What if the Title insurance company did not clear the title after closing and is asking seller to pay more money?

Answer 1

To begin with the title company should have "cleared" the title by collecting for any necessary items to be paid off at close, and by resolving any ownership questions far in advance of closing. If by "not clearing the title after close" you mean that they did not record required documents or payoff any encumberances, if they collected money for these items they must be paid off immediately after closing, and documents must also be recorded in a timely matter. If the reason for them not clearing the title is that something was unavailable and the company performed the actions that their underwriter requires, they may have a valid reason to ask for more money after closing. A good example of this is when a title company obtains a payoff for a mortgage good past the day of close and when they forward the fund to payoff that mortgage, an item such as escrowed insurance has been paid since the time the payoff was issued. It would be fair for the title company to ask the seller for more money in this case. Further, there are certain affidavits that the seller signs at close agreeing that they have not encumbered the property further during the contract period. If this proves to be incorrect, the seller would certainly owe any related expenses. Basically, as long as a title company followed procedure, most mistakes in this area are ones that they can come back legitimately to the seller for recourse. Now, on the other hand, if a title company has collected money to payoff liens, mortgages, etc., and doesn't send the money in a timely matter, they would be responsible for any additional expense incurred to payoff those items.