Summary: A contractor submits fake documents to a title company and then gets paid. The home buyer asks if he has any recourse for when a contractor submits fake documents. Ilyce says it depends on the type of escrow account involved in the home purchase and that the home buyer should consult a real estate attorney to sort through whether the title company is liable for accepting fake documents from the contractor.
Q: The contractor we hired submitted false documents to the title company in order to get money disbursed. The contractor was able to get 80 percent of the money, but only half of the work has been done. Now the contractor has bailed and we are left with a half-built house. Is this the title company's responsibility to fix?
A: Ouch! Just when you think you've planned for everything, something like this happens. I'm so sorry you have to go through this.
Depending on what kind of escrow account you had in which the cash was paid out, the title company may or may not be responsible for any losses. With some escrows, the title company takes full responsibility to ensure that the documentation delivered to the title company is proper and in order. With other escrows, the title company does not take the risk that the contractor has delivered false documents. You, the homeowner, continue to have that risk and responsibility. The title company simply cuts the checks or monitors the payments and protects the lender but not the homeowner.
You'll need a real estate attorney now to help you sort it out and figure out what you're going to do. Please find a qualified real estate attorney who is familiar with construction issues to start the discussion.
Jan. 19, 2009.
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