Location: Centereach, NY.
I sold my house a short time ago and the title company performed the title search, handled the closing, and the sale went through without any issues. I received my proceeds, and everything appeared to be finalized.
After the closing, the title company contacted me and said they had made a mistake during the title search. They claimed they failed to discover approximately $41,000 total in (3)HUD liens before the sale closed. I wasn’t aware of any HUD liens myself.
They are now demanding that I repay the money because those liens were not paid at closing.
The problem is that I relied on the title company to do its job correctly. If the liens had been discovered before closing, they would have been paid from the sale proceeds. Instead, the closing was completed, I received the money, and I have since used those funds for normal living expenses and housing.
I have now received a formal demand letter, but I have not been sued.
I spoke with a local real estate attorney who told me that, based on what he knew, this appeared to be the title company’s mistake and that there wasn’t anything for me to do unless I was actually sued.
My questions are:
Can a title company legally demand that I repay money because of its own error after the sale has already closed?
If they sue me, how strong is their case?
Should I respond to the demand letter, or is it reasonable to wait and see if they actually file a lawsuit?