sold his home in Clark in November 2010.

  • "I gave power of attorney to the lawyer for the closing," said Moore, 64. "He said they were withholding $7,500 and it would take about two weeks until the paperwork was completed."

  • But more than a year later, the escrow funds had not been returned. Here’s what happened.

  • Moore bought the home with his long-time girlfriend in 1998. They decided to sell in November 2010, and the couple had separate attorneys for the transaction.

  • The new buyers’ lawyer said there was an outstanding mortgage on the property. Moore said that couldn’t be. "We put down $200,000 and had a $40,000 mortgage, and that mortgage was paid off," he said. "When we bought the house we got title insurance so everything on the house should have been clear."

  • But apparently, it wasn’t. All mortgage lenders require title insurance, which protects the homeowner and the lender in case there are any unpaid property taxes or other liens on a property. Records showed there was a $133,000 mortgage from First Residential Mortgage dating back to 1993, in the names of the owners who sold the home to Moore and his girlfriend.

  • But Moore’s settlement statement when he bought the home showed that mortgage had been paid off. And even if the loan hadn’t been paid off, the title insurance policy – written by Old Republic Title of Minneapolis – would have covered Moore and his girlfriend.

  • The couple’s attorneys tried to get the escrow funds released, but the new buyers’ attorney, Adolph Sicheri, wouldn’t budge. "There is an open mortgage of record and it’s the seller’s responsibility to clear the home," Sicheri said. "That’s all we’ve been asking."

  • Sicheri recommended that Moore file suit to have the loan discharged, or contact the lender, First Residential Mortgage, for proof that the loan was paid. Moore said he couldn’t afford to go to court, and the evidence of payment was already in the closing paperwork.

  • "I’m not releasing that money until they do the right thing," Sicheri said. "It’s still a cloud on the title."

For more, see Getting escrow funds released no easy deed.

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